J.P. 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-2019.3-23页.pdf

See the end pages of this presentation for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Asia Pacific Equity ResearchMarch 2019HealthcareLeon Chik,CFA AC(852)2800 J.P.Morgan Securities(Asia Pacific)LimitedHealthcareChristine Wang+852 2800 J.P.Morgan Securities(Asia Pacific)LimitedHealthcareAlex Tso,CFA+852 2800 0496AJ.P.Morgan Securities(Asia Pacific)LimitedHealthcareDavid Li(852)2800 J.P.Morgan Securities(Asia Pacific)LimitedHealthcareLing Wang(852)2800 J.P.Morgan Securities(Asia Pacific)LimitedHealthcareSherry Yin(852)2800 J.P.Morgan Securities(Asia Pacific)LimitedChina Healthcare SectorPrivate and public measures to improve healthcare 2Top picks in China healthcare sectorStock picksTop picksTickerWuxi Biologics2269 HKInnovent1801 HKBeigene6160 HK3SBio1530 HKGenscript1548 HKKey message:We should see more changes to the centralprocurement(CP)ProgramastheNMPAassessestheoutcomes of the first batch of tendered drugs announced inDec 2018.The key factor would be the quality andavailability of drugs at the much lower prices for thosedrug makers that won the tenders.Our view is that there is still some risk that the program canbe expanded to other drugs in 2019 and that it is more logicalto see the development in the CP program over the next fewmonths before we can have more clarity on the genericmarket.We suggest looking at companies with innovative orbiological drugs,which are not under the CP program orthose with a strong R&D and a large pipeline of innovativedrugsKey OW stocks:Wuxi Biologics(2269 HK),Innovent(1801HK),Beigene(6160 HK/BGNE US),3SBio(1530 HK)andGenscript Biotech(1548 HK).Source:Bloomberg,J.P.Morgan3Market has double digit growth potential Source:Beigene company reports.PwC Report on Global Pharmaceutical Trend,IMS Health data,McKinsey Industry ReportChina is the second largest Rx market in the world with great growth potential as more and more drugs are included in the NRDL4China healthcare expenditure still has room to growSource:Frost&SullivanNational Healthcare Expenditure as a Percent of GDP,20155Medical insurance constraintsSource:Frost&SullivanBreakdown of total healthcare expenditure in China(2012-2026E)Deficit to come as early as 2020Growing at CAGR of 106%in thepast6 years,China hasalreadybecomethesecondlargestprescription market in the world.The monthly cost of oncology drugsincluded in the NRDL through pricenegotiationhasincreasedfrommedian of US$947 in 2012 to aboutUS$2,141 in 2018.The inclusion of many oncology drugsis positive news for Chinese patientsbut will create significant pressure tothe public medical insurance.The government is devising measuresto cut costs of older generic drugswhile increasing new drugs into thereimbursement list.6Matrix of key investment factors for healthcare sub-sectorsWe have lowered our attractiveness rating for diversified pharmas with a majority of sales ingeneric drugs(now 8 versus 5 in Oct)due to the uncertainties from the central procurementprogram on the pricing and margins of generic drugsBiological businessDemand growth MarginsDevelopment riskPricing powerInvestment intensityRegulatory PEG*LowHighBiotech innovator 1.5 2.0 Branded FTM biosimilar 1.3 1.5 CDMO/CMO/CRO 1.3 1.4 Online services/Telemedicine 1.2 1.5 Specialty hospitals 1.2 1.3 Devices 1.2 1.3 TCM 1.1 1.3 Diversified pharmas 0.9 1.2 Marketing/in-licence 0.9 1.1 Distribution 0.8 1.0 General Hospitals 0.8 1.0*Range of reasonable PEG for profitable copmpanies with a long track record(18 PE over 19 EPS y/y growth*100)FavorableMildly favorable NeutralNot favorableSource:J.P.Morgan7Healthcare frameworkSales growth is a key investment criteria and sales force is also a good growth indicatorInnovative therapeutics(e.g.biological drugs)have better pipelines and higher R&D spendingPricing power and margins.We also look at competition as an important driver for pricingpower and margins and companies with protection from new entrants(innovative drugs and FTMbiosimilar drugs should do better).PE to growth is an indicator of over/under valuationGrowth and risk factors for drug makersSource:J.P.Morgan8Ten top themes for healthcare1.Policies and regulations that improve affordability and availability of drugsCentral procurement impact on drug prices*NMPAs acceptance of clinical trial data from overseasNRDL inclusion and the impact on tender prices2.Policies and regulations that promote a world-class domestic biotech industryNMPA changes and impact on the industry*Vaccine quality issue and the impact on drug makers*Consistency evaluation of generic drugsCMO/CRO outsourcing policy/trends in China3.Policies and regulations that reduce waste and optimize the use of publiccoffersBudget constraints and impact on drug tendersDouble invoice system and the reduction of distribution layersZero mark-up policy on hospital disbursements*newly introduced in 2018 9Central ProcurementCentralized procurement(CP)is not a new practice in China,but the regulatory restructuringand establishment of State Medical Insurance Administration(SMIA)in 2018 make this 4+7 CPmore powerful than before.Consisting of 31 drugs and only drugs that pass the consistency evaluation will beconsidered during procurement.According to the program,about 60-70%of the total volume will be given to companiesthat win the bid.Lower the burden of drug costs for medical insurance and provide patients with moreaffordable medication.Expert view:Pace of expansion to new regions:Wide rollout of CP will certainly happen but maytake time,more likely after the assessment of first year pilot program.Potential procurement rule changes:The practice of having one single winner andhaving the lowest price bidder to win are likely to be revised in the future.This practicehas been proved unsuccessful multiple times in the history.Our view:We believe that pharmas with a large pipeline of new drugs should be able to growsteadily despite pressure on the prices of existing generic drugs.10NRDL inclusion and the impact on pricingOn October 10th,an additional 17 oncology drugs were newly included onto the NRDL B.The average price cut for these drugs was around 56.7%,which makes pricing36%lower than the average retail price in the nearby countries.From the previous round of negotiation in 2017,we note that the average price cut forinnovative drugs was around 37.8%and the highest cut was about 70%.However,this has been usually accompanied by significant volume upside(due tolow penetration of innovative therapies in China),which we believe will offset the pricecut and leads to faster sales growth.Most of the drugs on this list are newly launched(10/17 were launched after 2017)andonly two drugs are from domestic manufacturers including Pegaspargase Injection(培门冬 酶注射液)from Hengrui Pharma,and Anlotinib(盐酸安罗替尼胶囊)from Sino Biopharm.Going forward,we expect the government to gradually include more innovative therapiesonto the national reimbursement list and further price cut is expected(e.g.through thecentralized procurement/bulk purchasing program)in order to make this process moresustainable11Double invoice systemSource:Company reports,Ministry of Commerce,Frost&SullivanGradual consolidation of distribution industry in ChinaThe distribution market in China is still highly fragmented compared to the US(market share of Top 3 players in 2017)The full implementation of double invoice system in 2018 will lead to further consolidationof the distribution industry.The government introduced the two-invoice system,which requires pharmaceuticalproducts to be processed by only one distributor from manufacturers to hospitals.The central government has fully rolled out the double-invoice system in 2018 with thegoal of reducing the number players from over 13,000 to less than 3,000.We expect the industry to enter a stage of steady growth and market leaders such asSinopharm,China Resources Pharma,and Shanghai Pharma will gradually capture moremarket share from smaller distributors.12The online consultation businessSource:Frost&SullivanVolume of online consultationIn China,high quality medical resources are concentrated in large cities and class III hospitals,which account for only about 7.7%of all hospitals,but attracted approximately half of totalhospital outpatient visits in 2016Online healthcare services could provide more time-effective diagnosis than offline healthcareinstitutions,especially in remote areas where medical resources are unevenly distributed.Source:Frost&SullivanChinas medical resources are concentrated in large class III hospitals13Online retail pharmacies Source:Frost&SullivanMarket Size of Retail Pharmacy in China 2013 2022EGMV of B2C Online Pharmaceutical Market in China 2013 2022EAs a percentage of the total pharmaceutical retail market,the portion of GMV transactedthrough e-commerce is expected to grow from 1.8%in 2017 to 13.7%in 2022.Such growth will be primarily driven by the increasing demand for online pharmacies due totheir 1)convenience,2)superior user experience,3)competitive pricing,and 4)favorablegovernment policies.Additionally,the appeal of pharmaceutical ecommerce services is further enhanced by the newtrend of combining online and offline experience,manifested through the online ordering ofprescription drugs and offline payment,or the online consultation at an offline pharmacy.Source:Frost&Sullivan14Medical device marketSource:Evaluate MedtechGlobal Medical Device Market(2015-2022E)This market is largely dominated by leadingMNCs,as Top-10 companies owned 37%marketshareandTop-30companiesowned63%market share in 2016.US accounted for 40%of global market(incl.Medtronic,J&J,BD,Stryker,Abbott,GE andBoston Scientific).Europe market accountedfor 30%(Siemens,Philips,and Roche)Top-5 subsectors contributed around half ofglobal medical device sales:IVDs(13%),cardiovascular(12%),medicalimaging(10%),orthopedics(9%)andophthalmology(7%)China is the largest medical device marketamong emerging countries,accounting for 14%of global total.Strong growth momentum is mainly driven by1)governmentpolicytosupportimportsubstitution;2)agingpopulation;3)improving household disposable income;4)enhanced medical insurance coverage and5)technology advance15Peers comparison-BiotechnologySource:Bloomberg,J.P.Morgan estimates for covered companies(highlighted),as of March 18,201916Peers comparison-PharmaceuticalsSource:Bloomberg,J.P.Morgan estimates for covered companies(highlighted),as of March 18,201917Peers comparison Online healthcare services Source:Bloomberg,J.P.Morgan estimates for covered companies(highlighted),as of March 18,201918Peers comparison Medical deviceSource:Bloomberg,J.P.Morgan estimates for covered companies(highlighted),as of March 18,201919Peers comparison-DistributorsSource:Bloomberg,J.P.Morgan estimates for covered companies(highlighted),as of March 18,201920DisclosuresAnalyst Certification:All authors named within this report are research analysts unless otherwise specified.The research analyst(s)denoted by an“AC”on the cover of this report certifies(or,where multiple research analysts are primarily responsible for this report,the research analyst denoted by an“AC”on the cover or within the document individually certifies,with respect to each security or issuer that the research analyst covers in this research)that:(1)all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers;and(2)no part of any of the research analysts compensation was,is,or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s)in this report.For all Korea-based research analysts listed on the front cover,they also certify,as per KOFIA requirements,that their analysis was made in good faith and that the views reflect their own opinion,without undue influence or intervention.Important DisclosuresCompany-Specific Disclosures:Important disclosures,including price charts and credit opinion history tables,are available for compendium reports and all J.P.Morgancovered companies by visitinghttps:/ 1-800-477-0406,or e-mailing with your request.J.P.Morgans Strategy,Technical,and Quantitative Research teams may screen companies not covered by J.P.Morgan.For important disclosures for these companies,please call 1-800-477-0406 or e-mail .Explanation of Equity Research Ratings,Designations and Analyst(s)Coverage Universe:J.P.Morgan uses the following rating system:Overweight Over the next six to twelve months,we expect this stock will outperform the average total return of the stocks in the analysts(or the analysts teams)coverage universe.Neutral Over the next six to twelve months,we expect this stock will perform in line with the average total return of the stocks in the analysts(or the analysts teams)coverage universe.Underweight Over the next six to twelve months,we expect this stock will underperform the average total return of the stocks in the analysts(or the analysts teams)coverage universe.Not Rated(NR):J.P.Morgan has removed the rating and,if applicable,the price target,for this stock because of either a lack of a sufficient fundamental basis or for legal,regulatory or policy reasons.The previous ratingand,if applicable,the price target,no longer should be relied upon.An NR designation is not a recommendation or a rating.In our Asia(ex-Australia and ex-India)and U.K.small-and mid-cap equity research,each stocks expected total return is compared to the expected total return of a benchmark country market index,not to those analysts coverage universe.If it does not appear in the Important Disclosures section of this report,the certifying analysts coverage universe can be found on J.P.Morgans research website,.Coverage Universe:Chik,Leon:111,Inc.(YI),Alibaba Health(0241)(0241.HK),Beigene(6160)(6160.HK),Beigene USD(BGNE),CAR Inc.(0699)(0699.HK),Celltrion,Inc.(068270.KS),China State Construction(3311)(3311.HK),China Travel International Investments HK Ltd(0308)(0308.HK),Genscript Biotech Corporation(1548)(1548.HK),Hengrui-A(600276.SS),Huazhu Group Ltd(HTHT),Innovent Biologics(1801)(1801.HK),Kingboard Holdings Ltd(0148)(0148.HK),Kingboard Laminates(1888)(1888.HK),Lee&Man Paper Manufacturing(2314)(2314.HK),New Oriental Education(EDU),Nine Dragons Paper Holdings Ltd(2689)(2689.HK),Ping An Healthcare and Technology(1833)(1833.HK),Samsung Biologics(207940.KS),Shanghai Fosun Pharmaceutical Group-A(600196.SS),Shanghai Fosun Pharmaceutical Group-H(2196.HK),Sino Biopharm(1177)(1177.HK),Skyworth Digital Holdings(0751)(0751.HK),TAL Education Group(TAL),Techtronic Industries(0669)(0669.HK),Wuxi Biologics(2269)(2269.HK),Xinyi Glass