Caitong Securities: Innovative pharmaceutical devices are still an important main line in this round of the pharmaceutical bull market

Zhitong Finance App learned that CaiTong Securities released a research report saying that if it continues to see the rise in industrial chain resonance brought about by the new cycle of more innovative drug policies, pharmaceutical and medical companies with high-tech attributes will be more popular in the market. Focus 1: New pharmaceutical companies with real innovation capabilities will have greater valuation flexibility. Focus 2: Cyclical recovery brings upstream opportunities such as CXO and scientific services; Focus 3: Beta opportunities for AI healthcare. Focus 4: Defensive assets for domestic consumption.

The main views of Caitong Securities are as follows:

The FDA announced that it will gradually eliminate animal testing requirements for monoclonal antibodies and other drugs, and there are current investment opportunities in AI pharmaceuticals and organoids

On April 11, the US FDA issued an announcement stating that it will reduce, optimize, or possibly replace animal experiments through a series of methods including AI-based toxicity calculation models and cell line and organoid toxicity tests in laboratory environments. The plan will be immediately applied to new clinical trial drug (IND) applications, and the inclusion of NAMs (New Approach Initiatives) data is encouraged. In recent years, the scientific community has gradually recognized the fundamental limitations of animal models.

As shown by FDA data, more than 90% of drugs that are safe and effective in animal experiments ultimately fail to obtain FDA approval due to safety or efficacy issues. Aware of this challenge, the US Congress passed the FDA Modernization Act 2.0 at the end of 2022, which clearly authorizes the use of non-animal alternatives such as cytometry and computer models in IND applications, and “removes the requirement to use animal research in biosimilar biological product licensing applications (BLA)”. Subsequently, in 2024, the FDA Scientific Committee provided further comprehensive recommendations detailing how NAMs can be promoted.

The impact of the Sino-US tariff issue on the pharmaceutical industry is limited

The analysis is as follows: The impact on innovative drugs is neutral. Innovative drugs belong to technology stocks and are mainly affected by fluctuations in the capital market. However, BD transactions are mainly trade services, and no significant impact can be seen at present. The pharmaceutical manufacturing industry, including CRDMO, APIs, etc., is basically exempt from tariffs, and there will be no additional tariff increases for the time being. However, the decline was significant, mainly due to US biosafety related policies, which encouraged the return of raw material manufacturing to the US, which in turn affected the short and medium term valuation system of raw material manufacturing companies. The most favorable segments in the medium to long term are autonomous and controllable upstream areas such as medical devices and scientific services. There has also been this investment logic for the past two years, and now it is being strengthened even more. The country's incentive policies in the direction of expanding domestic demand may be introduced at an accelerated pace, favoring the logical sectors of domestic demand consumption, including traditional Chinese medicine, medical services, internet pharmaceuticals and pharmacies, medicine and beauty, etc., which is an extension of the healthy China logic.

Risk warning: the risk that the anti-corruption impact of the industry exceeds expectations; the risk of uncertainty about the progress of new drug research and development; the risk of sales falling short of expectations; the risk of harvesting price reductions exceeding expectations, etc.