The trend of the pharmaceutical industry is upward, and the behavior of public offering to increase positions has begun to appear
Last week (November 27 to December 01), the pharmaceutical and biological sector as a whole** 051%, ranking 10th among the 31 industries in Shenwan, outperforming the CSI 300 Index by 206 percentage points. According to wind statistics, last Friday, the total net inflow of funds in the whole market pharmaceutical ETF** was 201.93 million yuan.
According to Guotai Junan's estimates, in the past three months, institutions have increased their holdings in infrastructure, medicine, new energy, finance, science and technology, and military industry. It can be seen that the pharmaceutical sector has changed the declining state of "holding bottoms" in the past, and the trend of appropriate overallocation of various public offering institutions has begun to appear.
The pharmaceutical sector has had three full cycles in the year, and has entered the fourth cycle from 2022. There is a market view that the bottom of this cycle is at the end of the third quarter of 2022. However, this assertion is a little one-sided, because the judgment of the bottom of a cycle can not only focus on the bottom of the stock price, but also judge the bottom of the industry's fundamentals or the internal operating conditions of the industry. He Yuxuan, manager of Tianhong Hang Seng Shanghai-Shenzhen-Hong Kong Innovative Drug Selection 50 ETF (517380)**, believes that the bottom of the industry's operating conditions is at the end of the first quarter of 2023. There is a time gap of several months between the two, but the overall direction is not divergent.
There are four common points in the previous three rounds of cycle lows: low public offering ** holdings, low sector valuations, low points, and low market trading sentiment. At present, the latter three characteristics are clearly in line, and what about the first point of market capital holdings?According to the research and calculation of Tianhong** index investment team, if the over-the-counter and over-the-counter index** of passively tracking the index are excluded, the whole market** is overweight to the pharmaceutical industry, which is the first time since the past 6-7 quarters have been significantly underweighted. However, historically, this level of overweight is at a very low level, and the crowding of funds is not high.
Overall, the clear bottom has passed, and more than half a year has passed so far. And the overall performance of the industry is relatively ** and there is a clear upward trend in other industries.
For the pharmaceutical sector as a whole, whether it is policy or industry fundamental demand in the future, it may be marginally good, and the current situation of the pharmaceutical sector in the low range of positions, valuations, points and trading is still likely to be the behavior of losing time and not losing space.
The single volume of innovative drugs has been concentrated and increased, helping the industry to quickly get out of the trough of performance
In the domestic market, under the rules of volume procurement and medical insurance negotiation, innovative drugs will be supported and tilted, and pharmaceutical companies will be guided to increase innovation from the demand side, improve competitiveness, and promote the innovation and development of pharmaceutical products. At the same time, in addition to volume procurement, a certain market is set aside to provide space for innovative products to open up the market. In the future, with the participation and cooperation of commercial health insurance, charitable donations, medical mutual aid and other forces, China's medical security system will continue to develop and improve to further meet the diversified security needs of the people. With the continuous improvement of China's economic strength and the improvement of residents' consumption capacity, consumption upgrading is an inevitable result of the consumer medical market dominated by personal payment. With the continuous sinking of high-end consumption, the penetration rate has increased steadily, and the imagination of the consumer medical market is considerable.
As for overseas markets, the current position of China's pharmaceutical industry in the global value chain is continuing to improve, gradually opening up the demand for overseas markets. With the gradual migration from demographic dividend to engineer dividend, the international competitive advantage of China's pharmaceutical industry is also expected to continue to improve from a single cost advantage to a differentiated product advantage and efficient innovation advantage.
According to the statistics of Industrial **, the operating income of all listed companies in the pharmaceutical sector (excluding companies with large changes in non-recurring profits and losses of the same caliber and new shares, excluding some companies with abnormal fluctuations in operation, and excluding companies with a large new crown business base) in the first three quarters of 2023 increased by 579%, net profit attributable to shareholders of listed companies decreased by 196%, deducting non-attributable net profit decreased by 2 year-on-year32%。
However, after years of multi-pipeline and heavy capital layout, domestic self-developed innovative drugs have ushered in the stage of batch commercialization, and the industry is accelerating into the first period of profit realization. Judging from the recently announced price of domestic innovative drugs in the United States, overseas pricing is much higher than domestic medical insurance pricing. With the support of multiple benefits such as getting rid of the domestic "involution" of new drug research and development and the vast overseas market, it is foreseeable that the "tide of innovative drugs going overseas" is unstoppable, and the industry will quickly get out of the trough of performance.
For example, Betta Pharmaceutical, whose operating income and net profit increased by % year-on-year in the third quarter, exceeded expectations behind the performance of its innovative drug befacitinib, which was launched under new indications and entered the medical insurance, and the new product launch and indication expansion shaped the company's new growth curve. Up to now, it has icotinib, ensartinib, bevacizumab and other drugs that fully cover non-small cell lung cancer.
In addition, the newly launched innovative drug products of pharmaceutical companies such as Akeso, Remegen, and Innovent Biologics are also in a period of rapid expansion. Taking Akeso Biopharma as an example, its self-developed PD-1 monoclonal antibody penpulimab (anical) is used for patients with **systemic chemotherapy** or refractory classical Hodgkin lymphoma, and the total sales of the single product market in 2021, 2022 and the first half of this year have reached nearly 1 billion yuanIn addition, its bispecific antibody cadonilib (ketanil), which is used for metastatic cervical cancer immunity, was launched in June 2022, with cumulative sales of more than 1.1 billion yuan within one year of listing.
It can be seen that the performance of the pharmaceutical sector in the first three quarters of 2023 is relatively under pressure. However, on the whole, the performance of the pharmaceutical sector is still relatively resilient, and the performance of most companies is in line with expectations, and the rapid expansion of innovative drug business will bring considerable increments. It is expected that in the future, China's total medical and health expenditure will still achieve stable and sustainable growth. Looking for segments that are faster than the average growth rate of the industry will become the core of excess investment returns, and innovation, consumption upgrading, and high-end manufacturing are the core keywords in the field.
Innovative drugs are in a good opportunity to lay out, and it is recommended to grasp long-term investment opportunities
Tianfeng** view: According to incomplete statistics, so far in 2023, listed companies have completed the granting of overseas rights and interests of more than 20 drugs under development. China's innovative drugs going overseas have completed the transformation process of quantitative change leading to qualitative change, and it is sustainable. This is mainly due to the significant increase in industrial investment over the past 20 years. In the later stage, we can continue to pay attention to the investment opportunities brought by innovative drugs going overseas along multiple main lines, including ADC technology, R&D platform cashing of pharmaceutical companies, biotechnology companies and biosimilars. With the continuous improvement of the manufacturing and R&D capabilities of Chinese enterprises, in addition to the traditional CDMO and other outsourcing services, some Chinese companies' products have strong international competitiveness. In addition, we believe that it is more important to delve into the value of the technology and pipeline itself in order to identify investment opportunities earlier. For example, in the past 1-2 years, the pipeline targets that have entered the IND stage have moved forward, and the FIC attributes are stronger, and they have the potential to go overseas.
He Yuxuan, manager of Tianhong Hang Seng Shanghai-Shenzhen-Hong Kong Innovative Drugs Select 50 ETF (517380)**: Pharmaceutical performance was strong in November. Our views have not changed, and we have a clear bullish view on the pharmaceutical industry in the short, medium and long term. Compared with the low point of the whole market on April 26, 22, the overall increase in the pharmaceutical industry has only been 3% so far (the growth rate of sub-sectors such as biological products and medical services is even negative, -4% and -15% respectively), but the current industry and market environment and business conditions are significantly better than at the end of April last year.
Compared with the whole market, medicine is still not priced correctly, and it will be the starting point of a new round of medicine. From a bottom-up point of view, the vast majority of large and medium-sized enterprises in the pharmaceutical industry have very excellent cost performance. From the perspective of industry comparison, we believe that no matter from the perspective of industry fundamentals or valuation level, medicine should be an investment choice that is difficult to miss (correspondingly, we have also noticed that the strategy teams of many brokerages in the market have begun to notice investment opportunities in medicine recently). With the completion of the disclosure of the performance report for the first three quarters disclosed by listed companies, we believe that the pharmaceutical sector has undergone long-term adjustment and the precipitation of fundamental policy expectations, with clear bottom characteristics, and fundamentals, policies, and funds (according to the three quarterly reports disclosed by each public offering, the pharmaceutical industry has now returned to an overweight state) is expected to form a joint force and is expected to develop a higher level. You can pay attention to the Hang Seng Shanghai-Shenzhen-Hong Kong Innovative Drugs Select 50 ETF Connection**a(014564) c(014565).
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*: Tianhong**.
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