Hong Kong Stock Concept Tracking | Major Documents Issued! News of innovative drugs in A-shares surged 3%, institutions say the revaluation of innovative drug assets will continue (with concept stocks)

The Zhitong Finance App learned that on July 1, A-shares and the Huashun Innovative Pharmaceutical sector rose 3%, surging 25% during the year. Related concept stocks continued to rise in the afternoon, Frontier Biotech (688221.SH) rose and stopped, Anlikang (002940.SZ) 3-day 2-day stock prices hit a record high, and Kexing Pharmaceuticals (688136.SH) and others surged. According to the news, on June 30, the National Health Insurance Administration and the National Health Commission jointly issued “Certain Measures to Support the High-Quality Development of Innovative Drugs” (hereinafter referred to as “Measures”), targeting the core pain points of the innovative drug industry from “laboratory” to “bedside”, and launched 16 targeted measures.

The analysis points out that this major document, which is regarded by the industry as “timely rain,” aims to solve the persistent problem of “difficult development, payment, and admission difficulties” of innovative drugs and ignite the engine of local pharmaceutical innovation through multi-dimensional breakthroughs such as data openness, payment innovation, and entry into hospitals.

Specifically, judging from the source of research and development, health insurance data was first opened, and the “Measures” are a “guide” for innovation.

In the past, pharmaceutical companies' R&D was often like “finding a needle in a haystack,” and the direction was difficult to determine. The “Measures” have been clarified for the first time. It will explore and open up core data resources such as disease spectrum and clinical medication requirements on the unified national medical insurance information platform on the premise of ensuring safety and compliance. This means that pharmaceutical companies and research institutions are expected to obtain “accurate navigation” from the real world, target R&D targets more efficiently, optimize R&D pipeline layout, and reduce the blindness and risk of R&D.

At the same time, the policy encourages commercial health insurance to inject “patient capital” into innovative drug research and development through the establishment of innovative drug investment funds, etc., to resolve the bottleneck of long-term funding shortages. What makes pharmaceutical companies even more excited is that once an application for the marketing of a new drug is accepted by the drug regulatory department, they can simultaneously apply to the health insurance department for “peer-to-peer” policy guidance to clarify the key elements (such as main specifications, reference drugs, and scope of payment) in advance, so that companies can take fewer detours.

Judging from the dual payment track, the “Measures” give high-value innovative drugs a new way out of the “commercial insurance catalogue”.

The price of “health insurance” has been drastically reduced, and it is difficult to open up without entering the health insurance market — this is a “dilemma” situation faced by many high-value innovative drugs. In this regard, the “Measures” prescribed a “dual system” of prescriptions.

The National Health Insurance Administration plans to achieve simultaneous declaration and simultaneous adjustment of the commercial insurance innovative drug catalogue and the medical insurance catalogue. The procedures are basically the same. Enterprises can independently declare to be included in the medical insurance drug catalogue, the commercial insurance innovative drug catalogue, or both at the same time.

The most groundbreaking was the first proposal to establish a “Commercial Health Insurance Innovative Drug Catalogue”. This independent catalogue focuses on innovative drugs with significant clinical value but beyond the scope of basic health insurance coverage, providing a reference for commercial health insurance and mutual medical assistance. Drugs included in the catalogue will enjoy special treatment: price negotiations are confidential, not included in basic medical insurance self-rate assessment, exemption from collection and alternative monitoring, etc. This has opened up a new payment channel for those breakthrough treatments that are temporarily difficult to access or are more expensive, complementing the health insurance catalogue.

It is worth mentioning that this time, the “Measures” once again state that medical institutions must not restrict the distribution of innovative drugs on the grounds of “drug proportion” or number of drug usage lists. More importantly, drugs negotiated by medical insurance and drugs included in the commercial insurance catalogue can break through the “one product, two regulations” limit (that is, drugs with the same generic name can only have two specifications), greatly improving the chances of high-value innovative drugs entering hospitals.

It is foreseeable that with the implementation of this support policy covering the entire life cycle of innovative drugs, Chinese patients are expected to use more breakthrough “life-saving drugs” and “good drugs” faster and more accessible, and the local pharmaceutical innovation ecosystem will also usher in a new round of opportunities for high-quality development.

Looking ahead to the innovative drug market, Fangzheng Securities believes that it is not over yet. There are a few points that need to be emphasized again:

1. This round of innovative drug market is a recognition of the innovative drug business model. It is based on the perception that many leading companies such as BeiGene, Cinda Biotech, Hengrui Pharmaceuticals, etc. will reverse the company's losses through BD or globalization in 2024 or 2025Q1. It is a typical beta market with a round of long-term financial approval and purchases. It is a standard investment in industry trends, and the market's confidence in the sustainability of the profit model of innovative pharmaceutical companies has increased. The fundamentals of the industry are showing a positive improvement trend.

2. The collective rise in leading stocks of innovative drugs in this round reflects the market's systematic revaluation of the value of their long-term R&D investment. The value of R&D assets accumulated over the past years has gradually been recognized, driving up the overall valuation center of the innovative drug sector. The driving force behind this round of market conditions is mainly due to long-term expectations for industrial upgrading, rather than simply relying on data disclosure events at academic conferences. Even after the academic conference cycle ends, the core logic underpinning the market — continuous implementation of R&D value and clarification of industry trends — is expected to continue.

3. Today's innovative drug market is data asset pricing rather than BD pricing. BD is a catalyst to accelerate data value and is not a pricing benchmark. As long as R&D asset data is high-quality and world-leading, the market itself will give it a reasonable market value. Even if the BD rhythm fluctuates in the short term, the overall innovative drug market will not be greatly affected.

The bank pointed out that it is still firmly optimistic about the innovative drug market, that the revaluation of innovative drug assets will continue, and the R&D asset valuation compensation is far from over.

Tianfeng Securities, on the other hand, said that looking forward to the future, China's innovative drugs are already leading the way in some fields; in the Chinese market, foreign-funded companies' stocks still account for most of the domestic market. Under the dual factors of policy support and improved product strength, China's innovative drugs are expected to continue to replace domestic products in the local market.

Related concept stocks:

Hengrui Pharmaceutical (01276): The company is a leading global innovative pharmaceutical company rooted in China. In 2024, the company's revenue was 27.985 billion yuan (+22.6%), net profit to mother was 6.337 billion yuan (+47.3%), and gross margin increased 1.6 pct to 86.2%. The core growth engine is innovative drug revenue. Innovative drug sales revenue as a percentage of total revenue increased from 38.1% in 2022 to 43.4% in 2023, and further increased to 46.3% in 2024. Among them, major varieties such as PD-L1 & TGF-beta and HER2ADC will continue to be released, and overseas licensing cooperation will be combined to form a “domestic volume+overseas license” two-wheel drive.

Sansheng Pharmaceuticals (01530): Sansheng Pharmaceutical has achieved both breakthroughs in international cooperation and clinical progress in innovative drugs: On May 20, it reached an overseas rights license for PD-1/VEGF dual antibody SSGJ-707 with Pfizer, with a total amount of up to 6.15 billion US dollars (including a strategic investment of 100 million US dollars), setting a major record for local double antibodies going overseas; on June 1, ASCO released phase II data for treatment of advanced NSCLC with this drug. The objective remission rate for squamous cell carcinoma and non-squamous cancer reached 75%/64%, respectively, the disease control rate was 97%. The response was only 24.1%. This cooperation fully reflects the clinical value of the company's dual-antibody platform. In the future, the company will continue to focus on the development of innovative drugs in high-demand fields such as oncology, self-prevention, and nephrology. The future will focus on reading PD-1/VEGF (707) dual antibody clinical data and Pfizer's overseas clinical progress.

Kang Fang Biotech (09926): Recently, the company announced the Ivorsi Harmoni-2OS data, announced that the Iwasi 1LPD-L1+ NSCLC indication was approved in China, and announced that the Harmoni-6 trial had reached the main end point of PFS, boosting confidence and predictability for the future success of Ivorsi's international phase 3 trial.