According to Zhito Finance APP, Guoyuan released a Research Report stating that the Pharmaceutical Sector is at a triple bottom in earnings, valuation, and allocation. In 2023, the Pharmaceutical Sector's performance was significantly affected by anti-corruption, while the growth rate is gradually stabilizing in 2024. However, valuation levels and Fund allocation levels remain at the bottom. In 2025, as health commercial Insurance gradually develops, improvements are expected in the payment end of the Pharmaceutical Industry, with a Bullish outlook on the Innovative Drugs Industry Chain. Additionally, going abroad is still a necessary path for our country's pharmaceutical companies, and those with strong product power and channel capabilities are expected to gain advantages. Furthermore, it is advisable to pay attention to individual stocks in the subfields of mergers and acquisitions, centralized procurement clearance, and undervaluation.

Guoyuan Securities' main points are as follows:

Improvements are expected in the payment end, with a Bullish outlook on sub-tracks such as Innovative Drugs, going abroad in pharmaceuticals, and themes like mergers and acquisitions.

Innovative Drugs Industry Chain.

After more than ten years of research and development reserves, China's Innovative Drugs have entered the stage of成果兑现, with progress made in new drug research and development across multiple areas such as ADC, GLP-1, dual antibodies, and AD, gradually achieving domestic listings. Meanwhile, breakthroughs have also been made in overseas licensing and application for listing of China’s Innovative Drugs, which proves the rapid enhancement of the innovation capability of our country's Innovative Drug companies and provides ample Cash support for further research and development work. In 2025, a Bullish outlook is particularly placed on Innovative Drug companies that are in major tracks and have advanced research and development progress.

Going abroad in pharmaceuticals.

Exporting Pharmaceuticals is a fundamental threshold and an inevitable path for growth into a Global pharmaceutical enterprise. The global pharmaceutical market has vast potential, with many product price levels exceeding those in China. The regulatory pharmaceutical market in developed countries holds a large market share, with high health expenditures, making it an important market for pharmaceutical consumption. Meanwhile, emerging markets are growing at a rate higher than the world average and have a large population base, indicating even greater growth potential in the future. As the strength of China's pharmaceutical enterprises continues to grow, exporting is an essential path for future development, opening up long-term growth space for enterprises. Focus is particularly on export pharmaceutical companies with strong product capabilities and distribution capacities.

Mergers and Acquisitions in the Pharmaceutical Industry.

On September 24, 2024, the China Securities Regulatory Commission issued the "Opinions on Deepening the Reform of the Mergers and Acquisitions and Restructuring Market for Listed Companies," encouraging listed companies to strengthen industrial integration and improve the transaction efficiency of the restructuring market, with the possibility of a wave of mergers and acquisitions coming to the market. Currently, China's pharmaceutical market is in an accelerated phase of increasing concentration, and mergers and acquisitions are expected to accelerate. It is recommended to pay close attention to this.

Pharmaceutical Procurement.

Currently, centralized procurement in different pharmaceutical fields has been accelerating, with the impact in some niche markets already clearing. New growth is expected in the future, especially in segments like insulin, orthopedics, and some generic drug companies. After four years of adjustments, the valuation levels of certain pharmaceutical sectors are relatively low, with upward trends in fundamentals. Future events may also act as catalysts, such as the National Essential Medicine Catalog and State-owned Enterprise Reform, which are recommended to focus on.

Investment Suggestions: Pay attention to individual stocks in niche fields such as mergers and acquisitions, procurement clearance, and low valuations.

By 2025, with the gradual development of health commercial insurance, the payment side of the pharmaceutical industry is expected to gradually improve, making the Innovative Drugs Industry Chain bullish. Furthermore, exporting pharmaceuticals remains an essential path for the future of Chinese pharmaceutical companies, with export companies that have strong product capabilities and distribution capacities likely to gain a competitive edge. In addition, it is recommended to focus on individual stocks in niche fields like mergers and acquisitions, procurement clearance, and low valuations.

Risk Warning: Policy risks in the pharmaceutical industry, risks of product price reductions, and risks of slower-than-expected R&D progress.