创新是唯一的方向.docx

《创新是唯一的方向.docx》由会员分享，可在线阅读，更多相关《创新是唯一的方向.docx（41页珍藏版）》请在淘文阁 - 分享文档赚钱的网站上搜索。

1、Global Research 10 January 2019EquitiesEquitiesChinaHealthcareShaojingTongAnalyst +852-2971 7217Rachel Yang, CFA +86-213-866 8912Na LinAnalyst +86-105-832 8255Wendy Song, CFA +86-213-866 8858China Healthcare SectorNo wishful thinking-innovation is the only directionPolicy headwinds to continue; low

2、visibility in the near termReform of the healthcare system has proceeded faster than expected, with a series of policies implemented/proposed in Q418: 1) the 4+7 Group Purchase Organisation (GPO), which resulted in a collapse of generic drug prices; 2) a new round of curbs on the use of ineffective

3、adjuvant drugs; and 3) calls for testing diagnosis related group (DRG) insurance payment. While the speed of implementation of these hawkish policies should dominate near-term earnings, we expect sales of generics and adjuvant drugs to shrink substantially in the next two to three years. We believe

4、developing innovative and differentiated products is the only way companies can survive and thrive long term.Moving toward an innovation-driven industryCapital and talent have been chasing innovation in the Chinese medical sector. Since 2016, the China Food and Drug Administration (CFDA) has moved s

5、wiftly to converge the new drug/device application process with the western framework. The government insurance system has moved quickly to cover innovative drugs, while negotiating prices down. As a result, the accessibility and affordability of innovative drugs has improved significantly. With bet

6、ter affordability and new therapies we think the innovative drug market will expand quickly. Companies with deep innovative drug pipelines, including R&D-driven biotech companies, should remain the long-term value generators.Remains a growth sector; company performances to divergeWe forecast pharma

7、market growth to slow to a 2.2% CAGR over 2018-23, due to shrinking sales of old-fashioned drugs and rising innovative drug sales. A- and H-share healthcare sector valuations are close to historical lows, at 20x and 15x 2019E PE, respectively, after we adjust consensus down 10% to reflect the lag in

8、 consensus forecasts. We do not expect a meaningful catalyst to drive a sector re-rating in the short term given the short-term uncertainties. However, stock performances could diverge, with truly innovative companies outperforming those dominated by old- fashioned products. Short-term downside risk

9、s include larger-than-expected price cuts. The announcement of milder GPO policies is a potential positive catalyst.Stock picks: Hengrui, Tigermed, CTCM and TongrentangWith the industry becoming more innovation driven, we favour companies with strong innovative drug pipelines and Hangzhou Tigermed C

10、onsulting (Tigermed), a contracted research organisation (CRO)firm that helps traditional pharma companies to make the transition. We also like defensive sectors like traditional Chinese medicine (TCM).Top picksAbove data as of 8 January 2019.CompanyTickerRatingPrice target (LC)Share price (LC)Mkt c

11、ap, US$ m2019EP/BV20E PEPEG19EPE/20E19E ROEHengrui Medicine600276.SHBuy75.6053.9829,89340.0x32.7x1.8x21.0%Tigermed300347.SZBuy58.2839.192,86631.7x23.5x0.9x19.0%Tongrentang600085.SHBuy42.2226.335,36229.4x26.8x3.Ox11.4%CTCM570.HKBuy7.994.502,90112.1x13.lx0.7x11.0%Source: Reuters, Wind, UBS-S estimates

12、, UBS estimatesThis report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 30. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of

13、interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.substantial; however, the rest of the generic market is much more fragmented and prices are already low, and we think the impact of GPO on thos

14、e drugs could be milder; 2) there were a few injectable generics involved in the first round of GPO, and the price cuts were milder. Injections accountforthe majority of generics market; we think price cut pressure could be milder for injectable generics, considering their relatively small volume, a

15、nd the higher manufacturing barriers etc; and 3) import replacement should help ease the pressure on domestic generics.Import replacement should help ease the pressure on domestic genericsAccording to IMS and our estimates, MNC pharma companies5 revenue accounts for around 17% of Chinas generic mark

16、et (or total revenue of Rmb192bn in 2018, as per our estimates). We think such revenue will shrink significantly due to market-share loss as a result of import replacement under the GPO rule. We estimate at least half of our forecasted substantial revenue decline in the China generic market will com

17、e from the existing MNC generics market.GCA for most high-selling drugs should be done in 2019, while the impact of GPO on the rest of the market could be milder7% of generics have been re-priced, and nationwide implementation of GPO results will be rapid: Though only 31 drugs were involved in the f

18、irst round of GPO, the 4+7 cities account for around 12% of Chinas generic market. However, there is widespread consensus that the results of the GPO pilot project will be rapidly rolled out nationwide through various methods, given the large price gap formed during the bidding and negotiation proce

19、ss. We therefore think sales of the 31 drugs will start to quickly decline from 2019, and the new prices will be in place by end-2020E. Next round of GPO is likely to come soon, impacting another 25%+ of generics (by market size): The GPO will be expanded to more drugs, but the speed of the rollout

20、is dependent on the progress of GCA. According to CDE, around 4,100 drugs need to do BE, including 2,750+ oral drugs and 1,350+ injections. As of end-2018, apart from the 31 drugs included in the 4+7 GPO, another 90+ drugs are working on GCA, either in BE, applying for GCA or had passed GCA. These 9

21、0+ drugs contributed around 28% of total hospital drug sales in China, according to IMS. We expect these 90+ drugs to set the foundation for the next round of GPO, which could be kicked off around H219. Further detail on these 90+ drugs: Apart from drugs involved in the 4+7 GPO, another six drugs ha

22、ve passed the GCA, including five injections. These six drugs account for about 2% of generic drug sales;Companies have filed applications for GCA for 75 drugs. These drugs contributed around 21% of total drug sales, and most are injections, and Another 17 drugs are running BE registered in CDE; the

23、ir total revenue accounted for about 5% of total hospital drug sales.Figure 8: Number of generics under BE or GCAFigure 9: Breakdown of generic market based on BEand GCA progress14012010080604075Not started Rmb753bn (65%)Others passed GCA Rmb22bn (2%)2026in BERmb63bn(5%)4+7Passed GCA Submited GCA st

24、arted BE trialSource: CDE, UBSSource: CDE, UBSNote: as of 15 December 2018.Source: CDE, UBS Impact of GPO on the other 65% of the market could be milder, in our view: As discussed above, around 120 drugs have started BE. We estimate they contributed about 35% of generic revenue in 2018. More than 4,

25、000 drugs, accounting for 65-70% of Chinas total generic market, have not started GCA. That means the remaining generics (approximately 4,000) should be highly fragmented, with prices already low due to intense competition. This could indicate: 1) price cuts might not be as severe as in the first ba

26、tch, either because prices are already cheap, or because the volume is much smaller; and 2) potential for market consolidation.In terms of formulation: pressure to cut prices could be milder for injectables than oral generics29% of injectable generics (in revenue terms) have started BE, we expect an

27、 average price cut of 40%: We estimate the magnitude of price cuts will be milder for injectable drugs than it was for oral drugs, considering: 1) prices of injectable generics are generally higher in global markets; 2) the relatively smaller usage volume; and 3) the higher manufacturing barriers an

28、d usually less intense competition. In our model, we assume an average price cut of 40% from 2018 to 2023.Among the 120 drugs that have started BE (including drugs in BE, that have submitted an application for GCA or have passed GCA), around 50 are injections. We estimate they have a total market si

29、ze of Rmb190bn, and accounted for 17% of total generic drug sales in China in 2018. We estimate over 50% of oral generics (in revenue terms) should be ready for GPO by end-2019: based on the results of the 4+7 GPO, we assume oral drugs will sustain an average price cut of 55% from 2018 to 2023.Figur

30、e 10: Progress of BE, by formulationOral-started19%Oral-not started 15%Other formulation 10%-injectables- started 17%Injectables-not started39%Note: Started, includes: 1) all drugs that have started BE; 2) have submitted an application for GCA; or 3) have passed GCA.Source: UBSAround 70 oral drugs h

31、ave started BE. We estimate they have a total existing market size of Rmb220bn, and accounted for about 19% of total generic sales in China in 2018.(2) TCM injections and adjuvant drugs: we forecast a2018- 23 revenue CAGR of -20% on continued strict controlsTCM injections and adjuvant drugs still ac

32、count for 10% of the pharma market: As of 2017, there were still 8 TCM injections and adjuvant drugs among the top 20 best-selling drugs in China, according to IMS. The total sales value of TCM injections in IMS sample hospitals was about Rmb28bn in 2017, accounting for 35% of TCM drug sales or 5.4%

33、 of total pharma sales. Considering that TCM injections have a larger market share at lower-level hospitals, we estimate the sales value of TCM injections is over Rmb70bn. The end-market sales value of TCM injections plus adjuvant drugs could be over RmblOObn, accounting for about 5- 10% of the phar

34、maceutical market.Figure 11: TCM injections and adjuvant drugs accounted for 8 of the top 20 products in the hospital market by sales valueSource: IMS, UBSCompanyGeneric nameTrade name2017 (Rmb m)2016 (Rmb m)2015 (Rmb m)PfizerAorvastatin calciumLipitor3,4243,0312,578SanofiClopidogrelPlavix3,3533,087

35、2,722Yangtze RiverDezocineGaronin3,2922,7152,014AstraZenecaBudesonidePulmicort Respules3,0372,5202,030BuchangDanhongDanhong2,7312,7952,464ZhonghengXueshuantongXueshuantong2,6522,8342,806QiluMonosialotetrahexosylganglioside sodium injectionShenjie2,5673,0943,149PfizerCefoperazone + sulbactamSulperazo

36、n2,5412,0541,662Shanghai Green ValleySalvia polyphenolic acidSalvia polyphenolic acid2,1892,3982,204Hainan HailingCeftazidimeCeftazidime1,9701,9851,806ShijiazhuangButylphthalideNBP1,9161,5301,069JinzhouAohongDeproteinized calf serumOdkin1,8102,0402,279ZhengdaTianqingEntecavirRunzhong1,7601,7101,473S

37、hijiazhuangOlaxitanOulaining1,6881,8451,712CSL BehringAlbuminBehring1,6861,6151,390SihuanCerebroside-KininOudimei1,6841,9991,888SalubrisClopidogrelTaijia1,6681,5451,479CRJiuxin(CRSanjiu)Cefazolin sodium pentahydrateXintailin1,6641,7001,538KelunSodium chloride injectionSodium chloride injection1,6431

38、,8771,908MudanjiangYouboShuxuetongShuxuetong1,6151,8201,854ChangbaishanKangaiKangai1,5691,7101,693Total sales of the 20 drugs46,45945,90341,719Among them: TCM injections plus adjuvant drugs16,81718,69018,337% of TCM injections and adjuvant drugs36%41%44%Strict regulation of TCM injections and adjuva

39、nt drugs will continue: Controls on adjuvant drugs (including TCM injections) started from about 2017. About 14 provinces now have policies to control or monitor the use of adjuvant drugs, including major markets like Beijing, Jiangsu, Fujian, Anhui and Sichuan. The 2017 NDRL also added restrictions

40、 limiting reimbursement for many adjuvant drugs to use for approved indications or at certain level hospitals. As a result, sales of the typical major adjuvant drugs have declined 20-30% since 2017.In December 2018, the National Health Commission (国家卫健委)started to draft the list of adjunct drugs for

41、 the purpose of usage control, suggesting a national policy on controlling adjuvant drugs could come soon. We list the 20 adjuvant drugs mentioned most often in provincial/city level adjuvant drug lists in Figure 13. The trend of cutting usage of adjuvant drugs to spare budget for novel drugs is cle

42、ar, and we estimate TCM injections and adjuvant drugs will continue to decline about 20% pa during 2018-23, and will account for only 1-2% of Chinas pharma market by 2023.Figure 12: Major policies and regulations on adjuvant drugsSource: Government, UBSTimeDocumentDepartment12 December 2018Notice on

43、 clinical usage of adjuvant drugsNational Health Commission2015-presentMore than 47 TCM injections are required to add side-effect/restrictions in the instructionState Administration for Market Regulation201726outof45TCM injections included in the NDRLare restricted to level 2 or above hospitalsNDRL

44、Summary of 20 adjuvant drugs mentioned most often in provincial/municipal level adjuvant drug listsDrug name (Chinese)Drug name (English)Sales from Nov 2017-Oct 2018(IMS data, Rmb m)Times mentioned in provinces/citiesRelated listed companies单唾液酸四己糖神经节甘脂Ganglioside3,06341注射用小牛血去蛋白提取物Deroteiied Calf B

45、lood1,63233Fosun丹红注射液Dan Hong2,21433注射用复合辅酶Coenzyme Complex77631BJ SL疏血通注射液ShuXueTong1,20330转化糖电解质注射液InvertSugarand Electrolytes1,29829参英扶正注射液Shenqi Fuzheng79429Livzon注射用磷酸肌酸钠Creatinephosphoric acid2,23429参附注射液Shenfu injection41028CR Sanjiu参麦注射液Shenmai injection73227脑昔肌肽注射液Carnosine2,00624Sihuan丹参川芳

46、嗪注射液ligustrazine salvia miltiorrhiza1,93524Sihuan骨瓜提取物注射液Gugua extractive78024舒血宁注射液ginkgo biloba93023注射用鹿瓜多肽cervusnipponcucumismelo71322注射用复方骨肽ossotide1,31322参苜葡萄糖注射液glucose ligustrazinesalvia miltiorrhiza98322奥拉西坦oxiracetam3,80022CSPC血栓通注射液panax notoginseng2,51522红花注射液honghua13322CR SanjiuTotal29,

47、464Source: Provincial and city governments, IMSUBS Researchreturn 个China Healthcare SectorPIVOTAL QUESTIONSQ: Can innovative drugs rapidly become an important category in Chinas pharma market?UBS VIEWYes. Supported by the reformed new drug registration process, we expect intensive launches of novel drugs in China,