China International Capital Corporation (CICC) has released a research report stating that on April 14th, the General Office of the State Council issued the "Several Opinions on Improving the Drug Price Formation Mechanism." The report indicates that for high-level innovative drugs with significant innovation and substantial clinical value, the policy supports setting initial prices that correspond to their high investment and risk profile upon market entry, maintaining relative price stability for a certain period. This policy is expected to drive high-quality development within the pharmaceutical industry. Based on real-world research outcomes and clinical effectiveness, pharmaceutical companies can appropriately adjust price levels from the initial launch price. The policy also aims to promote diversified payment methods and the reasonable formation of prices for innovative drugs, broadening their payment channels. The main views from CICC are as follows:
The policy optimizes the initial pricing mechanism for newly launched drugs, including innovative drugs, and implements a self-assessment system for companies introducing new drugs. It encourages differentiated pricing strategies based on the type of drug, such as high-level innovative drugs, improved new drugs, and generic drugs. For high-level innovative drugs with significant innovation and clinical value, support is given for setting initial prices that reflect their high investment and risk, maintaining relative stability for a certain period. Companies can adjust prices based on real-world evidence and clinical performance.
The policy promotes diversified payment mechanisms and reasonable price formation for innovative drugs, aiming to broaden payment channels. It also accelerates the implementation of innovative drug listings in commercial health insurance directories and recommends referencing these within multi-tiered medical security systems, including commercial health insurance and medical mutual aid.
The innovative industry trend is clearly benefiting from advantages such as China's engineer dividend, abundant clinical resources, and supportive policies. Domestic innovative drugs are gradually evolving from follow-on research to first-in-class/best-in-class innovations and gaining international presence. In emerging technology platforms, specific sub-sectors with anticipated clinical data readouts by 2026 are expected to attract greater attention.
CICC maintains a firm positive outlook on current investment opportunities in the CXO (Contract X Organization) sector. It believes that synchronized demand from domestic and international markets could drive a dual recovery in both performance and valuation for the industry. Leading companies with technological barriers and platform capabilities are likely to benefit first. It is advised to seize opportunities presented by cyclical recovery and structural upgrades. Two main investment themes are highlighted: certainty in overseas demand performance (commercial scaling and PPQ scheduling) and the pace of domestic demand recovery (rebound in order pricing and realization of margin improvements).
Regarding specific stocks, CICC suggests focusing on: HENGRUI PHARMA (01276), BEIGENE (06160), AKESO (09926), SKB BIO-B (06990), INNOVENT BIO (01801), DUALITYBIO-B (09606), Hansoh Pharma (03692), RemeGen (09995), Sino Biopharmaceutical (01177), CSPC Pharmaceutical Group (01093), Henlius Biotech (02696), Kelun Pharmaceutical (002422.SZ), WuXi AppTec (02359), WuXi Biologics (02269), WuXi XDC Cayman (02592), Pharmaron (03759), Asymchem Laboratories (002821.SZ), Tigermed Consulting (300347.SZ), and Joinn Laboratories (603127.SH).
Risk factors include R&D progress falling short of expectations and delays in external collaboration progress for core innovative drug products.