The frequent collection of policies triggered by the pharmaceutical sector shock valuation repair probability interpretation.

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■ In the first half of 2021, changes in the centralized procurement policy have affected the investment value and investment logic of the entire pharmaceutical sector, and are changing and revising the competitive landscape and rules of the game in the pharmaceutical industry



In the context of drug volume procurement, the profitability and performance growth of enterprises with partial imitation varieties as the main business will be affected to a certain extent, but enterprises with certain research and development capabilities and cost control capabilities are still expected to enjoy policy dividends such as accelerated review and approval, accelerated volume procurement, and increased volume of innovative products.



■ From the perspective of historical valuation of the pharmaceutical industry, although the current valuation still has a premium, but the premium is not too high, there are still policy disturbances leading to adjustment, downward space is relatively limited



The "golden decade" of the pharmaceutical industry has become a thing of the past. Under the background of the new medical reform of "three medical linkage", medical insurance fee control has become the new normal, and the industry and enterprise pattern has gradually undergone new changes.



The price reduction of generic drugs brought about by the medical insurance reform for the control of auxiliary drugs and traditional Chinese medicine injections and the purchase of band quantities (the state has agreed on the minimum purchase quantity for generic drug varieties that have passed the consistency evaluation and are supplied by the manufacturer with the lowest quotation) has laid a good foundation for the vigorous development of innovative drug products.



In addition, affected by the epidemic, sound system, complement the public health short board will become one of the direction of industry development, in the long run, medicine or will become an important part of the "new infrastructure", the relevant pharmaceutical industry chain is also expected to usher in a larger scale of long-term stable investment and more construction opportunities.



Recently, Investor Network has launched a special plan entitled "Report of Listed Companies: Finding Value Here", which comprehensively sorts out the report data of listed companies, interprets the prosperity and development direction of major industries, and deeply analyzes the business changes and investment value of key companies, aiming to provide references for investors to understand the value of listed companies and find high-quality tracks.



  Total revenue of semi-annual report breaks trillion for the first time in nearly three years.



The semi-annual report of listed companies in the pharmaceutical industry in 2021 has come to an end, with several happy and several worried.



According to Wind statistics, taking 390 A- share pharmaceutical companies as statistical samples, the total revenue of the semi-annual report exceeded 1 trillion yuan for the first time in nearly three years, an increase of about 24% over the same period last year. Among them, 21 pharmaceutical companies entered the ranks of 10 billion revenue. For example, Zhifei Biology, Yingke Medical and Yaoming Kant entered for the first time, accounting for less than 5%, but the total revenue of 21 pharmaceutical companies accounted for more than half of the industry revenue. The revenue of 30 pharmaceutical companies was between 50 and 10 billion yuan, and the revenue of 213 companies in the first half of the year was less than 1 billion yuan.



In the first half of the year, the total net profit of 390 pharmaceutical companies was about 131.029 billion billion yuan, a year-on-year increase of about 43.6 percent, and the growth rate increased by 35.3 percentage points year-on-year. 354 pharmaceutical companies achieved positive net profit, 30 companies' net profit exceeded 1 billion yuan, and 63 pharmaceutical companies' net profit increased by more than 100 year-on-year. The net profit growth rate of 64 enterprises was between 40% and 100, with a four-digit year-on-year increase: rejing Biology (13852 per cent), Ha Sanlian (2137.11 per cent), Jimin Medical (1944.42 per cent), Jinshi Subyao (1856.15 per cent), Haohai Biotech (1855.89 per cent), Taiantang (1559.95 per cent), Laimei Pharmaceutical (1389.02 per cent), Chutian Technology (1269.48 per cent), Kangshino (1016.94 per cent)



According to the "Investor Network" statistics, 138 pharmaceutical companies in the first half of the growth rate slowed down, the performance is not as good as during the epidemic, 36 for the loss-making state, 43 enterprises in the first half of the net profit fell year-on-year, the largest decline in North China Pharmaceutical, a year-on-year decline of 99.16, and enterprises recently due to the collection of winning products ibuprofen slow-release capsules for the market concern.



In the entire A- share pharmaceutical sector, Science and Technology Innovation Board can be said to be a special part. According to Wind data, 72 companies on Science and Technology Innovation Board achieved revenue of 39.53 billion yuan in the first half of 2021, a year-on-year increase of more than 95%, of which 9 companies achieved revenue of more than 1 billion yuan; in the first half of the year, the total net profit was 12.02 billion yuan, a year-on-year increase of nearly 200, of 15 pharmaceutical companies more than 100, medical devices, medical services, biopharmaceutical companies are ranked high in revenue and net profit.



According to the statistics of "Investor Network", according to the data disclosed in the semi-annual report, the total R & D of 390 pharmaceutical companies in the first half of 2021 was 33.41 billion billion yuan, a year-on-year increase of more than 30%. Among them, Hengrui Pharmaceutical's research and development expenses were 2.58 billion yuan, up more than 38% year-on-year. It was the highest research and development expenses among pharmaceutical enterprises in the first half of the year, followed by Fosun Pharmaceutical and Meirui Medical.



Many pharmaceutical companies have focused on disclosing the current product lines under research. For example, Hengrui Pharmaceutical's interim report shows that more than 240 clinical projects have been launched at home and abroad, and 8 innovative drugs have been approved for listing.



In the first half of the year, the sales expenses of pharmaceutical enterprises were 149.61 billion yuan, up 15.2 year on year. The top five enterprises were Shanghai Pharmaceutical 6.739 billion yuan, Hengrui Pharmaceutical 4.665 billion yuan, Fosun Pharmaceutical 4.356 billion yuan, Buchang Pharmaceutical 3.722 billion yuan and Baiyunshan 3 billion yuan respectively.



  Collapsive procurement that cannot be bypassed



In the first half of the year, changes in the centralized procurement policy have affected the investment value and investment logic of the entire pharmaceutical sector, and are changing and revising the competitive landscape and rules of the game in the pharmaceutical industry.



From an investment point of view, medical collection is lethal to enterprises. After a sharp price reduction, the profit margin of enterprises will be reduced. If the enterprise has no other business to make money continuously, then the investment value will drop sharply, and investors' lack of confidence in the enterprise will often reduce their holdings, leading to a decline in stock prices.



The original intention of the national centralized procurement is to compress the intermediate links, reduce the sales revenue, eliminate the gray area, make the ex-factory price closer to the terminal price, and let the people really benefit. However, the pharmaceutical enterprises themselves should not be the targets of strangulation.



Or to "pharmaceutical one brother" Hengrui Pharmaceuticals, for example, the first half of 2021 operating income 13.297 billion, an increase of 17.58 percent year-on-year, after deducting non-profit profit of 2.562 billion yuan, an increase of 3.1 percent year-on-year, which is its lowest growth rate in the past decade a semi-annual report.



Hengrui Pharmaceutical's China Daily revealed three pieces of information: first, 28 generic drugs have entered the national collection in the past 18 years, with 18 varieties selected, with an average decrease of 72.6; Second, the sales revenue of 6 drugs involved in the third batch of centralized procurement began in November 2020, and the sales revenue of innovative drugs fell 57% month on month during the reporting period. Third, the 5.207 billion sales revenue of innovative drugs increased by 43.8 percent year on year, accounting for 39.15 percent of the total sales revenue.



These three pieces of information indicate that the main reason for the decline in its performance growth rate is the substantial growth of innovative drugs, which has been hedged out by the decline in revenue of generic drugs due to the collection of generic drugs. In the future, generic drugs will continue to shrink and the proportion of revenue of innovative drugs will further increase.



At present, Hengrui Medicine has carried out more than 240 clinical projects at home and abroad, including 23 international multi-center clinical projects. Due to the increase in clinical expenses and the continuous increase in the number of international clinical projects, the cumulative R & D investment during the reporting period was 2.581 billion billion yuan. An increase of 38.48 percent, R & D accounted for 19.41 percent of sales. Although there is still a gap between this investment and the international giants, it is definitely among the best in China.



Hengrui Pharmaceuticals has made frequent moves recently. On September 5, it announced an agreement with Tianguang Shi Biology. Tianguang Shi granted Hengrui the exclusive commercial right of the third generation anti-CD20 monoclonal antibody MIL62 in Greater China. The two sides jointly carried out clinical development. At the same time, Hengrui plans to make a cornerstone investment of about US $30 million to Tianguang Shi.



Hengrui Pharma's purchase of drug agency rights and equity investment shows that it has begun to take an extended expansion route, from the previous self-research to agent acquisition and self-research, and also proves from the side that the collection has greatly changed the ecology of the domestic pharmaceutical industry.



The change of collection to Hengrui is also reflected in Fosun Pharmaceutical. In recent years, Fosun Pharmaceutical has also acquired everywhere, cooperating with others in R & D and actively transforming, but the effect is not ideal, the traditional business is declining, and the emerging business cannot be connected.



If the enterprise's independent research and development ability is insufficient, only generic drug products, it is difficult to enjoy the excess dividend for a long time by imitating and following, it is easy to be collected, only to acquire and represent those drugs and companies that are not affected by the collection.



The essence of the pharmaceutical industry is technology-driven, in other words is actually risk-driven, innovative drugs is a risk-front, profit-back industry, like the European and American stock markets to see innovative drug companies are basically valued according to the research and development pipeline, the current profit reflection of pharmaceutical companies is the past pipeline. But the traditional pharmaceutical industry as a whole is unprepared for the business logic of risk-driven, innovative drug company value is essentially clinical benefits, while good products can get enough cash returns, if you can't sell out to make a profit, it may be a bubble.



  The valuation of the pharmaceutical sector has been relatively reasonable.



The collection is good for innovative pharmaceutical enterprises and innovative medical device enterprises, the three fees (research and development fees, sales fees, management fees) in the main sales costs significantly reduced, revenue and profits increased, production capacity improvement process optimization, so as to further improve the quality, innovation continues to enhance, and finally have the power to fight with international giants, to seize the international market.



According to the Wind Shenwan secondary industry index, medical services, biological products, medical devices in the first half of the growth rate of 98%, 77%, 50%, significantly better than the pharmaceutical sector as a whole.



From the perspective of the historical valuation of the pharmaceutical industry, although the current valuation is still a premium, but the premium is not too high. On the whole, it is more reasonable than some other cyclical industries.



At the same time, with the intensification of aging, the pharmaceutical industry is facing greater opportunities, which is also one of the few incremental markets with huge incremental demand.



Historically, policy suppression is often a good buying point in stages. The pharmaceutical industry has the defensive attribute of crossing cattle and bears. High-quality pharmaceutical enterprises have the dual attributes of counter-cycle and science and technology. Bioinnovative drugs and CXO in biomedicine, innovative devices and medical services in medical treatment also benefit from the state's concept of restricting the prices of generic drugs and low-end devices and encouraging innovation in the pharmaceutical field.



Combing the recent pharmaceutical policy, you can find that some have landed. There are still insulin, artificial joint collection, as well as the uncertainty of health insurance negotiations, the short-term market can not have excellent performance, but the valuation of the pharmaceutical sector has a good attraction, even if the follow-up policy impact led to adjustment, the downward space is relatively limited.