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On Friday, pharmaceutical and biotechnology stocks saw a long-lost bull market
.
The lead ignited by individual stocks that began this month suddenly exploded
across the entire sector.
Shenwan Pharmaceutical Bio Index posted its biggest intraday gain in more than 14 years, with a half-day net purchase of 9.
124 billion yuan
.
Before Friday's rally, the CSI Healthcare Index had fallen by more than 50% since the beginning of July 2021, and the maximum drawdown was more than 55%.
The sudden radicalization of capital, in the eyes of more conservative investors, is still a small cycle
brought about by policy.
Look at the top five stocks in the industry: Xiangsheng Medical, Microelectrophysiology, Dirui Medical, New Industry, Open Medical, two of which do medical equipment, two do in vitro diagnostics, and one does electrophysiology - all related
to financial discounts and autumn collective procurement.
to fiscal interest discounts and autumn collective procurement.
The pulling effect of the policy can also be seen from the high and low growth of sub-industries
.
Among the secondary sub-industries of the pharmaceutical and biological industry, the most powerful are medical equipment (14.
79%), in vitro diagnosis (12.
09%) and new medical infrastructure (11.
44%)
.
After the policy disturbance was removed, the scope of capital blood flow spread: in the fields of innovative drugs, CXO, innovative devices, medical services and other fields, this rise in the market has also brought different degrees of optimism
.
In the past two years that people have dissed pharmaceutical stocks, companies have grown small or large, but they have not pressed the pause button
.
All investors are looking forward to whether this fluctuation in market fundamentals can be repaired by taking advantage of policy warm winds to become the beginning
of a U-shaped trough for pharmaceutical biology.
of pharmaceutical biology to fully get out of the U-shaped trough.
-01-
-01-The pharmaceutical sector has been reopened for two years
The pharmaceutical sector has been reopened for two years In the past two years, the pharmaceutical and biological industry has not been without high light moments, but the overall sector capital diversion, the trade-off between the tracks - so tossed down, in fact, each piece has not been able to get sustained capital growth
.
Since 2020, the law of sector rotation is roughly as follows: epidemic-related-innovative drugs-CXO-vaccines-consumer healthcare-pharmacies-APIs, and then cycle again
.
.
The arrival of the epidemic has driven the research and development of innovative drugs in the midstream, and R&D orders have driven outsourcing services; Due to the lagging effect of innovative drug and CRO investment, capital is gradually transferred to downstream fields such as consumer healthcare and pharmacies.
After that, the previous midstream research and development phased results have boosted the market of upstream APIs
.
In the end, the epidemic has given the pharmaceutical and biotechnology sector more imagination, but the return cycle of the industry cannot meet market expectations, resulting in frequent
sector rotation.
Since 2022, the other side of the epidemic has begun to shine coldly: the economic environment is declining in shock, the industry performance is ebbing, and companies can no longer digest valuations
with profit growth.
Looking back at several major sectors from last year to now: innovative drugs, vaccines, and consumer medical care, they are basically a tragedy from hot to cold
.
At the end of 2020, all domestic PD-1 was selected for medical insurance negotiations, coupled with the blessing of the epidemic on the halo of pharmaceutical companies, China's innovative drugs ushered in a big outlet
.
However, in less than half a year, capital overheating caused the supply side to overflow, and people gradually realized that more pipelines are not king, and selling more is the real skill - at this time, China's innovative drug companies have not yet reached the mature commercialization stage
.
Therefore, since the second half of 2021, major fund managers have reduced or even liquidated their holdings
in innovative drug stocks.
Throughout the year of 2022, innovative drug companies are shrinking pipelines, controlling fees and increasing efficiency, and the overall sector is in a negative state
.
Let's look at vaccines
.
As of July 2021, China's new coronavirus vaccination has exceeded 1.
4 billion doses
.
The surge in vaccination rates has led to an increase in the performance of vaccine companies, and many companies like CanSino have turned losses into profits
.
The concept of vaccine stocks has also pushed up the valuation
of the mRNA vaccine and conventional vaccine industries.
After this year, domestic new crown vaccines have entered a period of stagnation in
sales.
Mainly affected by the decline in the increase in overseas vaccination rates, Kangtai Biologics' export revenue in the second quarter of this year was only 539,500 yuan
.
It decreased by 99.
43%
year-on-year.
The slow iteration of domestic vaccines in product iteration has also made domestic investors recognize the weakness
of vaccine companies in the speed of research and development.
When Pfizer/BioNTech and Moderna have submitted EUA applications for the bivalent new crown vaccine for Omicron BA.
4 and BA.
5, the research and development of new seedlings of most domestic vaccine companies is still in preclinical state
.
Environmental advantages disappeared, business weaknesses became prominent, and the market poured cold water on the vaccine industry in a timely manner: in more than a year, the PE value of vaccine concept stocks has shrunk by nearly half
.
It can be said that this year, in addition to the new crown oral medicine, all pharmaceutical stocks have collectively pounced on the street
.
In the middle, in the context of the continuous increase in domestic new crown cases in April, the three domestic new crown vaccines of CanSino, Sinopharm and Shiyao have been approved by the National Medical Products Administration to carry out clinical trials, which has brought a wave of small rebound
to the anti-epidemic concept stocks.
But the rebound is not a reversal - a small short-term increase cannot escape the whip of the epidemic news
.
For investors who once had high hopes for China's pharmaceutical and biotechnology industry, they need to see more
.
-02-
-02-It only takes a moment to go from pessimistic to optimistic
It only takes a moment to go from pessimistic to optimistic In the pharmaceutical biotechnology sector, more than half of white horse assets have fallen back to their early 2019 valuations
this year.
As mentioned above, the logic of the pharmaceutical bull market in the past "looking at the track and waiting for a high valuation" does not work: the overall demand has not been released, the cake is divided between the tracks, and the industry digestion period will inevitably come
too early.
At present, the PE valuation of the biomedical sector is in the historical 2.
35% quantile, and the secondary sectors such as medical services, medical devices, and traditional Chinese medicine are also in the 1-2% quantile range, which has been at a low valuation for
a long time.
On the one hand, the level of pharmaceutical holdings in the whole market has fallen to the historical freezing point; On the other hand, the Chinese and global markets of various pharmaceutical tracks are still growing
.
In this contrast, it is only a matter of time before
market replenishment will inevitably occur.
market replenishment will inevitably occur.
On the policy side, capital is tired of being whipped and walked away, and the long-term good news they expect has been coming in lately
.
First of all, the centralized procurement policy showed a moderate trend, which greatly eased the skepticism of
market expectations.
In June this year, the medical insurance catalogue adjustment plan was released, and the rules for negotiating renewal were announced for the first time to standardize the industry's price adjustment expectations
.
At the same time, collective procurement gradually changed from the bidding mode to the limit price mode
.
The above rules make "more opportunities for small businesses and less risk for large enterprises"
.
.
A few days ago, the centralized procurement plan of liver function biochemical reagents led by Jiangxi was introduced, and enterprises can be shortlisted by reducing the price by 20% on the basis of the highest effective declaration price, avoiding vicious competition
from only low prices.
Secondly, the overall demand side, finally through the export of new medical infrastructure, there is a clear signal
.
At the end of last month, the National Health Commission issued the "Notice of the National Health Commission on Carrying out Financial Subsidized Loans for the Renovation of Medical Equipment", implementing a phased incentive policy for new loans for the purchase and renovation of medical institutions' equipment, with a central financial discount of 2.
5%, with a total of 200 billion yuan
.
From 2019 to now, the amount of investment in new hospitals in China has reached an all-time high.
The short-term prosperity and decline in various segments caused by the epidemic will be more structurally stable
in the form of long-term industrial allocation.
On the industry side, the collective procurement of traditional pharmaceutical companies and the suppression of medical insurance negotiations have gradually cleared, innovative pharmaceutical companies have begun to go overseas and clinical value has begun to appear, and the results of supply-side reform have begun to appear
.
The license-out model of innovative pharmaceutical companies such as Baekje, Rongchang, and Shiyao has seen light at
the beginning of this year.
Just last week, BeiGene, which is listed in three places and seized the golden window of the capital market, announced that the global phase 3 head-to-head APINE trial of its anti-tumor blockbuster product zebrutinib has achieved effective results - that is, better
results than the original research.
As soon as the news came out, Baekje's increase in the three exchanges reached 15-20%.
The next day, the innovative drug and CRO sectors followed suit, and the entire pharmaceutical and biological sector was almost all red
.
Capital's vision is sometimes as simple as this: despite the pressure, there are pharmaceutical companies doing good medicine - as long as this underlying logic is preserved, there is hope
for everything.
In general, this surge is the result of the joint coordination of capital, policies and industries, and the previous unilateral decline was pathological, and now there is an opportunity
to return to normal.
Previously, either capital was waiting for the industry to grow, or the industry was waiting for capital blood transfusion, or capital was waiting for the policy to open.
Today, the three are rarely on the same level
.
-03-
-03-How long can it last?
How long can it last? The secondary market is an expected game
.
The price increase of the asset after buying it is only rich on paper, and after finding the receiver to sell, the pricing difference is the real profit
.
The gap between two prices reflects an expected difference
.
Take the policy of subsidized loans for medical equipment as an example
.
After the policy of financial subsidized loans carried out by the Health and Health Commission came out, it led the medical equipment sector to rise sharply, and this price increase reflects the long-term economic downturn of medical equipment due to policies such as centralized procurement, and the expected difference between the performance brought about by a large number of equipment orders released by the interest discount policy, how much can this expectation gap support the valuation? In the current macro environment, I am afraid that it is not very optimistic
.
So what's the next expectation? Is it the financial discount that has brought about a significant increase in the company's market share? Or will the improvement of the company's operation bring about the expansion of new businesses? After the growth rate declines, the valuation is further raised, and then there will be another chicken feathers
left.
Another example is the temperature of
collective mining.
The difference in expectations lies in the difference
between the previous sharp price reduction and the current small price reduction.
Maybe before a 70% reduction, you can only give a 15 times valuation, but now you find that it is only 40% lower, so you can give a 20 times valuation
.
But the price reduction is finally returned to the price, the ceiling of the market is still contracting, where to make up for the 40% reduction? This is a problem
that collective procurement companies need to face.
Of course, before the market forms a consensus, there is still a wave of emotional continuation of funds, which will further boost
the prosperity in the short term in a relatively liquid market such as A-shares.
Although it is difficult to surface a significant improvement in the medium-term fundamentals of medical equipment, it is optimistic that the banner of new infrastructure has been being raised, which can be found in the medical part of the 14th Five-Year Plan
.
Centralized procurement is the trend of the times, and the state is forcing the entire industry to explore
in the direction of higher technical barriers, greater risks and higher clinical value.
However, there is another characteristic of the pharmaceutical industry, that is, there are enough subdivision tracks and the choice of investors is wide
enough.
The stories in this are also rich
enough.
enough.
Looking at the various investment strategies given by brokers, there are several points that everyone will talk about
.
For example, consumer healthcare
.
Even if there is a black swan for dental implant collection hanging above the industry this year, consumer products are not the main goal of medical insurance bureaus and other institutions after all, and price constraints are difficult to be transmitted to this field to a large extent, after all, medical beauty, ophthalmology, dentistry, etc.
, as long as there is no quality problem, it is also a means to
stimulate domestic demand.
Another example is scientific research instruments and pharmaceutical upstream
.
Although it can only be an upstream branch of the entire pharmaceutical industry, the market size is not enough to be compared with the medical / pharmaceutical to C, but the story of domestic substitution can be told for a long time
.
After all, China's accumulation in this industry is much lagging behind the global frontline, and the independent and controllable supply chain is an important part of
the future "security" melody.
Of course, there are also innovative drugs
that can always carry the imagination of the pharmaceutical industry.
The technological revolution of the whole industry is rarely seen, but in tumors, in self-immunity, in various subdivided indications in various clinical increments are accumulating, "disruptive therapy" is not every day, but in the field of innovative drugs can see some "revolutionary breakthroughs" every once in a while, such as 8201, such as semeglutide
.
There will always be in the
future.
Human lifespan and healing experience will continue to improve
.
After this wave of rise, the pharmaceutical industry in the secondary market has at least got out of the dilemma
of bottoming out.
Although under the two macro indicators of total health expenditure and medical insurance funds that will not change significantly in the short term, the ceiling of the pharmaceutical industry is expanded, and there is still a lack of some "epic" technologies and policies, so the unilateral rise in the secondary market also lacks momentum
.
Buying medicine because it is cheap is not a long-term solution
after all.
But the industry is big enough and there are enough subdivisions to accommodate those restless funds, tossing and rotating back and forth
.
