德银-港股-医疗保健行业-2018展望：我们仍在寻找机会-20171208-59页_6mb

2018 China Healthcare Industry Outlook Summary

Core Content

This document provides an outlook on the China healthcare industry for 2018, focusing on pharmaceutical companies and the regulatory landscape. It highlights the potential for growth, key catalysts, valuation trends, and risks in the sector.

Main Points

Opportunities in the Sector

• Quality Names with Robust Pipelines: Companies like Sino Biopharm (SBP), Hengrui, and CSPC are expected to outperform due to their strong pipelines and positive catalysts.
• Mispriced Opportunities: Jointown is identified as a mispriced opportunity, despite the sector-wide decline in the distribution segment.

Regulatory Catalysts

• NRDL Impact: The National Reimbursement Drug List (NRDL) is expected to benefit large-cap manufacturers starting from 1Q18, with the financial impact delayed at the hospital level.
• Accelerated Approvals: The regulatory process has improved significantly, with faster approval times for innovative and class 3.1 drugs.
• Positive Drug Approvals: The number of innovative drug approvals has increased, with 35 drugs approved YTD17 compared to 6, 6, and 3 in 2016, 2015, and 2014 respectively.

Valuation Trends

• Sector Valuation: The MSCI China HC Index is trading at 18.9x FTM EPS, slightly above the three-year average of 17.7x.
• Large Cap Valuation Gap: Valuation gaps among large-cap names are expected to widen as investors focus on key variables such as POS and peak sales.
• Preferred Companies: SBP and Hengrui are favored for their proven market access and marketing capabilities.

Key Risks

• Macro-Economic Slowdown: Potential slowdown in the economy could affect the sector.
• Price Erosion and Reimbursement Reform: These are significant risks that may impact profitability.
• Regulatory Delays: Delays in the regulatory process for key drugs are a concern.
• Two-Invoice Policy: This policy is expected to create a nadir in the distribution sector from 3Q17 to 2Q18, with an inflection point likely in 2H18.

Key Companies and Their Picks

Top Picks

Catalysts for Sino Biopharm

• Blockbuster Approvals: Four potential blockbuster approvals.
• Innovative Pipeline: Improved visibility on early stage innovative drugs (TQ series) and biosimilars.
• M&A Opportunities: Potential business development and M&A opportunities.

Catalysts for Jointown

• Market Share Gains: Continuous gains under the two-invoice policy.
• Outpatient Traffic Shift: Outflow of outpatient traffic to lower-tier institutions.
• Prescription Drug Shift: Outflow of prescription drugs to drug stores from hospitals.

Regulatory Impact

• SBP, CSPC, 3SBio: SBP has 12 drugs in the NRDL, representing 19% of YTD3Q17 revenue; CSPC has 6 drugs, representing 26%; 3SBio has 3 drugs, representing 56%.
• Hengrui: 8 drugs in the NRDL, representing 36% of YTD3Q17 revenue.

Potential Drug Launches in 2018

• SBP: 8 compounds under review, with additional 2 drugs under review filed before 2016.
• Hengrui: 8 compounds under review, including 7 drugs filed in 2016-2017.
• CSPC: 10 compounds under review, with additional 2 drugs under review filed before 2016.

Summary of Regulatory Data

• Innovative Drug Approvals: 35 drugs approved YTD17, with notable examples like AZD9291 (Tagrisso) and Jardiance, Daklinza, and Sunvepra.
• Class 3.1 Drug Approvals: Approval times have significantly reduced for both domestic and MNC players.
• Priority Review Lists: 323 applications in total, with 136 from MNCs and 11, 8, and 4 from Hengrui, SBP, and CSPC respectively.

Conclusion

The China healthcare sector is poised for growth in 2018, driven by improved regulatory frameworks and the implementation of the NRDL. Companies with robust pipelines and strong market access are expected to outperform, while mispriced opportunities like Jointown and Universal Medical present attractive investment prospects. Investors should be cautious of macroeconomic risks, price erosion, reimbursement reform, and regulatory delays.