Guolian Securities 2025 Pharmaceutical and Biological Investment Strategy: Increment depends on space stock and structure

The Zhitong Finance App learned that Guolian Securities released a research report saying that looking forward to the pharmaceutical and biological industry in 2025, from an incremental perspective, we need to pay attention to the long-term development of the three major spaces of health insurance, private expenses, and overseas travel; in terms of inventory, we need to pay attention to the return of medicine and medicine to their essence. It is recommended to focus on two core lines: First, high-quality innovative drugs go overseas. The top 100 pharmaceutical companies' top 100 sales varieties in the world only account for 31% of the patent period for 5 years. Demand is determined. The quantity and quality of domestic IND varieties all have a basis for going overseas, and it is expected to continue the trend induced by licensing; second, the valuation repair of assets on the left. The pharmaceutical sector has retracted a lot in the past few years, and has accumulated a large number of undervalued assets on the left, such as CXO, consumer medicine, pharmacies, etc., focusing on demand resilience and valuation recovery of left-hand assets.

Guolian Securities's main views are as follows:

Causes of Pharmaceutical Investment Difficulties: The New Normal of Health Care Reform in the Context of Structural Aging

Pharmaceutical investment has been relatively difficult in recent years. The Shenwan Pharmaceutical Index has retraced as much as 50%. The industrial side is also facing a transition period in the post-collection era. The average price of the past 9 rounds of generic drug collection has dropped by about 50%, and the stock business of pharmaceutical companies has been affected to a certain extent. In the context of structural aging of the population, the pressure of unbalanced health insurance payments is a factor that needs to be considered in medical reform. Future pharmaceutical investment needs to adapt to the new normal of structural aging of the population. The idea of pharmaceutical stock selection in the post-collection era can be summed up as “increment looks at space, stock looks at structure.”

Looking at space incrementally: the three major spaces of medical insurance, self-financing, and overseas travel support the long-term development of pharmaceuticals

The pharmaceutical support side is not limited to health insurance; health insurance is currently the core payment side. Health insurance revenue accounts for 2.66% of GDP in 2023, and is expected to increase year by year in the future. After the medical reform, the speed of new products entering health insurance will accelerate, finding segments that can quickly seize the increase in health insurance; the self-funded medical market will also strengthen as economic strength increases. With changes in ideas and the rise of tripartite payment power, it is expected to become a powerful complement to payment power outside of medical insurance; the pharmaceutical overseas business industry will gradually upgrade and deepen to achieve raw materials and pharmaceuticals From agents and basic consumables to innovative medicines and innovations The equipment's overseas mode has been upgraded.

Inventory depends on structure: medicine and medical care return to their essence

The pharmaceutical stock market is mainly reflected in structural investment opportunities brought about by the redistribution of benefits in the pharmaceutical industry chain in the post-medical reform era. Policy and industrial resonance guide the industrial chain to achieve transformation from medicine to medicine, from products to services, from imitation to innovation, from assistance to immediate needs, from imports to domestic production, and from channels to products. In breaking the old pattern and establishing a new pattern, it has nurtured many investment opportunities from scratch, from small to large. Future pharmaceutical investment should seek investment opportunities that meet the characteristics of the pharmaceutical sector era and the changing trend of health care reform policies.

Think about industry trends in the bottom range from a medium- to long-term dimension. Traditional pharmaceutical companies respond to the peak ceiling in single product sales through rapid iteration of new product matrices; demand and supply drive innovative drugs to go overseas and continue to enjoy overseas product volume and valuation and pricing rights; medical device platformization and internationalization open up room for growth; CXO domestic and foreign demand ushered in a moderate recovery; the Chinese medicine sector has moved from the era of systematic investment to select individual stocks, and business quality and corporate governance are more critical; medical services have long focused on business quality, recent consumer recovery and policy expectations; pharmaceutical retail policy pain, and long-term outflow of prescriptions And the leading effect of increased concentration; the pharmaceutical wholesale sector focuses on investment opportunities with absolute returns on the left; APIs reduce their focus on price and return to growth on the demand side.

Investment advice: high-quality innovative drugs going overseas and asset restoration on the left

In 2025, we will focus on two main lines of investment: high-quality innovative drugs going overseas. The top 100 pharmaceutical companies' top 100 sales varieties in the world only account for 31% of the patent period for 5 years. Demand is determined. The quantity and quality of domestic IND varieties all have a basis for going overseas, which is expected to continue the trend induced by licensing; the valuation of assets on the left side has been repaired. The pharmaceutical sector has retracted a lot in the past few years, and has accumulated a large number of undervalued assets on the left, such as CXO, consumer medicine, pharmacies, etc., focusing on demand resilience and valuation recovery of left-hand assets.

Recommended targets: Ed Biotech (300685.SZ), Betta Pharmaceuticals (300558.SZ), Donga Ejiao (000423.SZ), Hengrui Pharmaceutical (600276.SH), Huadong Pharmaceutical (000963.SZ), Kangfang Biotech (09926), Colon Pharmaceuticals (002422.SZ), Lianying Healthcare (688271.SH), Lingrui Pharmaceuticals (600285.SH), Mindray Pharmaceuticals (300760.SZ), Cinda Biology (01801), Yao Ming Kang De (603259.SH), Pharmaceutical Federation (02268), Yifeng Pharmacy (603939.SH), Yihe Jiaye (301367.SZ), Yuyue Medical (002223.SZ), etc.

Risk warning: commercial sales fall short of expectations, clinical progress or time to market fall short of expectations, worsening competitive landscape, geopolitical risk, risk of exchange rate fluctuations, and valuation risk.