• Further optimize and implement the prevention and control measures of COVID-19 epidemic situation

On December 7, the Joint Prevention and Control Mechanism issued a notice on further optimizing the implementation of COVID-19 epidemic prevention and control measures (Joint Prevention and Control Mechanism Comprehensive Development (2022) 113), which mainly includes the following ten measures: first, scientific and accurate division of risk areas. The second is to further optimize nucleic acid detection. The third is to optimize and adjust the isolation mode. The fourth is to implement the "quick seal and quick solution" in high-risk areas. Fifth, to ensure the basic drug purchase needs of the masses. Sixth, speed up the promotion of novel coronavirus vaccination for the elderly. Seventh, strengthen the health status of key groups and classified management. The eighth is to ensure the normal operation of society and basic medical services. The ninth is to strengthen the protection of epidemic-related safety. Ten is to further optimize the prevention and control of epidemic situation in schools. The comprehensive group of joint prevention and control mechanisms continues to optimize prevention and control measures to further improve vaccines, COVID-19 drugs, household standing OTC, chain drugstores and consumer medical care and other related targets.

• Pay attention to the "upgrading" of COVID-19 Vaccine and strengthen Needle vaccination
  

On November 29th, the Integrated Group of the Joint Prevention and Control Mechanism issued the Circular on issuing and issuing the work Plan for strengthening the vaccination of novel coronavirus for the elderly (Guowei Mingdian (2022) No. 484), calling for an accelerated increase in the vaccination rate of people over 80 years old and continue to increase the vaccination rate of people aged 60-79 years old. As of November 28, the whole-course vaccination rate of the whole population in China was 90.29%, 57.54%, 86.42%, 65.79% and 40.38%, respectively. According to the data of the Health Commission, we estimate that the total population COVID-19 vaccine gap is at least 300 million doses, of which COVID-19 vaccine gap for people over 60 years old is 4860-7500 million doses (COVID-19 vaccine gap for people over 80 years old is 3152-3509 million doses). According to the sequential reinforcement ratio of 25%, 30%, the total demand for sequential reinforcement needles is between 0.75 and 90 million doses.

• Strengthen the reserve of COVID-19 's therapeutic drugs and coordinate the combination of traditional Chinese and western medicine to deal with the epidemic situation.
  

This time, the joint prevention and control mechanism issued a notice calling for the protection of people's basic drug purchase needs. Local drugstores should operate normally and shall not be closed at will. People shall not be restricted from purchasing antipyretic, antitussive, antiviral, cold and other over-the-counter drugs online and offline. We expect that as the epidemic prevention and control measures become more scientific and accurate, the integration of traditional Chinese and western medicine will still be an important way to deal with the epidemic.We believe that COVID-19 small molecule oral medicine and COVID-19 related traditional Chinese medicine will be an important guarantee for COVID-19 prevention and control in the future. At the same time, the target of family standing OTC drugs will usher in performance increments.

• Focus on the main line of medical demand recovery: the growth rate of passenger flow is expected to recover under the relaxation of prevention and control policies, and the profitability of chain drugstores is expected to continue to strengthen.
  

The passenger flow is expected to recover further under the marginal relaxation of the current epidemic prevention and control policy, and the proportion of prescription drugs is expected to continue to increase after the continuous promotion of national collection and the gradual acceptance of outflow varieties by "dual-channel" stores in the future. we expect the industry growth and profitability of 2022Q4 to continue to strengthen; at the same time, optional consumer health care is expected to recover significantly, and performance elasticity is expected.

The spread of the epidemic in many places in China in 2022 has a significant negative impact on the number of hospital visits, and the demand for optional attributes of consumer health care (such as assisted reproduction, dentistry, ophthalmology, traditional Chinese medicine, medical beauty, etc.) is obviously limited. After the marginal change of the epidemic prevention and control policy, we expect that the terminal consultation volume and consumer demand in the relevant sectors are expected to recover, and taking into account the gradual optimization of prevention and control, overseas navigation is expected to resume gradually in the future. We expect that Jinxin Reproduction, which distributes operations in the United States, Laos and other places, may benefit.

• Risk factors:
  

The development of the epidemic exceeds the expected risk, novel coronavirus variation exceeds the expected risk, COVID-19 vaccine clinical progress falls short of the expected risk, COVID-19 vaccination falls short of the expected risk, COVID-19 drug demand falls short of the expected risk, and the recovery of medical service demand falls short of the expected risk.

• Investment strategy
  

We believe that changes in epidemic prevention and control policies bring incremental opportunities for vaccines, COVID-19 drugs, household standing OTC, chain drugstores and consumer health care. The Health and Health Commission will strengthen the vaccination of COVID-19 for the elderly, and the certainty of the demand gap will be enhanced. It is expected that COVID-19 small molecule oral medicine and COVID-19 related traditional Chinese medicine will be an important guarantee for COVID-19 prevention and control in the future, while the performance of the family standing OTC drug will usher in the increment. With the relaxation of prevention and control policy, the growth rate of passenger flow is expected to recover, and the profitability of chain drugstores is expected to continue to strengthen; optional consumer health care is expected to recover significantly, and performance elasticity is expected.