Written By: Manager Ge Lan
Health Care Industry Views:
Medicine, as a necessary consumer product, is a sector with stable demand. However, despite the rapid rise in the growth of medical insurance expenditure, expenditure on medicine and medical care is far below the overall demand. On the other hand, with the beginning of the innovation cycle, the pharmaceutical industry has appeared scientific and technological attributes on the basis of consumption attribute, and its valuation system is changing. At present, the valuation of the pharmaceutical industry is at the historical low, but we expect high prosperity and growth for next year. This round of price decline in the pharmaceutical industry was mainly affected by the emotional impact of policy disturbances, while the relatively poor liquidity of the pharmaceutical industry exacerbated the volatility of individual stocks.
We believe that with the overall growth and increasing concentration of the pharmaceutical industry, the industry still has a great investment value, and its direction of overall transformation to innovative drugs and high-quality generic drugs will not change fundamentally. Therefore, we hold optimistic view on innovative pharmaceutical and high-quality generic pharmaceutical enterprises. Besides, leaders of medical services with long-term growth potential and high prosperity maintain one of our focuses.
Recent Event of 4+7 Centralized Procurement:
The results of the pilot program of the 4+7 city drug centralized procurement were released on Dec 7 2018. The overall price cut for winners was much steeper than the 30-40% expected by the market earlier.
We believe the business model of generic pharmaceutical industry will be reconstructed, and enterprises will pay more attention to cost and R&D. We believe that the bidding mode of centralized procurement will change the valuation system of generic pharmaceutical industry in the short term, giving downward pressure on valuation. In the medium and long term, the demand for stable growth of the pharmaceutical industry has not changed. This reform will help guide generic pharmaceutical enterprises to adjust their competitive strategy from “marketing-focused” to “product-focused”. It is a sign of industry progress, and the enterprises that can win will have stronger comprehensive competitiveness.
Portfolio Manager Background:
Ms. Ge Lan, obtained PhD in biomedical engineering at Northwestern University, where she successfully led scientific research projects. Prior to Zofund, Ge Lan became a member of New Wealth (2011-12) Best Research team. She joined ZO as a research analyst and then a PM in equity research platform.
Zhong Ou Asset Management Co., Ltd
5F, OFC, 333 Lu Jia Zui Ring Rd, Shanghai, China
www.zofund.com
Disclaimer: This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
