2013 Pharmaceutical Industry Status and Trend Analysis

According to the Consultation Report on the 2013-2017 China Pharmaceutical Industry Survey and Investment Strategy Study, from January to February 2013, the total retail sales of Chinese and Western drugs increased by 16.7% year-on-year, which was lower than the 21.4% in December 2012 and 2012. The year-on-year growth of 23.0%; also lower than the 21.5% year-on-year increase in January-February 2012 (December 2011: 27.2%, 21.5% for 2011).

The retail sales of Chinese and Western drugs are the retail sales of enterprises above designated size, and its absolute value is of little significance. The pharmaceutical industry accelerated its integration, and the growth rate of pharmaceuticals by companies above designated size was higher than the overall growth of society. Since October 2012, we have begun to worry about the decline in the growth rate of the pharmaceutical industry. Due to the impact of the tail-tail factor at the end of the year, the retail sales growth in January-February is usually lower than that in December of last year. The year-on-year growth of 21.5% in January-February 2012 was lower than the year-on-year growth of 27.2% in December 2011. However, the tail suspension factor at the end of December 2012 was not significant (21.4 percent year-on-year in December 2012 and 19.8 percent year-on-year in November), and the growth rate in January-February was still declining, causing us to further worry about the growth of the industry.

Investment advice: We are concerned that the reform of public hospitals and the cost of medical insurance control will affect the future growth rate of the pharmaceutical industry, and have previously lowered the industry rating to “underperform the market”. We remind investors to pay attention to relevant risks. The industry's first choice is Tong Ren Tang Technology (01666 HK). Although it will also be negatively impacted by the decline in the industry growth rate, the company is mainly based on retail pharmacy channels and is basically unaffected, with a target price of HK$27.50 and “buy”.

The Ministry of Health website officially announced on March 15 the “National Essential Drug List” (2012 edition) and announced that it will be implemented on May 1 this year. The new directory has more than 60% more capacity than the 2009 version, and it has added 40 exclusive Chinese medicine varieties, accounting for about 40% of the new Chinese medicine varieties. Analysts told the "Golden Securities" reporter that the exclusive variety has an advantage in pricing, although it will also cut prices and profits, but the sales of drugs will be amplified, and the pharmaceutical market is expected to reshuffle.

When the list of basic medicines was first implemented in 2009, it was very difficult. The basic medicine is state-subsidized, so the hospital is willing to use it, but in the process of actual implementation, the subsidy is not delivered with sufficient intensity and the speed is very slow. As a result, the last health clinic has no money to reopen the base medicine, in order to protect the operation, or purchase other materials. Drugs, because of the procurement of other drugs, medical institutions generally have about 15% of the commission.

Thickening performance see 2014

The new catalog is divided into three parts: chemical drugs and biological products, proprietary Chinese medicines, and traditional Chinese medicine decoction pieces. Compared with the 2009 edition, the new catalog has been expanded from 307 to 520, expanding more than 60%, supplementing anti-tumor and hematological drugs. And enrich children's special drugs, dosage forms and specifications.

Another major feature of the new edition of the base medicine list is the large number of exclusive new varieties of Chinese medicine. Dechuan Medical Fund Jiang Guangze said that the revision of the new edition of the list is more beneficial to Chinese medicine companies.

According to the "2013-2017 China Pharmaceutical Industry Survey and Investment Strategy Study Consultation Report", the Chinese medicine industry is the fastest growing sub-sector in the pharmaceutical industry in recent years. The market growth rate of Chinese patent medicines is 25%, and Chinese herbal medicines Even if the growth rate reaches 50%, the state's support for Chinese medicine is an important factor in the development of the industry. "The state has proposed several times that it is necessary to mention traditional Chinese medicine as the same as western medicine. This year, it may also enact the "Chinese Medicine Law."

The new edition of the base medicine list has added 40 exclusive Chinese medicine varieties, accounting for about 40% of the new Chinese medicine varieties. Involved in the listed companies are Yiling Pharmaceutical (002603), Baiyunshan A, Dong-e Ejiao (000423), Guizhou Braun (002424), Kangyuan Pharmaceutical (600557), Lingrui Pharmaceutical (600285), Wohua Pharmaceutical (002107) , Tasly (600535), Guilin Sanjin (002275), Tong Ren Tang (600085) and others.

Analysts in the pharmaceutical industry pointed out that, overall, it is good for listed companies with exclusive products, but this year is a big year for tenders, and the contribution of exclusive brands to the company's performance will be until 2014.