Investment logic
r & D investment of China Meheco Group Co.Ltd(600056) enterprises continued to increase The R & D expenses and R & D expense rate of China Meheco Group Co.Ltd(600056) enterprises have continued to increase in recent years, and the number of R & D personnel and R & D salary expenditure have also increased rapidly. With high R & D investment, the number of Chinese innovative drugs approved for the first time has increased rapidly. In 2021, the proportion of domestic innovative drugs ind reached 76%; The number of clinical trials conducted in China has also increased rapidly, with a year-on-year increase of nearly 50% in 2021 and a compound growth rate of 35% in recent five years.
China’s R & D of innovative drugs is gradually in line with international standards. In 2021, the number and type distribution of innovative drugs approved for listing in China are similar to that in the United States, and the distribution of disease fields is similar to that in the United States. The approval process of innovative drugs in China is becoming more and more perfect, and the four accelerated approval paths of priority review, conditional approval, breakthrough therapy and clinical urgently needed new drugs listed abroad are becoming more and more mature; The median approval time of innovative drugs was shortened from nearly 800 days in 2016 to about 400 days in 2021; The time difference between the approval of innovative drugs with the same target in China and the United States is also gradually shortening; China’s R & D of innovative drugs is gradually in line with international standards.
Cooperation between China and foreign countries is becoming more frequent and closer. In recent years, there has been a rapid growth in the number of domestic pharmaceutical enterprises, the number of overseas transactions, and the number of authorized overseas pharmaceutical enterprises, as well as the rapid growth in the overseas pharmaceutical market. In 2021, many Chinese pharmaceutical enterprises introduced three or more products within one year. On the one hand, they can quickly supplement the enterprise’s product pipeline, on the other hand, they can accelerate the integration with the world. Since 2021, there has been no lack of large amount of external authorization transactions, especially the second cooperation between Baiji Shenzhou and Novartis, Shanghai Junshi Biosciences Co.Ltd(688180) and coherus. On the one hand, it has rapidly supplemented cash flow for Chinese enterprises, on the other hand, it also reflects that the R & D strength of Chinese pharmaceutical enterprises has been gradually recognized by overseas pharmaceutical enterprises.
Domestic innovative drugs go to sea and move forward in exploration. The continuous progress of drug research and development in developed markets and the changing requirements of regulatory approval put forward higher requirements for the innovative drug research and development ability, clinical trial design ability, clinical trial promotion ability outside China and communication ability with supervision of Chinese pharmaceutical enterprises. Zebutinib of Baiji and cilte cel of legendary biology have been successfully approved by FDA. More products submitted for listing have not been approved, but they have also accumulated valuable experience. Domestic innovative drugs going to sea is still in the exploration stage, but with all kinds of innovative drug enterprises in China sticking to the exploration, it is expected that innovative drugs going to sea will usher in full bloom and fruit in the near future.
Marginal warming trend of medical policy. Entering the medical insurance catalogue is an effective means for innovative drug products to achieve high volume and sales growth. With the increasing improvement of the dynamic adjustment system of medical insurance, innovative drug products are expected to enter the medical insurance catalogue within one year after listing. It is optimistic that innovative drugs will accelerate the volume through medical insurance negotiation. With the normalization and institutionalization of generic drug centralized purchase and the reduction of the scale of subsequent centralized purchase products, the impact on generic drug stock enterprises is gradually weakened. With the stability of the price reduction range of centralized purchase and the marginal benefit of the price increase allowed by contract renewal, the generic drug business can still bring reasonable profit space.
Investment advice
We are optimistic about China’s innovative drug investment opportunities driven by marginal recovery of pharmaceutical policies and long-term innovation in the second half of 2022. We are optimistic about differentiated innovation and innovation going out to sea, and we are optimistic about leading bigpharma enterprises and biotech enterprises with international ability, as well as enterprises with differentiated innovation ability.
It is suggested to pay attention to: Shanghai Junshi Biosciences Co.Ltd(688180) , Xinda biology, Rongchang biology, Jiangsu Hengrui Medicine Co.Ltd(600276) , Kingsley biotechnology, etc.
Risk tips
The R & D progress is less than the expected risk, the registration and declaration progress is less than the expected risk, the internationalization process is less than the expected risk, covid-19 epidemic risk and other policy risks.
