|作者：||Hayden Zhang,Warren DAI|
|摘要：||Report title:China Pharmaceutical & Healthcare - Interim results mostly hit by COVID-19
Analyst:Hayden Zhang,Warren DAI
■ 1H20 healthcare players mostly saw weakness due to COVID-19 disruption, while biotech and CRO names proved more resilient
■ Innovation players continue the rides on policy tailwinds, while GPO worries still weigh on generic portfolios of pharma names
■ Our top picks are Innovent, BGNE, and Wuxi Apptec
Healthcare sector saw sales weakness amid COVID-19
Despite effective mitigation measures in China, most of healthcare products and services were still largely affected by the COVID-19 pandemics due to suspension of many routine and elective services in hospitals and restrictions of marketing activities in 1H20. We noted major HK-listed TCM players and pharma names were hit most severely by the crisis with sub-sectors avg. sales contraction of 11%/9% yoy, followed by healthcare service (-6% yoy), distributors (-6% yoy) and medtech (+1% yoy). On the contrary, biotech and CRO names proved more resilient to COVID-19 pressures with a sector average growth of 139%/23% yoy in 1H20. This is due to robust oncology demand and low base in biotech space as well as rising overseas demand and growing COVID-19-related business in CROs sector. We think broad COVID-19 challenges remain in 2H20E as effective vaccine and treatment may not yet be available in the rest of year and the annual flu season also looms ahead.
Policy tailwind continues to support innovation
As per Insight, NMPA approved 27 new drugs in 1H20 (51 approvals in 2019), showing that policy tailwind and efficient regulatory process continued despite COVID-19 challenges. Noting 10 innovative drugs are developed by the Chinese pharma companies, we reckon Hansoh’s almonertinib (3rd Gen EGFRi) and BGNE’s zanubrutinib (BTKi) have potential to reach blockbuster. Meanwhile, those new NMPA-approved drugs are further benefit from the updated NRDL guidance with selection criteria of drugs extended to Aug.17 2020 from YE19, well poised for an accelerated timeframe for NRDL inclusion. Meanwhile, we believe some leading CRO/CDMO names are worth chasing, thanks to robust CRO demand and growing overseas backlogs.
Top picks with positive outlook / clear midterm catalyst
Innovent (1801 HK, BUY, TP HKD67.9) should deliver several R&D catalysts in 4Q20E/21E, and we like its leading position in PD-1/L1 space and positive global strategy outlook backed by expanded Eli lily collaboration.
BeiGene (BGNE US, BUY, TP USD280) should be catalyzed by multiple milestones over 2020E/21E, including upcoming NRDL negotiation for its key products. We continue to favour Co.’s rich late-stage pipeline, strong execution and BD capability.
Wuxi Apptec (2359 HK, BUY, TP HKD144) should sustain a resilient 28% earnings CAGR over 2020E-22E, thanks to its well-built platform and rising overseas demand amid COVID-19 pandemic. We also think its strong balance sheet to provide M&A optionality ahead.