CHINA HEALTHCARE:TAKEAWAYS FROM DB CONFERENCE/TOUR;EXECUTIVE SURVEY ON 2018 OUTLOOK

时间:2018年01月12日 16:02:46 中财网
Anticipate stable delivery in 2018; Hengrui/SBP guided growth acceleration
We hosted executives from 18 listed companies during the DB conferenceand tour this week. Most executives remain constructive for 2018 and, despitethe stock rally, have not become more bullish or bearish vs. 1H17. Additionaltakeaways: 1) most expect an acceleration of drug approvals and benefits fromNRDL inclusion, although their views on the exact timeline of the latter weremixed; 2) their expectations of the pricing/volume trends after BE were mixed.We highlight that only two companies guided a growth acceleration for 2018 vs.2017 – Hengrui and Sino Biopharm.
DB proprietary executive survey on the 2018 outlook
We conducted our annual survey of executives from 16 listed companies to gaugeviews of key policies and sector catalysts. We highlight the following results: 1)on whether the executives have changed their views on the sector growth outlookin 2018 vs. 1H17, 37% indicated no change. We concur and remind investors thatthe fundamentals have not changed despite the significant stock rally; 2) on thegrowth outlook for the distribution sector, 2 distributor bellwethers voted 7-8%,one expected a high single digit and another said 6-7%, vs. 7.8% growth in 1H17;3) on the timeline of the NRDL benefit on drug growth, the feedback was mixed,with 25% being uncertain; 4) on an acceleration of regulatory approvals in 2018,56% of the executives expected one; 5) on the pricing trend after the BE study,the responses were mixed as well, with 25% anticipating a price erosion and 44%expecting stable prices.
DB view: more challenging to identify delta vs. consensus estimates
From a valuation perspective, we believe most of the near-term catalysts havebeen reflected for large-cap stocks while new mid/long-term risks are likely toemerge. On fundamentals, while we could still identify meaningful differencesin selective mid/long term growth drivers on a qualitative basis, we see feweropportunities for consensus revisions of 2018 numbers. While it would bechallenging to predict the sustainability of a large-cap stock rally, we now believelaggards may have more chances to outperform. We highlight Jointown andUniversal Medical as our top picks. We also like IHH at this point.
We will host a teleconference on DB conference takeaways at 9:30am HKT,January 15. Dial-in: +852 3051 2792, conference ID: 4595967, passcode: DBJC18.
Summary
We conducted a proprietary survey of executives from 16 H/A listed companies.We interviewed them for their views on NRDL inclusion, healthcare reformpolicies and the industry outlook for 2018. The following are our key takeaways:
On whether the executives have changed their views on the sectorgrowth outlook for 2018 vs. 1H17, 37% indicated that they had notchanged theirs. We concur and remind investors that the fundamentalshave not changed despite the significant stock rally.
Among pharma manufacturers, 44% of the executives expect 6-7%growth in 2018, higher than in 9M17. Among pharma distributors, 44%expect growth in 2018 to be 6-7%, slightly lower than in 1H17. Thissuggests a more optimistic consensus on performance among pharmamanufacturers than distributors, due to the two-invoice policy.
On NRDL, the results are mixed and 25% of executives are not sure aboutthe time it will take for the financial impact to be reflected in relevantproducts.
No clear conclusion can be drawn on price erosion, as 56% of therespondents expect the price erosion in 2018 to be similar to that in 2017,while 19% / 19% anticipate a larger / smaller price cut.
Regarding reimbursement control, 50% of the respondents think thepressure on drug variety will stay at the current level, while 38% believeit will be larger in 2018.
On the drug approval process, 56% of the participants anticipate a newdrug approval acceleration in 2018, suggesting clear confidence in aseries of policy changes leading to a more efficient approval process.Naturally, 87% of executives believe the volume of drugs to complete BEstudies will increase. However, 44% expect a similar ASP for such drugs,while 19% / 25% anticipate a higher / lower ASP in 2018, suggesting noclear preference.
On MDL, the survey suggests a clear consensus that there will beincreasing usage control in 2018, as voted by 75% of the respondents.
□ .J.a.c.k. .H.u./.M.e.g.a.n. .X.u  .德.意.志.银.行.股.份.有.限.公.司
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