ZhaoYin International: Policies continue to exert force, optimistic about the valuation rebound of China Meheco

According to the Zhitong Finance APP, CMB International has released a research report stating that benefiting from overseas interest rate cuts and improvements in the domestic macro environment, the pharmaceutical industry, as a highly elastic sector, is expected to outperform the market in 2025. The State Council has issued another document supporting innovative drugs and medical devices, and the "Category C Medical Insurance Catalog" is expected to be launched. The upcoming JPM conference will be a good opportunity for Chinese innovative drugs to facilitate business development cooperation with various overseas pharmaceutical companies, and innovative drug exports are expected to welcome another small peak. With a significant recovery in medical device bidding, the sustainability of this recovery is optimistic, and industry valuation repair is expected.

CMB International's main viewpoints are as follows:

The MSCI China Healthcare Index has fallen 4.7% since the beginning of 2025, underperforming the MSCI China Index by 0.9%.

Benefiting from overseas interest rate cuts and improvements in the domestic macro environment, the pharmaceutical industry, as a highly elastic sector, is expected to outperform the market in 2025. The State Council has issued documents to promote the high-quality development of the pharmaceutical industry, and innovative drugs and medical devices will continue to enjoy a positive policy environment. As the focus of macro policies shifts to stimulating the economy, the income and expenditure situation of medical insurance funds is expected to improve significantly. With stricter regulation of medical insurance funds, products that meet the characteristics of hospital use, essential needs, and medical insurance will continue to grow. The accelerated recovery of medical device bidding will drive the profitability recovery of domestic medical device companies.

The State Council has issued another document supporting innovative drugs and medical devices.

On January 3, the General Office of the State Council released the "Opinions on Deepening the Reform of Drug and Medical Device Regulation to Promote the High-Quality Development of the Pharmaceutical Industry." The policy mentions deepening the reform of the entire process of drug and medical device regulation, accelerating the establishment of a nationally unified market in the field of drugs and medical devices, creating a globally competitive innovation ecosystem, and promoting China's transition from a major pharmaceutical country to a strong pharmaceutical country.

The policy aims to significantly improve the quality and efficiency of the review and approval of innovative drugs and medical devices by 2027, establishing a regulatory system that is compatible with pharmaceutical innovation and industrial development. By 2035, the pharmaceutical industry is expected to have stronger innovation and creativity and global competitiveness. The policy mentions improving the multi-level medical security system and enhancing the diversified payment capabilities for innovative drugs. The "Category C Medical Insurance Catalog" is expected to be launched, which may prioritize drugs that have passed formal review and expert evaluation but were ultimately not included in medical insurance, such as CAR-T therapy.

The JPM conference is about to be held, and innovative drug exports are expected to welcome another small peak.

The JP Morgan Healthcare Conference will be held in mid-January. This conference will be a good opportunity for Chinese innovative drugs to facilitate business development cooperation with various overseas pharmaceutical companies, and innovative drug exports are expected to welcome another small peak. Recently, the export transactions of Chinese innovative drugs have continued to grow rapidly, for example, Innovent Biologics and Heng Rui Medicine have reached overseas licensing agreements with Roche and IDEAYA Biosciences regarding DLL3ADC, with total transaction amounts exceeding 1 billion USD each. China has effectively become a global research and development engine for innovative drugs, and the early research and development efficiency of Chinese pharmaceutical companies is competitive globally.

The medical device bidding has significantly recovered, and the sustainability of this recovery is optimistic.

According to statistics from Zhongcheng Shuke, the national public bidding market size for medical devices in December grew by 37% year-on-year. Based on the statistics of medical device bidding amounts published on the China Government Procurement Network, the bidding amounts for devices from companies such as United Imaging Healthcare, Mindray Medical, and Kaili Medical all achieved high double-digit growth in December 2024 compared to the previous month At the same time, a large number of equipment upgrade projects have been implemented, including entrusted hospitals such as Peking University Third Hospital and China-Japan Friendship Hospital, as well as provincial and municipal tertiary/secondary hospitals such as Haikou People's Hospital and Chiping District People's Hospital in Liaocheng.

According to statistics from Zhongcheng Shuke, as of December 22, 2024, the national medical equipment upgrade bidding and procurement scale has exceeded 6.7 billion yuan. In addition, the accelerated issuance of special bonds by local governments and the introduction of debt reduction policies are expected to alleviate local financial pressure. With the improvement of local finances and the implementation of equipment upgrade policies, medical equipment bidding is expected to continue to recover in 2025.

Optimistic about industry valuation recovery

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