20180105-中国银河国际证券-China_Healthcare_Sector_2018_Outlook_45页_2mb

报告摘要

China Healthcare Sector 2018 Outlook Summary

Core Content

The 2018 outlook for the China healthcare sector highlights a continued divergence in performance between leading and smaller players, driven by ongoing policy reforms and market dynamics. The report identifies key opportunities and challenges for different segments, including pharmaceutical manufacturers, distributors, device makers, and hospitals.

Main Opportunities

National Medical Insurance Payment Method Reform: Expected to benefit innovative and clinically indispensable drugs.
Approval of New Drugs: Provides growth potential for companies with strong R&D capabilities.
Consistency Assessment of Generics: Promotes consolidation in the generics market.
Completion of the Two-Invoice System by End-2018: Beneficial for leading distributors.
M&A and Overseas Drug Approvals (U.S. ANDA): Expected to serve as new growth engines for pharmaceutical companies.

Key Challenges

RMB Depreciation: May impact sales growth and margins.
Tender Price Cuts: Especially for competitive generics and non-therapeutic drugs.
Expensive Bioequivalence (BE) Tests: Could increase R&D costs.
Removal of 15% Price Markup for Drugs: Turns drug sales into cost centers.
Medical Insurance Cost Controls: May lead to reduced drug usage, particularly for non-essential drugs.

2018 Stock Recommendations

Company	Ticker	Rating	Remarks
CTCM	0570.HK	BUY	Attractive valuation, strong CCMG growth, potential strategic investor
Sinopharm	1099.HK	BUY	Bottoming out, low valuation, strong retail and medical device distribution
CSPC	1093.HK	BUY	Strong R&D, expected launch of Paclitaxel-albumin, premium execution, strong cash flow from Vitamin C business
3SBio	1530.HK	HOLD	Minor upside, ongoing clinical trial data resubmission
Luye Pharm	2186.HK	HOLD	Mixed performance, modest upside
TUL	3933.HK	HOLD	Decline in share price, limited upside
HEC	1558.HK	HOLD	Decline in share price, negative rating change
CMS	867.HK	HOLD	Decline in share price, negative rating change
SSY	2005.HK	HOLD	Decline in share price, negative rating change

2017 Healthcare Sector Performance Summary

Leading Drug Manufacturers Outperformed: Benefited from government policies and support for innovation.
Sub-segment Leaders Outperformed: Companies like SSY, HEC, Genscript, and Consun Pharm showed strong performance due to their unique market competitiveness.
Top Traditional Distributors Underperformed: Due to the impact of the two-invoice system and hospital reforms.
Medical Device Manufacturers Underperformed: Mainly due to tender price cuts and cost controls.
Hospitals Continued to Underperform: Due to public hospital reforms.

Key Strategies for 2018

Focus on Innovative Drug Manufacturers: These are expected to continue outperforming due to policy support and market dynamics.
Value Investment in Quality Large Caps: Catch-up opportunities may arise as the market re-rates leading innovative players.

Sub-segment Growth Opportunities

Oncology, CCV, and Diabetes Markets: Show potential for fast organic growth.
Bio-drugs: Expected to grow rapidly, with companies like CSPC, TUL, and 3SBio positioning well in this sector.
Existing Products in Fast-Growing Life Cycles: Such as HEC's Kewei and 3SBio's TPIAO.

R&D and Policy Impact

R&D Policies: Favor strong companies with robust R&D capabilities and financial strength.
Priority Review: Accelerates the approval process for drugs, giving an edge to leading manufacturers.
CFDA Priority Review: For CSPC, five drugs are on the priority list, including Paclitaxel-albumin, which is expected to drive growth.

Conclusion

The China healthcare sector in 2018 is expected to continue showing divergence in performance. While challenges like tender price cuts and medical insurance cost controls persist, opportunities in innovation, M&A, and market consolidation are likely to benefit leading companies. The report emphasizes the importance of innovation and high-quality generics in navigating the evolving landscape.

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