Source: Financial Services Association Author: Yan Jun

When the movie “Hot and Hot” was released on the first day of the new year, Jia Ling, who lost 100 pounds, received the top 7 hits. “Jia Ling lost 100 pounds,” “Jia Ling's voice changed,” and “Jia Ling was really hungry and tired this year,” various topics continued to be popular, and even netizens asked Jia Ling if she could write a weight loss tutorial.

“Hot and Hot” tells the story of an ordinary person who finds himself and learns to love himself. There is also the power to grow in a happy atmosphere. According to media reports, in order to make this movie, Jia Ling first gained 40 pounds and then lost 100 pounds in a year. From the first year to the fourth year, the “Jia Ling lost weight” topic continued to be popular. This made market participants speculate whether the concept of weight loss will make a comeback and become the first investment theme at the beginning of the Year of the Dragon?

Will the diet pill concept make a comeback?

The diet pill concept was one of the few highlights of A-shares in the second half of 2023.

In the third quarter of 2023, the concept of diet pills rose to prominence and led a wave of hot markets. The Wande Diet Pills Index increased by 24.4% between September 7 and October 16, 2023. ranging$Brightgene Bio-Medical Technology Co.,Ltd. (688166.SH)$,$Hebei Changshan Biochemical Pharmaceutical (300255.SZ)$,$Hybio Pharmaceutical (300199.SZ)$,$Beijing Sl Pharmaceutical (002038.SZ)$und$Aurisco Pharmaceutical (605116.SH)$Other individual stocks reached a market capitalization of 10 billion dollars.

However, the popularity of the A-share diet pill concept is more of a reflection of US stocks. There are not many domestic listed companies with real strength, and at one point, quite a few pharmaceutical companies were regulated and punished due to its popularity.

First come first$Xinjiang Bai Hua Cun Pharma Tech (600721.SH)$At the performance briefing, it was stated that Warwick Pharmaceuticals, a wholly-owned subsidiary of the company, can provide customers with drug research and development services related to liraglutide injections and simeglutide injections. In response to investors' questions on an interactive platform, it was also stated that there is a weight loss product in the research project. Also, Yuan Jiandong, chairman and general manager of Borui Pharmaceutical, claimed in a conference call that he personally tried the BGM0504 injection, a product currently being developed by the company, and lost about 30 kilograms of weight in two months.

The chairman personally tested the drug and sparked public opinion, but this “hot spot” came to an end after regulatory action was taken. Baihua Pharmaceutical,$Shaanxi Kanghui Pharmaceutical (603139.SH)$After receiving letters of regulatory work one after another, the two companies later clarified that the relevant products are still undergoing research or trial production. Afterwards, Yuan Jiandong also received a warning letter from the Jiangsu Securities Regulatory Bureau due to misleading remarks.

The concept of diet pills after cooling down began to decline. From October 16, 2023 to February 5 of this year, the Wande diet pills index fell by more than 37%. Orient, Changshan Pharmaceutical, Hanyu Pharmaceutical,$Jiangsu Sinopep-Allsino Biopharmaceutical (688076.SH)$As individual stocks declined significantly, their market capitalization once again fell below 10 billion dollars.

However, on the last 3 trading days before the Spring Festival, the diet pill concept showed signs of stabilizing again. The index rose 13.52% on the three trading days. Pre-holiday diet pills are picking up again. On the one hand, the movie is warming up and discussions such as Jia Ling's weight loss have increased the popularity of the incident. On the other hand, diet drug companies have also been making frequent moves recently.

Overseas, media reports show that overseas diet drug giants$Novo-Nordisk A/S (NVO.US)$Recently, it was announced that it would spend 11 billion US dollars to acquire three production plants. In the 2023 results released at the end of January, sales of simeglutide exceeded 20 billion US dollars; another diet drug giant$Eli Lilly and Co (LLY.US)$According to the company's financial report, injecting the hypoglycemic drug Tirzepatide was RMB 21.104 billion in the first three quarters of 2023, an increase of 6.24 times over the full year of 2022. The performance of “Diet Pills Double” has allowed the market to see the broad market for diet pills.

In terms of domestic promotion, on January 26, simeglutide tablets under Novo Nordisk (China) Pharmaceutical Co., Ltd. were approved for marketing to treat type 2 diabetes. This is the first oral GLP-1 (glucagon-like peptide-1) receptor agonist approved for marketing in China. However, it is worth noting that this oral dose of simeglutide is suitable for diabetes treatment, not weight loss treatment.

In terms of the layout of domestic pharmaceutical companies,$Huadong Medicine (000963.SZ)$The marketing license application for liraglutide injections for obesity or overweight indications has been approved.$INNOVENT BIO (01801.HK)$The marketing application for Maxidu Peptide was accepted by the State Drug Administration, and Maxidu Peptide is the first new drug for weight loss indications to be marketed in China. Furthermore,$Jiangsu Hengrui Pharmaceuticals (600276.SH)$, Huadong Pharmaceutical,$Guangdong Zhongsheng Pharmaceutical (002317.SZ)$Other pharmaceutical manufacturers are also developing oral GLP-1 diet pills.

The concept of weight loss in the eyes of fund managers

As the base of obese people increases and the demand from beauty lovers, the weight loss market has broad prospects. J.P. Morgan predicts that China's weight loss drug market is expected to reach 14.9 billion US dollars by 2030.

After three days of release, “Hot and Hot” has grossed more than 1.3 billion dollars, and is currently number one in the Spring Festival program. Driven by this incident, will the first major investment line in the beginning of the Year of the Dragon be a comeback in diet pills? Judging from fund managers' judgments on diet pills in previous reports, the diet pill concept is not over.

Zhou Sicong, manager of Ping An Fund, believes that diet pills are a super topic, and this theme is expected to drive the overall popularity of pharmaceutical investment. Lai Qingxin, equity investment fund manager of Xinhua Fund, also pointed out that from the perspective of prosperity, large overseas products represented by diet pills continued to exceed expectations, and stock prices reached record highs, driving the domestic industrial chain to rise, and there are strong structural opportunities. GLP-1 single-target and multi-target drugs mean a new direction of pharmaceutical growth, which will have a great impact on the disease spectrum of the population.

There are also many fund managers who are optimistic about and explore domestic pharmaceutical companies that can seize the opportunity of diet pills. Xu Xun, fund manager of Xinghua Fund, believes that domestic diet drug-related concept stocks are divided into two categories. The first category is companies that make peptide CDMOs for overseas core varieties. Domestic CDMO companies can make up for multinational pharmaceutical companies' production capacity shortcomings and benefit more directly; the second category is GLP-1 related diet drugs developed independently in China. There aren't many such companies; they have a relatively first-mover advantage.

What are the public funds ambush?

Faced with the topic of diet pills, which fund managers acted quickly? Looking back, many fund managers have ambush ahead of schedule among individual diet drug concept stocks.

Looking at individual stocks that rose a lot in the third quarter of last year, although Changshan Pharmaceutical, Shuanglu Pharmaceutical, and Orient did not appear in the public offering of heavy stocks, many public funds have already bought into the company's top ten shareholders. Guangfa's core competency mix appeared in Changshan Pharmaceutical's 2023 mid-term report; Yinhua's special account bought the top ten tradable shares of Shuanglu Pharmaceutical in the second quarter of 2023; Orient showed mixed trends in the Huaxia industry, 111 national social security fund portfolios, Shenwan Lingxin Pharmaceutical pioneers, and a number of private equity and insurance products in last year's interim report. Furthermore, although Hanyu Pharmaceutical's top ten tradable stocks did not have heavy public fund positions, they received additional positions from northbound capital.

In the public offering of heavy individual stocks, diet drug concept companies have split.

Look at the changes in positions at the end of 2023. Innovative drug giant Hengrui Pharmaceutical received 127 million additional shares from the public offering. Borui Pharmaceutical, which has GLP-1's independent research and development capabilities, received a significant increase in public offering. Wanjia Fund increased its holdings by more than 1.06 million shares in the fourth quarter of last year. China Merchants Fund and Huaan Fund increased their holdings by 7.14 million shares and 3.8 million shares respectively. In terms of a single fund, the investment advantage company managed by Zhai Xiangdong holds the most positions, at 6.95 million shares. He clearly stated that he is optimistic about the direction of GLP-1 innovative drugs.

Another diet drug concept stock that has also received a focus on public funding is Zhongsheng Pharmaceutical. 10,000 funds still added the most positions, adding 19.298,900 shares in the fourth quarter of last year, followed by Xingzheng Global and Huaan Fund, which both surpassed 5.5 million shares. Wanjia Fund manager Geng Jiazhou believes that the 2024 theme will still be the hot topic and focus of the market. Starting from the fundamentals, artificial intelligence, innovative drugs, and steady growth are still the three main effective lines. However, due to rapid market rotation, fund managers will operate by trading individual stocks higher and lower in these three sectors to lock in profits and eliminate risks.

In addition, Nootech Biotech, which obtained the qualification of simeglutide as an API, also received a small increase in public offering in the fourth quarter of last year, increasing its public offering position by 3.77 million shares.

In terms of public offering sales, the stock price is falling short of its high position$ASYMCHEM (06821.HK)$Its holdings have been reduced a lot. Gloria Ying is also a CDMO company. It has now been registered in the US and has production capacity in the simeglutide API industry chain. Judging from the reduction in holdings, index products sold a lot. In terms of increasing holdings, the core growth of HSBC Jinxin, managed by Lu Bin, and the Chinese and European Pharmaceutical Innovation managed by Gülen increased their positions slightly.

Huadong Pharmaceutical also reduced its holdings the most. The public offering reduced its holdings by 17.22 million shares. China Merchants Fund reduced its holdings by a total of 11.17 million shares. In addition, funds under Wells Fargo and Expo also reduced their holdings by 6.07 million shares and 3.72 million shares, respectively.

edit/lambor