Industry: Suggestions To Focus On Transformation Opportunities For Three Types Of Chinese Medicine Companies

With the promotion of a series of favorable policies and the growth in demand brought about by aging, the Chinese medicine industry will usher in a good space for development.

Yinhe Securities believes that the two main lines of innovation and consumption are the long-term development direction of Chinese medicine, suggesting that the transformation opportunities of three types of Chinese medicine enterprises: first, innovative Chinese medicine research and development enterprises; second, the transformation of "medical insurance immunity" in the field of general consumer goods; third, the transformation of low-cost, high-quality Chinese herbal suppliers, especially for scarce The third is to transform into a low-cost, high-quality supplier of Chinese herbal medicines, especially for the artificial substitution of scarce Chinese herbal resources.

Innovative Chinese medicine supported by policy

In the broader context, the value chain structure of the pharmaceutical industry is being reshaped under the control of medical insurance premiums.

The space for non-therapeutic drugs may be compressed, and the market share of some Chinese medicine varieties with unknown efficacy (especially some large varieties of Chinese medicine injections whose safety and economics are difficult to prove) will be reduced, while therapeutic products with clear clinical effects, innovative products that meet actual clinical needs, and products with safe and controlled quality and efficacy will have a good opportunity to develop in the market.

This will also benefit innovative Chinese medicine R&D companies.

Unlike chemical and biological drugs, which have clear ingredients and mechanisms of action, Chinese medicines are more difficult to innovate and have longer R&D cycles.

In order to encourage innovation in Chinese medicine, the "Several Policy Measures on Accelerating the Development of Chinese Medicine Features" directly points out the problem of an imperfect innovation system, and makes it clear that the level of technical guidance and registration service capacity of Chinese medicine registration applications should be improved, an effective mechanism for science and technology, medical and Chinese medicine departments to recommend eligible new Chinese medicine drugs to enter the fast-track review and approval channel should be established, and the number of third-party Chinese medicine new drug registration and testing institutions should be increased, etc.

The industry believes that this series of initiatives is expected to accelerate the approval of new Chinese medicines, and the number of innovative Chinese medicines approved is expected to increase.

Yinhe Securities said it is optimistic about the future development prospects of Yiling Pharmaceuticals, which focuses on innovation in Chinese medicine. The increase in market share of products under the brand awareness of Ealing Pharmaceuticals will ensure the growth of Ealing Pharmaceuticals. Secondly, Yiling Pharmaceuticals is an innovative pharmaceutical company at its core. The company has developed innovative Chinese medicines based on the "complex disease theory" and has strong innovative strength, which is more resilient under the "medical insurance cost control" environment.

The bank believes that there is still room for valuation improvement for Ealing Pharmaceuticals, which will reflect stronger innovation attributes and growth.

General consumer products are good for avoiding the pressure of medical insurance

Under the pressure of medical insurance cost control, the general consumer goods sector, which can avoid the pressure of medical insurance, is the choice of many TCM companies, especially those lacking experience in R&D of innovative drugs. In addition, TCM consumption has a strong attribute of general consumption, and against the background of residents paying more attention to health and wellness, treatment of untreated diseases and management of chronic diseases, there is also a greater demand for general wellness consumer products.

In recent years, Chinese medicine enterprises including Pientzehuang, Yunnan Baiyao and Tongrentang have interpreted their respective paths in the consumer goods market.

Chinese herbal medicine producers have low-cost advantage

In recent years, the Chinese medicine industry has often experienced price hikes and scarcity of resources, behind which factors such as weather, natural disasters and the science of cultivation are all related. The industry believes that in order to guarantee a stable supply of Chinese herbs, Chinese medicine manufacturing companies urgently need standardised and large-scale production bases for Chinese herbs.

In addition, the "Several Policy Measures on Accelerating the Development of Chinese Medicine Features" also points out that it is necessary to strengthen the construction of good breeding bases and production bases for authentic Chinese herbs, promote standardized planting of Chinese herbs, encourage the development of professional cooperatives and joint societies for planting Chinese herbs, promote the construction of a number of modern logistics bases for Chinese herbs that are standardized, intensive, large-scale and have traceable product information, and guide medical institutions, pharmaceutical enterprises, and Chinese herbal beverage tablets.

In addition, it will guide medical institutions, pharmaceutical companies and Chinese medicine factories to procure quality-assured and traceable Chinese herbal medicines, and implement in-depth standardization projects for Chinese medicines. Against this backdrop, the industry expects to see opportunities for producers of high-quality, low-cost Chinese herbal medicines to transform.