Looking ahead to future investment opportunities in the Industry, the bank is Bullish on pharmaceutical companies stabilizing their domestic foundations, actively participating in industry consolidation, managing the rhythm and path externally, and proactively exploring overseas markets.
According to the Zhito Finance APP, China Securities Co., Ltd. released a Research Report stating that against the backdrop of a reshaped global pattern, the China Medical Industry needs to 'base itself internally and expand externally', promoting independent controllable technology and accelerating international layout to respond to tariff policies and geopolitical challenges, capturing opportunities for transformation in the global medical Industry Chain. In the recent U.S. tariffs imposed on China, there is a phased exemption for pharmaceuticals, and the primary innovation drug export involves IP transfer, which also has a limited impact. For the Medical Device Industry, the firm is long-term bullish on the trend of independent control and Medical Device exports. Looking ahead to future investment opportunities in the industry, the firm is optimistic about medical enterprises stabilizing their domestic foundation, actively participating in industry integration, managing the pace and pathways externally, and actively exploring overseas markets.
China Securities Co.,Ltd.'s main points are as follows:
The external environment facing the China Medical Industry.
From the perspective of the current global competitive advantages of various parties, China has advantages in manufacturing and supply chain, population and domestic demand, while its innovation capacity is rapidly improving. The USA has clear advantages in innovation and early-stage research and development, while other markets are relatively fragmented, with Europe, Southeast Asia, and the Middle East being attractive markets. The medical Industry Chain is quite complex, with multinational pharmaceutical companies (MNCs) having production bases dispersed globally, but the production of key Active Pharmaceutical Ingredients is somewhat reliant on China and India. The medical industry has humanitarian attributes, and tariff imposition is relatively cautious, but challenges still exist.
The impact of the China-U.S. tariff policy.
1) Impact on the pharmaceutical Industry Chain: phased exemption for pharmaceuticals. For pharmaceutical exports, currently, domestic innovative drugs exported mainly involve IP transfer and external authorization through BD cooperation, which does not generate a commodity sales logic. The temporary impact on CXO and upstream is manageable, as the majority of Active Pharmaceutical Ingredient categories are also exempt from increased tariffs this time. The drug industry tariff collection is currently in the 232 investigation process, and subsequent impacts remain to be observed. 2) Impact on the Medical Device Industry: continued optimism about independent control and Medical Device export trends. Focus should be on companies with domestic market share growth, relatively small impact from shocks, and strong long-term export capabilities. It is especially important to note that the analysis of individual companies should consider whether U.S. competitors' shipping/production sites are in the U.S., the localization strategy of overseas companies in China, and the revenue share of Chinese companies exporting to the U.S.
Focus on domestic: Stabilize domestic foundations, embrace innovation and integration.
1) Policy outlook: Reform has entered a deep-water zone, and high-quality growth has become the norm. The reform policies in the pharmaceutical field have entered a period of normalization. By 2025, this organization will focus on optimizing the collection policies for drugs and consumables, as well as establishing a diversified and composite reform of medical insurance payment methods. The internal market needs to continuously strengthen clinical value assessment, while the external market still has incremental opportunities. 2) Opportunities for domestic alternatives arising from sudden changes in the external environment lead to adjustments in supply chain strategies. 3) Medical instruments: The industry stands at a turning point of integration. 4) The Chinese Patent Medicine industry: Resource integration and strategic empowerment. 5) The pharmaceutical industry: Overseas acquisitions primarily focus on technological layout while resource integration is the main focus domestically.Mergers and Acquisitions.Explore externally: Grasp the rhythm and path, actively develop overseas markets.
1) Medical devices going overseas: The overseas market holds great potential, with domestic leading companies gearing up. 2) Overseas licensing transactions: The overall number and amount of drug companies' license-outs are increasing. 3) Vaccines going overseas: The model is becoming more diversified, and progress is expected to accelerate. 4) Blood products going overseas: Taking IgG as an opportunity, overseas product registration continues to advance.
Investment suggestion: Focus internally, explore externally.
Continue to be bullish on high-quality innovative drug companies, and actively pay attention to cutting-edge technologies in pharmaceutical and medical instruments.
Global liquidity is expected to continue improving, and national policies encourage industry innovation. This organization remains bullish on high-quality innovative drug companies with global competitiveness. At the same time, this organization suggests actively paying attention to cutting-edge technologies, such as innovative drugs and pharmaceuticals (dual antibodies, multi-antibodies, TCE, nuclear medicine, etc.), and medical devices (AI, Brain-computer Interface, etc.). Relevant companies in the innovative drugs and pharmaceuticals field include: Jiangsu Hengrui Pharmaceuticals, INNOVENT BIO, AKESO, BEIGENE, Sichuan Kelun Pharmaceutical, Kelun Botai, Hutchmed (China), SINO BIOPHARM, Haisco Pharmaceutical Group, Shenzhen Salubris Pharmaceuticals, Jiangsu Nhwa Pharmaceutical, and Zexing Pharmaceutical, etc.; relevant companies in the medical devices field include United Imaging Healthcare, Guangzhou Kingmed Diagnostics Group, Dian Diagnostics Group, etc.
The main line of going overseas: focusing on the long term, unafraid of short-term fluctuations. In the long term, the medical industry is expected to produce global large companies, but investors should also fully anticipate the challenges posed by going overseas. The innovative drug sector includes companies with blockbuster license-out potential, and the medical device sector includes Shenzhen Mindray Bio-Medical Electronics, United Imaging Medical, and BGI Genomics; the vaccine sector includes Shenzhen Kangtai Biological Products, CanSino Biologics Inc., and Olin Bio.
The main line of marginal changes: focusing on opportunities from policy and supply-demand relationship improvements. 1) Policy improvements: including the main line of pharmaceutical circulation and medical devices update, relevant companies in the circulation field include SINOPHARM, SH PHARMA, CHINARES PHARMA, and Jointown Pharmaceutical Group; the equipment update main line includes Shenzhen Mindray Bio-Medical Electronics, United Imaging Medical, and Sonoscape Medical Corp. 2) Supply-demand relationship improvement: In the CXO industry, the previous adjustments were sufficient, and the recovery of global investment and financing is expected to gradually boost global customer demand. This sector is optimistic about WUXI APPTEC, WUXI BIO, Asymchem Laboratories, TIGERMED, and Zhejiang Jiuzhou Pharmaceutical, which have global competitiveness; upstream in life sciences and biopharmaceuticals includes BPS.
Integration main line: focusing on the medical device, Traditional Chinese Medicine, pharmaceutical sector, and state-owned enterprises. It is recommended to pay close attention to the medical device and Traditional Chinese Medicine sub-industries, certain pharmaceutical enterprises, and state-owned enterprises.
Risk Warning
Industry policy risks; risks of research and development falling short of expectations; risks of approval not meeting expectations; risks of macroeconomic environment fluctuations.
