To believe in common sense and experience, historical data shows that innovative drugs are negatively correlated with the interest rate of Laos and the United States. That is to say, when the interest rate of Laos and the United States is low, the innovative drug market is active; When the interest rate of Laos and the United States is high, the innovative drug market is suppressed. The core bet is the inflection point of interest rates in the United States.
From 2019 to 2021, due to the impact of the epidemic, the United States implemented an unlimited QE policy, causing interest rates to fall from nearly 5% all the way to about 1%. At this stage, the innovative drug market ushered in a big bull market. However, starting in 2022, the United States has entered a crazy cycle of interest rate hikes, and interest rates have begun to rise, rising from about 1% in 2021 to more than 5%. At the same time, innovative drug companies began to appear sharply.
The main reasons for the sharp decline of innovative drugs in recent years are as follows:
1.The excessiveness from 2019 to 2021 has led to a huge valuation bubble, taking Hengrui as an example, its stock price once reached a high of 100 times.
2.The centralized procurement policy that began in 2018 has gradually expanded from generic drugs to innovative drugs, which has had an impact on the market.
3.With the recovery of interest rates in the United States, the market environment has become more unfavorable.
However, the current landscape of innovative drugs is changing:
1.Since the peak of innovative drugs in 2021, after continuous substantial**, the valuation of most companies has fallen to a reasonable range.
2.The attitude of the centralized procurement policy has also changed, from a one-size-fits-all approach in the past to a more moderate attitude, providing space for the development of innovative drugs.
3.High interest rates in the United States seem to be nearing their peak, and a rate cut cycle is expected to come soon.
Judging from the experience of countries such as Japan and the United States, centralized procurement is not a problem, but may stimulate greater development of innovative drugs. At the same time, as a large country with a population of 1.4 billion, China has a huge space for the development of the pharmaceutical market. Compared with the market value of foreign counterparts, there is still a lot of room for improvement in the growth of China's pharmaceutical market. Therefore, I think the innovative drug market is at the bottom of the big bottom, just waiting for the arrival of the catalyst.