Pharmaceutical industry: short-term good domestic manufacturers of basic drugs

Business Club November 29th

Core Tip: The Development and Reform Commission's Drug Price Office is devising a price reduction for individually priced varieties of essential drugs. The scope will cover all foreign drugs entering the Essential Drug List. Foreign drugs are generally qualified for separate pricing, and the number of sales remains to be tested in the market.

event:

November 25, 2010 21st Century Business Herald, "Daily Knife Foreign Drugs: Development and Reform Commission to Reduce the Price of Deploying Essential Drugs":

On November 23, the 21st Century Economic News learned from the National Development and Reform Commission that the Drug Pricing Office of the National Development and Reform Commission is devising price cuts for individually priced varieties of essential medicines. The scope will cover all foreign drugs entering the basic drug list. Foreign-funded drugs are generally qualified for separate pricing, and have been exempted from the previous wave of drug price cuts. On November 23, the National Development and Reform Commission issued an emergency notice to deploy stable prices to protect the basic livelihood of the masses, which clearly stated that "continue to reduce some of the higher prices of medicines." It is reported that this time the first drop is the foreign-funded enterprises' products. Domestically-priced individual drugs will gradually adjust prices in the next year's bidding.

Comments:

There is a certain negative impact on the original foreign investment medicines under the basic drug list. The original research drug is divided into patent protection period and lost patent protection. In China's current price system, even if patent protection is lost, foreign invented drugs enjoy long-term independent pricing power. According to our statistics, this adjustment involves the entry into China's basic medicine list of 51 foreign companies, 39 categories, and 198 specifications of drugs. The incident has a certain impact on the gross profit margin of the base medicines list for foreign companies. The extent of the impact has yet to be announced, and whether the increase in the sales volume after price cuts remains to be tested in the market.

Good for domestic manufacturers entering the basic drug list. We expect that due to the decrease in the prices of foreign research drugs, the absolute value of the 15% plus portion will become less, and doctors may be more likely to choose inexpensive domestically-based drugs. The listed companies that benefited from the company include: Shuanghe Pharmaceutical, Connbay, Livzon Pharmaceutical, Zhejiang Pharmaceutical, Northeast Pharmaceutical, Southwest Pharmaceutical, North China Pharmaceutical, and Federal Pharmaceuticals.

The gradual adjustment of prices for individually-priced Chinese medicines in the next year’s bidding will have a negative impact on the manufacturers of the base drug catalogs. In addition to the above-mentioned list of basic medicines that are independently priced by the chemical drug companies, TCM companies also include: Tong Ren Tang, Sanjiu Pharmaceutical, Kangyuan Pharmaceutical, Baiyunshan, Zhongxin Pharmaceutical, Jiuzhitang, Zixin Pharmaceutical, Sanjing Pharmaceutical. Wait.

Give the industry a "neutral" rating. Taking into account the static 48.75x P/E ratio for the pharmaceutical bio-sector and the high premium of 14.14x P/E for the Shanghai and Shenzhen 300 static, we give the industry a “neutral” rating.