From Imitation to Innovation: Domestic Innovative Drugs Enter a Golden Development Period

        Since 2021 Year 1 Month 1 Day, the national organized coronary stent centralized procurement results have been implemented in many places, with the average price of coronary stent products dropping from around 1.3 ten thousand yuan to around 700 yuan. According to the national preset reporting volume, the annual savings will be 11.7 billion yuan.

       With the establishment of the regular mechanism for centralized volume-based procurement and dynamic adjustment of the medical insurance drug catalog, the interest chain in China's pharmaceutical industry is no longer invincible. With the continuous deepening of the "Three Medical Linkage" reform, the initial pains and reshuffling faced by the pharmaceutical industry during the early reform stage have basically been completed. Under the main theme of price reduction, innovation has become the top priority for enterprises. " Three Medical Linkage " reform continues to deepen, the initial pains and reshuffling faced by the pharmaceutical industry during the early reform stage have basically been completed. Under the main theme of price reduction, innovation has become the top priority for enterprises.

The first batch of volume-based procurement stents implemented

       January 1 Day, Beijing, Tianjin, Hebei, Liaoning, Jilin, Heilongjiang, Jiangsu, Zhejiang, Fujian, Shandong, Hunan, Guangdong, Hainan, Guizhou, Yunnan, Gansu, Qinghai, Xinjiang and other 18 provinces and cities (regions) officially implemented the national organized coronary stent centralized volume-based procurement.    

       It is reported that the first batch of 18 provinces and cities (regions) selected products have local inventory averaging 33% of the agreed procurement volume, which can meet the first month's usage demand of medical institutions. Other provinces will also be implemented successively in January.

       After the price reduction, many people worry whether the quality of the selected products in volume-based procurement will decline or whether companies will cut corners. Chen Jinfu, Deputy Director of the National Healthcare Security Administration, stated that there is already a complete system design in this regard.

       Indeed, such ultra-low prices inevitably raise concerns about whether companies' profits can be guaranteed. Data from Guohai Securities Research Institute shows that 2019 year MicroPort Medical Firebird2、 Firehawk and FireCondor these three coronary stents generated revenue of about 16 billion yuan, accounting for about 29% of total revenue. Among them, Firebird2 revenue increased year-on-year by 22.9% . However, according to the two products won by MicroPort Medical, Firebird2 and Firekingfisher the first-year intended purchase volume accounts for about 35% of this centralized procurement volume, with a listed price of 7799 yuan for Firebird2 which will drop to 590 yuan, Firekingfisher the winning bid price is 750 yuan. Calculated at the winning bid price, the first-year revenue of the two products will be less than 160 million yuan.

       "Improved accessibility, increased volume, and accelerated payment will bring hope to enterprises from another perspective. ” said an industry insider. 2020 Year 12 Month On the 17th, the National Healthcare Security Administration issued the "Opinions on the National Organized Coronary Stent Centralized Volume-Based Procurement and Supporting Measures," which made clear requirements on local platform listing and distribution work, medical insurance fund prepayment policies, and other aspects.

      The "Opinions" pointed out that medical insurance departments in all coordination areas should calculate the agreed procurement amount for each selected product based on the selected product price and the procurement products and quantities agreed between medical institutions and enterprises. On the basis of the total medical insurance fund budget management, a prepayment mechanism should be established; after medical institutions sign procurement agreements with selected enterprises, the medical insurance fund shall prepay no less than 30% of the annual agreed procurement amount to medical institutions, and require medical institutions and enterprises to settle payments promptly, with settlement time not exceeding the end of the month following the acceptance of delivery. While implementing the payment responsibility of medical institutions, it encourages medical insurance agencies or procurement agencies to settle directly with enterprises. Provincial medical insurance departments should monitor and supervise the implementation of the prepayment policy and the payment recovery situation of medical institutions. Volume-based procurement of medical devices will continue. Dong Zhaohui, Director of the Pharmaceutical Pricing and Bidding Procurement Department of the National Healthcare Security Administration, said that the next step will be to summarize existing experience and further optimize procurement rules. Since it is still in the exploratory stage, priority will be given to products that are widely used clinically, have large procurement amounts, are technically mature, and have sufficient market competition to be included in centralized procurement.

      In fact, as early as

       month, the State Council issued the "Reform Plan for the Governance of High-Value Medical Consumables," mentioning the establishment of a basic medical insurance access system for high-value medical consumables, implementing directory management of high-value medical consumables, improving the dynamic adjustment mechanism of the directory, timely adding necessary new technology products, and removing products no longer suitable for clinical use. Gradually implement price negotiation for medical insurance access of high-value medical consumables to achieve 2019 Year 7 price for volume exchange. " 2020 Capital Market Achievements Shine ”。

Price reduction does not mean market contraction. In fact, with the maturity of centralized procurement bidding rules, market expectations are relatively sufficient, and the marginal effect of market impact has greatly weakened.

              Choice data shows that as of

day, according to the Shenwan industry classification, there are a total of 2020 Year 12 Month 31 companies listed on the Science and Technology Innovation Board in the chemical and biological pharmaceutical sector, with a total market value of 20 billion yuan. Among them, 3956.54 companies have a total market value exceeding 14 billion yuan. Among them, Huaxi Bio, Junshi Bio, and CanSino rank the top three with 100 billion yuan, 702.86 billion yuan, and 646.75 626.48 billion yuan respectively. 626.48亿元位列前三甲。

       From the perspective of stock prices, this 20 company's stock price performance is relatively good. As of 12 Month 31 day, only three companies' stocks fell below their IPO price, while the rest 17 companies' stock prices have all risen, with an average increase reaching 236.2%.

       The report from Huajin Securities Research Institute shows that due to the impact of the pandemic, the pharmaceutical sector has received high market attention. Coupled with liquidity easing factors, pharmaceutical and biological stocks have been favored by market funds. As of 2020 Year 12 Month 18 day, the cumulative increase in pharmaceutical and biological stocks was 48.97% , outperforming the 300的 22.05% increase in the Shanghai and Shenzhen markets, ranking fourth among 29 primary industries, with outstanding relative sector returns.

       From a valuation perspective, the report shows that, 2020 at the beginning of the year, the average valuation of the pharmaceutical sector was 41 times. Under the influence of the pandemic, the pharmaceutical sector rose continuously, and at the end of 7 month, the valuation premium rate relative to all A shares reached a peak of 123% . In the second half of the year, due to the high previous gains being digested and policy uncertainty suppressing the sector, the overall valuation declined. As of 2020 Year 12 Month 18 day, the pharmaceutical sector's PE was about 61.8 times, with a valuation premium rate relative to A stocks (excluding financials) of 68% , slightly higher than the central range since 2010 year (the average premium rate since 2010 year is 49% , with a median of 52%).

       From the perspective of holdings, holdings declined somewhat at the end of the third quarter but remained at historically high levels. As of the end of the third quarter of 2020 year, the proportion of pharmaceutical stock holdings in all funds was 13.6% , down by 3.9 percentage points quarter-on-quarter; excluding pharmaceutical funds, pharmaceutical stock holdings were 9.9% , down by 3.4 percentage points, but overall, compared to historical data, sector allocation remains at a relatively high level.

Innovative drugs usher in a golden development period

       Medical policies are intensively promoted, and the core trend of medical insurance cost control remains unchanged. The momentum of innovation is unstoppable. Zheng Wei, an analyst at Tianfeng Securities, stated that medical reform represented by volume-based procurement has accelerated the price reduction of generic drugs and high-value consumables, forcing companies to pursue innovation and research and development.

       Industry insiders say the next decade will be a boom period for original innovative drugs. With continued compression of generic drugs, first generics, and China-specific drugs in the coming years, innovative drugs will usher in unlimited structural opportunities.

       Approval of domestic innovative drugs has accelerated. The Huachuang Securities report shows that, 2020 in year, the number of approved domestic new drugs reached 11 units, reaching double digits for the first time. Among them, there were 6 oncology new drugs, 2 anesthesia new drugs, 3 and hepatitis C new drugs. 2020 At the same time, 20 in year, more than domestic innovative drugs had submitted marketing applications, and the number of approved domestic new drugs in 2021 is expected to continue to break double digits.

       Zheng Wei said that compared to developed countries such as the US, Europe, and Japan, the proportion of innovative drugs in China is low, with significant room for improvement. 2015 In year, the US pharmaceutical market size was 4390 billion USD, with innovative drugs accounting for 67% ; the European market was 1440 billion USD, with innovative drugs accounting for 60% ; the Japanese market size was 790 billion USD, with innovative drugs accounting for 68% ; while China’s market size is about 115 billion USD, with almost no share for innovative drugs.

       She stated that conservatively, the innovative drug industry in China has 10 Year 10 times the potential space and is expected to produce giants and new leaders. According to Minet data, 2019 in year, the overall size of China's pharmaceutical terminal market was about 2 trillion, with innovative drugs accounting for only about 5% %, approximately 1000 billion yuan. Assuming conservatively that China's overall pharmaceutical market maintains a relatively low compound growth rate of about 10 4.14% for the next years, then after 10 years, China's overall pharmaceutical market will expand to 1.5 times, reaching a scale of 3 trillion. Further conservatively assuming that the proportion of innovative drugs in China rises to about 33% (conservatively estimated to be lower than in the US, Europe, and Japan), reaching a scale of 1 trillion, then China's innovative drugs have 10 Year 10 times the potential space, with the possibility of producing a batch of growing high-quality companies. If in the future China's innovative drug proportion rises to about 50% %, then China's innovative drugs have 10 Year 15 times the potential space.

       In addition to the pressure from medical insurance cost control policies, various local government incentives have also once again increased the enthusiasm of pharmaceutical companies for research and development. 12 Month 28 On [date], the official website of the Kunming Municipal People's Government released the "Several Measures for Promoting the High-Quality Development of the Biopharmaceutical Industry in Kunming (Trial)", accelerating the improvement of the biopharmaceutical industry chain, innovation chain, capital chain, talent chain, and service chain, optimizing the industrial ecological environment, and striving to build a distinctive and important biopharmaceutical industry cluster in Southwest China. It clarifies that for new varieties that have obtained drug clinical approval or clinical filing, and completed domestic and international Ⅰ 、 Ⅱ 、 Ⅲ phase clinical research or bioequivalence studies, according to the subsidy amount of the Yunnan Province Biopharmaceutical Industry Development Special Fund, 50% , respectively provide a maximum of no more than 150 ten thousand yuan, 150 ten thousand yuan, 250 ten thousand yuan, 4 million yuan matching subsidy.

       On the Shandong side, the "Shandong Province Innovative Drugs and High-end Medical Devices Leading Action Plan (2020-2022)" points out that major innovative achievements are encouraged, and for new drugs with independent intellectual property rights that have been industrialized in Shandong, 2020-2022 it provides comprehensive post-subsidy funding support of ten thousand yuan. Hebei Province issued the "Several Policies to Support the High-Quality Development of the Biopharmaceutical Industry" to reward innovative drugs entering Ⅰ phase clinical trials with 2000 5 million yuan provincial strategic emerging industry special fund reward. Ⅲ phase clinical trial research of innovative drugs, providing 5 million yuan provincial strategic emerging industry special fund reward.