CMB International: Pharmaceuticals are expected to outperform the market in 2025, optimistic about industry valuation recovery
Zhao Yin International released a research report indicating that the pharmaceutical industry is expected to outperform the market in 2025, benefiting from overseas interest rate cuts and improvements in the domestic macro environment. The implementation of the Class B medical insurance catalog is imminent, and innovative drugs will obtain better payment conditions through commercial health insurance, driving the profit recovery of domestic medical device companies. It is expected that leading companies such as INNOVENT BIO and BEIGENE will enter a phase of sustained profitability, and the overseas expansion of innovative drugs will also become a new growth point
According to 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 high-elasticity sector, is expected to outperform the market in 2025. The MSCI China Healthcare Index has risen 5.3% from the beginning of 2025 to date, outperforming the MSCI China Index by 0.9%. Among them, the Class B medical insurance catalog is expected to be implemented within the year, and innovative drugs will benefit from better payment conditions through commercial health insurance coverage. The accelerated recovery of medical equipment bidding will drive the profitability recovery of domestic medical device companies.
CMB International's main viewpoints are as follows:
Innovative drugs continue to deliver performance, leading companies will enter a sustained profitability phase
Innovent Biologics' product revenue for 2024 is expected to exceed 8.2 billion yuan, a year-on-year increase of over 40%. The management has guided that the company will achieve EBITDA breakeven in 2025. Benefiting from the strong global sales growth of Zebrutinib, BeiGene has guided that it will achieve operating profit breakeven in 2025.
In addition, the overseas expansion of innovative drugs will become a second growth engine for profitability. According to incomplete statistics from Pharma Times, the total number of Chinese innovative drugs going overseas in 2024 is expected to reach 98, with a total disclosed transaction amount of 59.55 billion USD, a year-on-year increase of 96% compared to 2023. China will become a must-choose destination for overseas pharmaceutical companies seeking innovative drug pipelines, and Chinese innovative drugs will play an increasingly important role on the international stage.
The Class B medical insurance catalog is planned to be implemented within the year, and commercial health insurance will help break the payment ceiling for innovative drugs
On January 17, the National Healthcare Security Administration proposed that the Class B drug catalog will mainly focus on drugs with high innovation levels, significant clinical value, and substantial patient benefits, but which cannot be included in the basic medical insurance catalog due to exceeding the "basic protection" positioning. The National Healthcare Security Administration will adopt various incentive measures to actively guide and support commercial health insurance to include Class B catalog drugs in the coverage scope.
The Class B catalog will be adjusted in sync with the annual basic medical insurance drug catalog, with the first version planned to be released within this year. New drugs approved by the end of May will be eligible for review. The Class B catalog may prioritize drugs that have passed formal review and expert evaluation in national negotiations but were ultimately not included in the basic medical insurance catalog, such as CAR-T and ADC, which is expected to open up payment space for domestic innovative drugs.
The medical insurance prepayment and instant settlement system are expected to alleviate financial pressure on the industry chain
In 2024, the national basic medical insurance fund expenditure is expected to grow slightly faster than income; total fund income is projected to be 3.48 trillion yuan, a year-on-year increase of 4.4% (vs. 2023 +8.3%); total expenditure is expected to be 2.97 trillion yuan, a year-on-year increase of 5.5% (vs. 2023 +14.7%); the cumulative balance of the medical insurance pooling fund is expected to be 3.87 trillion yuan (vs. 3.40 trillion yuan at the end of 2023). The medical insurance system is accelerating the implementation of the prepayment system, with 72% of the pooling areas nationwide arranging a prepayment of 94.3 billion yuan in 2024.
At the same time, the medical insurance system is accelerating the realization of instant settlement, aiming for about 80% of pooling areas nationwide to achieve instant settlement by 2025, and all pooling areas nationwide to achieve instant settlement by 2026. The medical insurance prepayment and instant settlement system will effectively alleviate the financial pressure on the industry chain, benefiting commercial circulation, medical institutions, and others Investment Advice: Optimistic about Industry Valuation Recovery
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