"Twelfth Five-Year Plan" released, the pharmaceutical market welcomed the policy "spring breeze"

The Ministry of Industry and Information Technology recently released the “Twelfth Five-year Development Plan for the Pharmaceutical Industry” to draw a blueprint for the pharmaceutical industry in the next five years. From the perspective of the organization, as the world's fifth-largest pharmaceutical market, investment opportunities in the Chinese pharmaceutical industry will be highlighted under the support of policies and gain more attention from the capital market.

The fifth largest pharmaceutical market in the world welcomes policy "spring breeze"

According to the statistics of IM SH ealth, a world-renowned medical consultancy, the global pharmaceutical market reached US$856.4 billion in 2010, an increase of 4.1% over the previous year. Among them, China's pharmaceutical market has made the largest contribution to growth, reaching US$32.2 billion in the year, ranking fifth in the world and increasing by 23% over the previous year.

According to the latest forecast of IM SH ealth, the Chinese pharmaceutical market will surpass Germany in 2013, ranking third in the world.

As the world's most promising pharmaceutical market, the Chinese pharmaceutical industry has ushered in the "spring breeze" of the policy through the issuance of the "12th Five-Year Plan" industry development plan. According to the above plan, the average annual growth rate of the industrial output value and industrial added value of the pharmaceutical industry in the next five years will be 20% and 16% respectively; the top 20 companies in basic pharmaceutical production will account for more than 80% of the market; the original drug will reach 30 Above; By 2015, there will be more than 5 companies with sales exceeding RMB 50 billion.

Fan Hongbing, an appraisal fund manager of the Huabao Xingye Pharmaceutical Biological Fund, commented that “Planning” has set specific targets for the development of the pharmaceutical industry, which is conducive to the survival of the fittest, the promotion of innovation, and the enhancement of industry competitiveness. In the long-term, it will bring benefits to the development of the pharmaceutical industry. .

Fan Hongbing analyzed that the intrinsic driving factors for the rapid development of the Chinese pharmaceutical industry are reflected in the huge population base, increased income of residents, aging, urbanization, and the improvement of the social security system.

By the end of 2011, the per capita disposable income of urban residents in China had reached 21,810 yuan, and the per capita net income of rural residents was 6,977 yuan, both of which maintained steady growth. The per capita GDP had reached 5,541 US dollars. From the perspective of international experience, once the per capita GDP exceeds 3,000 US dollars, pharmaceutical consumption will usher in an inflection point and achieve rapid growth.

In 2011, the urbanization rate in China increased to 51.27%, and the urban population exceeded the rural population for the first time. The NDRC predicted that the figure will exceed 60% by 2020. The trend of aging society is also driving the consumption of medicine. The experience of developed countries shows that more than half of medicines are consumed by the elderly population.

In addition, the Social Security New Deal continued to promulgate. In 2010, the proportion of government investment in total health expenditure rose from 18.1% in 2006 to 28.6%.

Pharmaceutical industry into the capital market "darling"

In the capital market, the pharmaceutical industry has always been known for its high growth, and it has brought great returns to investors.

Data show that from 1989 to 2011, the US S&P 500 Pharmaceutical Index rose by 608%, nearly doubled the S&P 500 Index's gain of 364%. From 1995 to 2011, the Japanese Pharmaceutical Index rose by 155%, while the Nikkei 225 fell by nearly 60% during the same period.

A similar situation also occurs in the A-share market. From 2005 to January 11, 2012, the accumulative yield of the CSI Bio-industry Index far outperformed the CSI 300, the CSI 500, and the CSI 800 Index. In 2007 and 2008, where the market was rapidly rising and falling, the medical sector also demonstrated the excellent characteristics of “more or less loss”.

According to the classification of Shenwan Pharma Bio-Plates, since the Shanghai Composite Index reached the 998-point intraday low on June 6, 2005, the gains of the top 13 individual stocks in the medical sector rose by more than 1000%.

Due to the rapid growth of the pharmaceutical industry, the increasing number of listed companies, and the increasing recognition of the pharmaceutical sector in the market, the market share of the A-share pharmaceutical biotech industry continues to increase. By the end of 2011, the circulation market value of China's pharmaceutical and biological industries was approximately 686.8 billion yuan, accounting for 4.20% of the total market value of A-shares, ranking 6th among all sectors.

Fan Hongbing believes that due to the large-scale adjustment of the pharmaceutical sector in the early stage, the "12th Five-Year Development Plan of the pharmaceutical industry" policy factors may stimulate the rebound of the sector, thus forming short-term theme investment opportunities and boosting the share price of some small and medium-sized companies. From a long-term perspective, taking into account the continued improvement of industry concentration in the future, leading companies in all sub-sectors have good investment value.

Industry Long-term Investment Opportunities Receive Institutional Concern

It is worth noting that the value of investment in the pharmaceutical industry has always been the concern of the organization. The view from China Merchants Securities believes that amid fierce commercial mergers and acquisitions, accelerating drug innovation, and deepening internationalization process, the pharmaceutical sector of the A-share market will present a number of stock opportunities.

Guojin Securities also stated that under the background of the 12th Five-Year Plan to promote economic restructuring, the pharmaceutical industry will continue to receive policy support. At the same time, the industry consolidation brought about by the adjustment of drug prices will make the leading companies in the industry bigger and stronger, and the prospects for R&D and innovative companies are promising.

In the mainland public fund market, there have been many medical industry theme funds that have appeared in recent years. The issuance of the “Twelfth Five-Year” development plan is expected to “heaten” investors’ enthusiasm for investment in this industry.

The news from Huabao Industrial Fund Management Co., Ltd. said that as its first product launched in the year of the dragon, the Huabao Xingye Pharmaceutical Biological Fund will be publicly raised from January 30 to February 24. The proportion of this active equity fund investing in pharmaceutical bio-related stocks is not less than 80% of the stock assets. The investable pharmaceutical industry includes chemical raw material medicines, chemical medicine preparations, Chinese medicines decoction pieces, Chinese medicine preparations, medical devices, pharmaceutical commerce, Medical services, biopharmaceuticals and biological agriculture.

Industry experts said that from the perspective of historical premium rate, the current average valuation level of the pharmaceutical industry is higher than that of banks, real estate and other cyclical industries, but it is not as high as new energy, new materials, etc. in the same emerging industries. The future can be solved by rapid growth to resolve valuation pressures. From this perspective, its long-term investment opportunities are worth grasping.