JP摩根中国医疗保健行业中国医疗保健行业改善医疗的个人和公共措施2019323页

Seetheendpagesofthispresentationforanalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.AsiaPacificEquityResearchMarch2019HealthcareLeonChik,CFAAC(852)[e-mail](AsiaPacific)[e-mail](AsiaPacific)LimitedHealthcareAlexTso,[e-mail](AsiaPacific)LimitedHealthcareDavidLi(852)[e-mail](AsiaPacific)LimitedHealthcareLingWang(852)[e-mail](AsiaPacific)LimitedHealthcareSherryYin(852)[e-mail](AsiaPacific)LimitedChinaHealthcareSectorPrivateandpublicmeasurestoimprovehealthcare2ToppicksinChinahealthcaresectorStockpicksToppicksTickerWuxiBiologics2269HKInnovent1801HKBeigene6160HK3SBio1530HKGenscript1548HKKeymessage:Weshouldseemorechangestothecentralprocurement(CP)ProgramastheNMPAassessestheoutcomesofthefirstbatchoftendereddrugsannouncedinDec2018.Thekeyfactorwouldbethequalityandavailabilityofdrugsatthemuchlowerpricesforthosedrugmakersthatwonthetenders.Ourviewisthatthereisstillsomeriskthattheprogramcanbeexpandedtootherdrugsin2019andthatitismorelogicaltoseethedevelopmentintheCPprogramoverthenextfewmonthsbeforewecanhavemoreclarityonthegenericmarket.Wesuggestlookingatcompanieswithinnovativeorbiologicaldrugs,whicharenotundertheCPprogramorthosewithastrongR&DandalargepipelineofinnovativedrugsKeyOWstocks:WuxiBiologics(2269HK),Innovent(1801HK),Beigene(6160HK/BGNEUS),3SBio(1530HK)andGenscriptBiotech(1548HK).Source:Bloomberg,J.P.Morgan3MarkethasdoubledigitgrowthpotentialSource:Beigenecompanyreports.PwCReportonGlobalPharmaceuticalTrend,IMSHealthdata,McKinseyIndustryReportChinaisthesecondlargestRxmarketintheworldwithgreatgrowthpotentialasmoreandmoredrugsareincludedintheNRDL4ChinahealthcareexpenditurestillhasroomtogrowSource:Frost&SullivanNationalHealthcareExpenditureasaPercentofGDP,20155MedicalinsuranceconstraintsSource:Frost&SullivanBreakdownoftotalhealthcareexpenditureinChina(2012-2026E)Deficittocomeasearlyas2020GrowingatCAGRof106%inthepast6years,Chinahasalreadybecomethesecondlargestprescriptionmarketintheworld.ThemonthlycostofoncologydrugsincludedintheNRDLthroughpricenegotiationhasincreasedfrommedianofUS$947in2012toaboutUS$2,141in2018.TheinclusionofmanyoncologydrugsispositivenewsforChinesepatientsbutwillcreatesignificantpressuretothepublicmedicalinsurance.Thegovernmentisdevisingmeasurestocutcostsofoldergenericdrugswhileincreasingnewdrugsintothereimbursementlist.6Matrixofkeyinvestmentfactorsforhealthcaresub-sectorsWehaveloweredourattractivenessratingfordiversifiedpharmaswithamajorityofsalesingenericdrugs(now8versus5inOct)duetotheuncertaintiesfromthecentralprocurementprogramonthepricingandmarginsofgenericdrugsBiologicalbusinessDemandgrowthMarginsDevelopmentriskPricingpowerInvestmentintensityRegulatoryPEG*LowHighBiotechinnovator1.52.0BrandedFTMbiosimilar1.31.5CDMO/CMO/CRO1.31.4Onlineservices/Telemedicine1.21.5Specialtyhospitals1.21.3Devices1.21.3TCM1.11.3Diversifiedpharmas0.91.2Marketing/in-licence0.91.1Distribution0.81.0GeneralHospitals0.81.0*RangeofreasonablePEGforprofitablecopmpanieswithalongtrackrecord(18PEover19EPSy/ygrowth*100)FavorableMildlyfavorableNeutralNotfavorableSource:J.P.Morgan7HealthcareframeworkSalesgrowthisakeyinvestmentcriteriaandsalesforceisalsoagoodgrowthindicatorInnovativetherapeutics(e.g.biologicaldrugs)havebetterpipelinesandhigherR&DspendingPricingpowerandmargins.Wealsolookatcompetitionasanimportantdriverforpricingpowerandmarginsandcompanieswithprotectionfromnewentrants(innovativedrugsandFTMbiosimilardrugsshoulddobetter).PEtogrowthisanindicatorofover/undervaluationGrowthandriskfactorsfordrugmakersSource:J.P.Morgan8Tentopthemesforhealthcare1.PoliciesandregulationsthatimproveaffordabilityandavailabilityofdrugsCentralprocurementimpactondrugprices*NMPA’sacceptanceofclinicaltrialdatafromoverseasNRDLinclusionandtheimpactontenderprices2.Policiesandregulationsthatpromoteaworld-classdomesticbiotechindustryNMPAchangesandimpactontheindustry*Vaccinequalityissueandtheimpactondrugmakers*ConsistencyevaluationofgenericdrugsCMO/CROoutsourcingpolicy/trendsinChina3.PoliciesandregulationsthatreducewasteandoptimizetheuseofpubliccoffersBudgetconstraintsandimpactondrugtendersDoubleinvoicesystemandthereductionofdistributionlayersZeromark-uppolicyonhospitaldisbursements*newlyintroducedin20189CentralProcurementCentralizedprocurement(CP)isnotanewpracticeinChina,buttheregulatoryrestructuringandestablishmentofStateMedicalInsuranceAdministration(SMIA)in2018makethis4+7CPmorepowerfulthanbefore.Consistingof31drugsandonlydrugsthatpasstheco