From a policy perspective, on September 8th, the "Notice on Carrying out Pilot Work to Expand Opening up in the Medical Field" was released, which proposes to allow the establishment of wholly foreign-owned hospitals (excluding traditional Chinese medicine, excluding mergers and acquisitions of public hospitals) in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen, and the entire island of Hainan. The market generally believes that with the entry of foreign hospitals, advanced medical equipment, drug research and development, medical informationization and other related fields may also usher in new development opportunities.

 

 

 

In addition, according to our analysis, since the beginning of this year, multiple favorable policies have directly targeted the innovative pharmaceutical industry. In July of this year, the National Medical Products Administration released the "Pilot Work Plan for Optimizing Clinical Trial Evaluation and Approval of Innovative Drugs"; In February of this year, the National Healthcare Security Administration released a draft of the "Notice on Establishing a Mechanism for Forming the Initial Price of Newly Listed Chemical Drugs to Encourage High Quality Innovation" for soliciting opinions.

 

 

 

From the perspective of market demand, according to the "Statistical Bulletin on the Development of China's Health Care Industry in 2023", the total number of medical and health institutions in China will reach 9.55 billion in 2023, an increase of 1.13 billion from the previous year, and residents will visit medical and health institutions an average of 6.8 times; The number of hospitalizations was 301.873 million, an increase of 55.011 million from the previous year. With the increase in medical visits, the national health expenditure has also maintained an upward trend. In response, the industry has expressed confidence in the overall demand growth of the pharmaceutical sector.

 

 

 

In addition, with the implementation of the interim report, the temporary negative effects may be exhausted, and pharmaceutical companies are expected to usher in a turning point in the third quarter, with stocks that have realized their innovative achievements experiencing a rebound.

 

 

 

Ruoli Pharmaceutical recently released its performance forecast for the first three quarters of 2024, expecting its net profit attributable to shareholders of the listed company to increase by 43.29% -48.52% year-on-year, from 411 million yuan to 426 million yuan. Among them, the net profit for the third quarter is expected to increase by 28.92% to 45.73% year-on-year, approximately 115 million to 130 million yuan. The company stated that the growth in performance was mainly due to the increase in sales revenue of its core products, Wuling Capsules and Lingze Tablets, as well as a significant increase in sales revenue of traditional Chinese medicine formula granules.

 

 

 

According to the data, Zuo Li Pharmaceutical is based on the production of traditional Chinese medicine products using medicinal fungal biological fermentation technology. It mainly engages in the research and development, production, and sales of medicinal fungal Wuling and Bailing series products, traditional Chinese medicine decoction pieces, and traditional Chinese medicine formula granules. It stated that during the reporting period, the company continued to strengthen market expansion based on the advantages of its three core products, Wuling Capsules, Lingze Tablets, and Bailing Tablets, which are listed in the National Essential Medicines List. Among them, the sales revenue of Wuling Capsules and Lingze Tablets continued to grow well in the market; With the increase of registered varieties, the sales revenue of traditional Chinese medicine formula granules has significantly increased compared to the same period last year.

 

 

 

Analysts point out that in terms of the entire pharmaceutical sector, especially the prescription drug sector, the biggest opportunities are estimated to be concentrated in the third and fourth quarters. It is believed that the focus should be on the third and fourth quarter reports, with a particular emphasis on the prescription drugs, traditional Chinese medicine, and biopharmaceuticals in the third quarter report. These medicines are essential and are less affected by other factors. The person also stated that both traditional Chinese medicine prescription drugs and chemical medicine prescription drugs are expected to have good performance in the third and fourth quarters, which is judged from performance.

 

 

 

Another institution also stated that the interim report has verified that most of the prescription drug companies in the hospital have good performance, and the impact of medical anti-corruption is gradually weakening. The high base effect of last year may end, and the growth rate of listed companies' performance is expected to accelerate in the second half of this year.

 

 

 

In addition, some analysts have expressed continued optimism about the opportunities for innovative drugs. In the semi annual reports of most innovative pharmaceutical companies, the revenue from innovative products is increasing. The revenue of Obutinib, a subsidiary of Ruocheng Jianhua, increased by 30% year-on-year, while the company's loss narrowed by 37.6% year-on-year. The relevant person in charge of the company stated that the company's revenue mainly comes from the sales of innovative product Obutinib. In the semi annual report of Hengrui Pharmaceutical, known as the "leader in innovative drugs," the proportion of innovation revenue has exceeded half. Hengrui Pharmaceutical stated that the sum of its innovative drug revenue and external licensing revenue accounts for more than half of its total revenue. Innovation revenue has become the main engine driving company performance growth.

 

 

 

According to data, a total of 60 new drug varieties were approved for market in the first half of this year, of which 30 were Class 1 innovative drugs, a year-on-year increase of 20%. Looking ahead, domestic innovative drugs will accelerate their landing, and listed companies of innovative drugs will enter a period of intensive harvest. If any institution predicts that in the next 1-2 years, several pharmaceutical companies such as BeiGene, Sinopharm, and Hutchison Pharma are expected to gradually turn losses around.