From imitation to innovation, domestic innovative drugs welcome the golden development period

 Since January 1, 2021, the results of centralized procurement of coronary stents organized by the state have been implemented in many places, and the average price of coronary stents has dropped from about 13,000 yuan to about 700 yuan. According to the preset national reporting volume, 11.7 billion yuan will be saved throughout the year.
With the establishment of centralized procurement with quantity and the normalization mechanism of dynamic adjustment of medical insurance drug catalog, the interest chain of China's pharmaceutical industry is no longer strong and unbroken. With the continuous deepening of the "three medical linkage" reform, the pain and reshuffle of the pharmaceutical industry at the initial stage of the reform have been basically completed. Under the theme of price reduction, innovation has become the top priority of enterprises.
The first batch of purchased supports with quantity landed
On January 1, 18 provinces and cities (districts) including Beijing, Tianjin, Hebei, Liaoning, Jilin, Heilongjiang, Jiangsu, Zhejiang, Fujian, Shandong, Hunan, Guangdong, Hainan, Guizhou, Yunnan, Gansu, Qinghai and Xinjiang officially launched centralized procurement of coronary stents.    
It is reported that the local inventory of selected products in the first batch of 18 provinces and cities (districts) has reached an average of 33% of the agreed purchase volume, which can meet the demand of medical institutions in the first month. The rest of the provinces will also be implemented in January.
After the price reduction, many people are worried about whether the quality of the selected products in the mass purchase is declining and whether the enterprises are cutting corners. Chen Jinfu, deputy director of the State Health Insurance Bureau, said that there is a complete system design in this regard.
Indeed, such ultra-low prices will inevitably cause people to worry about whether corporate profits can be guaranteed. According to the data of Guohai Securities Research Institute, the revenue of the three coronary stents of minimally invasive medical Firebird2, Firehawk and FireCondor in 2019 was about 1.6 billion yuan, accounting for 29% of the total revenue. The revenue of Firebird 2 increased by 22.9% year on year. However, according to the two products Firebird2 and Firekingfisher won the bid of minimally invasive medical, the intended purchase volume in the first year accumulatively accounts for about 35% of this centralized purchase volume, the Firebird2 with the online price of 7799 yuan will be reduced to 590 yuan, and the bid winning price of Firekingfisher will be 750 yuan. If the bid winning price is calculated, the revenue of the two products in the first year will be less than 160 million yuan.
"Increased accessibility, increased volume and accelerated payment collection will bring hope to the enterprise from the other side." Some insiders said. On December 17, 2020, the National Health Insurance Bureau issued the Opinions on the Supporting Measures for the Centralized Procurement and Use of Coronary Stents by the State, making clear requirements on the networking and distribution of local platforms, the prepayment policy of medical insurance funds, etc.
The Opinions pointed out that the medical insurance department of each overall planning area should calculate the agreed purchase amount of each selected product according to the selected price of the selected product, the purchased products and quantity agreed by each medical institution and the enterprise. On the basis of the management of the total budget of the medical insurance fund, establish a prepayment mechanism; After the medical institution signs the purchase agreement with the selected enterprise, the medical insurance fund shall be paid to the medical institution at least 30% of the annual agreed purchase amount, and the medical institution shall be required to settle the payment with the enterprise in a timely manner, and the settlement time shall not exceed the end of the next month after the delivery acceptance. Under the premise of implementing the main responsibility of payment for goods of medical institutions, medical insurance agencies or purchasing agencies are encouraged to directly settle accounts with enterprises. The provincial medical insurance department shall monitor and supervise the implementation of the prepayment policy and the payment collection of medical institutions.
However, the procurement of instruments with volume will continue. Dong Chaohui, director of the Department of Medicine Price and Bidding Procurement of the State Medical Insurance Bureau, said that the next step would be to summarize the existing experience and further optimize the procurement rules. Because it is still in the exploration stage, priority will be given to the products that are widely used clinically, have a large purchase amount, are technically mature, and have sufficient market competition.
In fact, as early as July 2019, the State Council issued the Reform Plan for Controlling High value Medical Consumables, which mentioned the establishment of a basic medical insurance access system for high-value medical consumables, the implementation of high-value medical consumables catalog management, the improvement of the dynamic adjustment mechanism of the catalog, the timely addition of necessary new technology products, and the withdrawal of products no longer suitable for clinical use. Gradually implement the negotiation on the access price of medical insurance for high-value medical consumables, and achieve the goal of "exchanging price with quantity".
Outstanding achievements in capital market in 2020
Cutting prices does not mean that the market will shrink. In fact, with the maturity of the rules of centralized purchase bidding, the market expectation is relatively sufficient, and the marginal effect of market impact has been greatly weakened.
Choice data shows that, as of December 31, 2020, according to the industry classification of Shenwan, there are a total of 20 companies listed on the science and technology innovation board that belong to the chemical and biological medicine sector, with a total market value of 395.654 billion yuan. Among them, 14 companies have a total market value of more than 10 billion yuan, of which Huaxi Biology, Junshi Biology and Kangxinuo ranked in the top three with 70.286 billion yuan, 64.675 billion yuan and 62.648 billion yuan respectively.
From the perspective of stock prices, the stock prices of these 20 companies have performed relatively well. As of December 31, only three companies had broken their hair, while the stock prices of the other 17 companies have risen, with an average rise and fall of 236.2%.
The report of Huajin Securities Research Institute shows that due to the epidemic situation, the pharmaceutical sector has received high attention from the market. With the addition of liquidity easing factors, pharmaceutical and biological products are favored by market funds. As of December 18, 2020, the cumulative growth rate of medicine and biology was 48.97%, which was better than the 22.05% growth rate of CSI 300, ranking fourth among 29 primary industries, and the relative earnings of the sector was outstanding.
From the perspective of valuation, the report shows that the average valuation of the pharmaceutical sector was 41 times at the beginning of 2020. Under the influence of the epidemic situation, the pharmaceutical sector rose all the way, and the valuation premium rate reached a high of 123% relative to all A-shares at the end of July. In the second half of the year, the overall valuation of the sector fell back due to the digestion of the high early increase in valuation and the suppression of policy uncertainty. As of December 18, 2020, the PE of the pharmaceutical sector was about 61.8 times, the valuation premium rate relative to A-share (excluding finance) was 68%, and the premium rate was slightly higher than that of the central region since 2010 (the average premium rate since 2010 was 49%, the median was 52%).
From the perspective of position, the position at the end of the third quarter fell back but remained at a historical high position. As of the end of the third quarter of 2020, the proportion of Chinese medicine stock holdings in all funds was 13.6%, down 3.9 percentage points from the second quarter; After deducting medical funds, the position of medical shares was 9.9%, down 3.4 percentage points month on month. However, overall, compared with historical data, the sector allocation is still at a relatively high level.
Innovative medicine meets the golden development period
Medical policies have been intensively promoted, the core trend of controlling medical insurance fees has not changed, and the trend of innovation is irresistible. Zheng Wei, an analyst at Tianfeng Securities, said that the medical reform represented by volume procurement accelerated the pace of price reduction of generic drugs and high-value consumables, forcing enterprises to take the road of innovative research and development.
Some insiders said that the next decade will be an outbreak of original new drugs. With the continued compression of generic drugs, first generic drugs and Chinese characteristic drugs in the next few years, innovative drugs will usher in unlimited structural opportunities.
The approval of domestic innovative drugs has been accelerated. According to the report of Huachuang Securities, in 2020, the number of domestic new drugs approved reached 11, reaching double digits for the first time. Among them, there are 6 new drugs for tumor, 2 new drugs for anesthesia and 3 new drugs for hepatitis C. At the same time, more than 20 domestic innovative drugs have submitted applications for listing in 2020, and the number of domestic new drugs approved in 2021 is expected to continue to exceed double digits.
Zheng Wei said that compared with developed countries in Europe, the United States and Japan, China has a relatively low proportion of innovative drugs and a large room for improvement. In 2015, the U.S. drug market was 439 billion dollars, of which innovative drugs accounted for 67%; The European market was 144 billion US dollars, with innovative drugs accounting for 60%; the Japanese market was 79 billion US dollars, with innovative drugs accounting for 68%; In China, the market size is about US $115 billion, and innovative drugs account for little.
She said that it is conservatively estimated that China's innovative drug industry has 10 times the space in 10 years, and is expected to grow into a giant and new rich. According to Minneapolis data, the overall size of China's drug terminal market in 2019 will be about 2 trillion, of which innovative drugs will account for only about 5%, about 100 billion yuan. It is conservatively assumed that the overall drug market in China will maintain a relatively low compound growth rate of about 4.14% in the next 10 years, and then the overall drug market in China will expand to 1.5 times, to 3 trillion in size 10 years later. The conservative estimate assumes that the proportion of innovative drugs in China will increase to about 33% (the conservative estimate assumes that the proportion is lower than that in Europe, the United States and Japan), to 1 trillion. Therefore, China's innovative drugs have a space of 10 times for 10 years, which is expected to produce a number of growth oriented high-quality enterprises. If the proportion of innovative drugs in China will increase to about 50% in the future, there will be 15 times more space for innovative drugs in China in 10 years.
In addition to the pressure of the medical insurance fee control policy, the advantages of the local government have also increased the R&D enthusiasm of pharmaceutical enterprises again. On December 28, the official website of Kunming Municipal People's Government released Several Measures for Promoting the High Quality Development of the Biomedical Industry in Kunming (Trial), speeding up the improvement of the biomedical industry chain, innovation chain, capital chain, talent chain and service chain, optimizing the industrial ecological environment, and making every effort to build an important biomedical industry cluster with distinctive characteristics in southwest China. Clarify that for new varieties that have obtained clinical approval documents or clinical records of drugs, and completed Phase I, II, and III clinical studies or bioequivalence studies at home and abroad, matching subsidies of no more than 1.5 million yuan, 1.5 million yuan, 2.5 million yuan, and 4 million yuan will be given respectively according to 50% of the special funds for the development of Yunnan's biomedical industry.
In Shandong, the Action Plan of Shandong Province for Leading Innovative Drugs and High end Medical Devices (2020-2022) pointed out that we should encourage the output of major innovative achievements, and give 20 million yuan of comprehensive post subsidy support to Class I new drugs with independent intellectual property rights and industrialization in Shandong. Hebei Province issued Several Policies on Supporting the High Quality Development of the Biomedical Industry, and awarded 5 million yuan of provincial special funds for strategic emerging industries to innovative drugs entering phase III clinical trial research.