According to the Futu Securities APP, Sinolink Securities released a research report stating that this week, the White House announced the prices for the first batch of drugs subject to price negotiations, and the US stock market reacted steadily. In addition, it is optimistic about the development of the domestic medical device industry in the second half of the year, and industry procurement demand is expected to accelerate recovery. At the same time, leading domestic companies in sub-sectors such as ultrasound and endoscopy are expected to further increase their market share and return to a growth and profit upward trend.

With the recent disclosure of half-year reports for the pharmaceutical sector, concerns about business performance are expected to gradually clear up. Looking ahead to the second half of the year, Sinolink Securities continues to be optimistic about the pharmaceutical sector ending its 3-4 year down cycle and welcoming a variety of reversals in policies, valuations, earnings, and institutional allocations. In this regard, Sinolink Securities remains bullish on two key directions: innovative drug exports and volume expansion, as well as the recovery of in-hospital stock pharmaceutical and equipment business performance. In addition, since the second quarter, purchasing plans for medical equipment have been launched in many places, and attention is recommended to be paid to the industry revival opportunities brought about by medical equipment updates.

In this regard, Sinolink Securities continues to be optimistic about two key directions: innovative drug exports and volume expansion, as well as the recovery of in-hospital stock pharmaceutical and equipment business performance. In addition, since the second quarter, purchasing plans for medical equipment have been launched in many places, and attention is recommended to be paid to the industry revival opportunities brought about by medical equipment updates.

According to Sinolink Securities, any mature medical insurance system and pharmaceutical market needs to face medical insurance cost control and price negotiations, and these measures should not bring excessive panic and concern about the investment prospects of the pharmaceutical industry and listed companies. Considering that the expectations for the centralized procurement of drugs and equipment in China have been relatively sufficient, Sinolink Securities believes that policy expectations will equally help A-share valuations in the pharmaceutical sector to rise in the future clearing period and marginal improvement.

Innovative drugs: With the disclosure of interim reports for innovative drug companies, the main growth driving theme is clear. Sinolink Securities continues to be optimistic about domestic innovative drug companies gradually entering domestic and foreign commercialization or authorization trading redemption stages; at the same time, with the support of national policies and technological progress in China's innovative drug industry, the industry will usher in a faster overall development. Sinolink Securities maintains its optimism for three segmented directions: first, the new products with leading R&D advantages of consumer-oriented innovative drugs and the high elasticity space for future revenue of mature capacity pharmaceutical companies; second, the high-growth future of leaders in ADCs (antibody-drug conjugates) and bispecific antibodies; and third, the upward trend in the performance of bottom-tier leaders.

Biological products: Fujian Cosunter Pharmaceutical has completed the phase II clinical trial for GST-HG141 low viral load, and the clinical trial results are positive. The proportion of patients with low viral load after taking oral antiviral drugs is close to 30%, and if HBV DNA cannot be cleared, the risk of developing liver cancer will be significantly increased. Real-world studies have shown that nucleoside analogue used in combination with long-acting interferon is the best treatment option for low viral load at this stage. With the further promotion of the combination schemes based on long-acting interferon and the introduction of more innovative therapies, the low viral load population is expected to speed up the clearance of HBV DNA, and the guidelines at this stage suggest that the scale of "advantaged population" for initiating hepatitis B treatment is expected to continue to expand, with the penetration rate of hepatitis B cure expected to accelerate.

Medical devices: Sinolink Securities is bullish on the development of the domestic medical device industry in the second half of the year. As medical equipment update policies are gradually being implemented, industry procurement demand is expected to accelerate recovery. At the same time, leading domestic companies in sub-sectors such as ultrasound and endoscopy are expected to further increase their market share and return to a growth and profit upward trend.

Chinese medicine: Some listed companies in the Chinese medicine sector have already announced or published their 1H24 performance forecasts. It is recommended to continue to pay attention to the unique varieties + centralized procurement risks clearing the inside-the-hospital direction and the company with high certainty of performance determination. Pay attention to the OTC companies with strong brand power and good price control system outside the hospital. In addition, the Chinese herbal medicine price index: the trend of the comprehensive 200 rebounded from the high level after April 24, and fell slightly after July but still remained at a high level. Companies with layouts in the cultivation of Chinese herbal medicine are worth paying attention to.

Medical services and medical aesthetics: Recently, the State Council issued the "Opinions on Promoting High-Quality Development of Service Consumption", which mentioned for the first time the cultivation and development of new service formats such as health checkups, consultations, and management in the field of health consumption. Leading companies in the professional physical examination industry are expected to benefit from the double drive of policy and demand, and continue to develop. In terms of individual stocks, recently related stocks have successively released/forecasted 1H24 performance, and with the pressure of high base number coming to an end, bullish on the consumption recovery brought by the peak season in the second half of the year in the sector.

Investment recommendation: Sinolink Securities continues to be bullish on two key directions: innovative drugs going overseas and increasing volumes, as well as the rebound of in-hospital inventory drug performance. In addition, since the second quarter, many places have successively launched medical equipment procurement plans, and it is recommended to pay attention to the industry's recovery opportunities brought by the update of medical equipment.

Key companies to focus on: Kelun-Biotech, Xiamen Amoytop Biotech, Humanwell Healthcare, Innovent Bio, shenzhen new industries biomedical engineering, and others.

Risk warning: Hospital bidding and procurement progress is slower than expected; hospital demand is lower than expected; risk of medical insurance cost control and centralized procurement price reduction; risk of merger and integration falling short of expectations.