The Zhitong Finance App learned that Open Source Securities released a research report stating that the SPD system has established a transparent drug circulation record by tracking the flow and inventory of drugs in the supply chain in real time. The bank believes that after this round of medical restructuring, the pharmaceutical device distribution sector is expected to welcome major innovations in the industry. The SPD project can achieve refined management of in-hospital materials, improve the level of informatization in hospitals, make it easier to accept government supervision, and improve the compliance of the pharmaceutical supply chain and the integrity of in-hospital logistics management. Leading state-owned supply chain companies are expected to further maintain their leading edge, and individual stocks with relatively high SPD revenue contributions are expected to maintain rapid growth.

Beneficial targets:Sinopharm Holdings (01099), Saili Medical (603716.SH), Guoke Hengtai (301370.SZ), Guoxin Health (000503.SZ), Runda Medical (603108.SH), Shanghai Pharmaceuticals (0.3), China Resources Pharmaceuticals (03320). 601607.SH

The main views of Open Source Securities are as follows:

SPD enhances the transparency of circulation in the medical industry, or is it a strong starting point for improving hospital integrity

The in-hospital logistics management system (SPD, supply, processing, distribution and distribution) is an emerging centralized distribution model in the pharmaceutical and medical device fields. It can generally be briefly described as a centralized processing or outsourcing management method for logistics activities such as the supply, inventory management, and processing of medical supplies. The SPD system establishes a transparent drug circulation record by tracking the flow and inventory of drugs in the supply chain in real time. The entry, exit, storage and distribution of every drug has traceable records, and any abnormalities can be traced back to the source. This transparency reduces the possibility of supply information being tampered with or concealed, makes it easier for supervisory authorities to carry out full supervision, and reduces the space for non-compliance in all parts of the supply chain. As this round of medical restructuring continues, the pharmaceutical device distribution sector is expected to welcome major innovations in the industry. Hospitals are expected to use SPD and other in-hospital information systems as a starting point to further improve the fine management of the pharmaceutical device supply chain. At the same time, the SPD system can trace the entire distribution process, enhance the transparency of the pharmaceutical drug distribution process, facilitate supervision by relevant government departments, and improve the compliance of the pharmaceutical supply chain and the integrity of hospital logistics management.

The current penetration rate of SPD in public hospitals is about 5.5%, and the market size of the industry is expected to expand rapidly

According to data from the China IoT Medical Device Supply Chain Branch, from 2019 to October 2022, the number of public hospitals collected to carry out SPD projects in China increased rapidly from 32 to 647. As of October 2022, level-III hospitals accounted for 76% of public hospitals carrying out medical device SPD projects, and level-III hospitals accounted for 24%; the hospital categories were mainly general hospitals, accounting for 86%. According to the “2021 Statistical Bulletin on the Development of Health Services in China” issued by the National Health Commission, as of the end of 2021, there were 1,1804 public hospitals in China. According to this market stock estimate, as of October 2022, the penetration rate of China's medical device SPD projects in public hospitals across the country was about 5.5%, and there is plenty of room for future market development. At the same time, the value of the SPD project is high. According to C&D's new prospectus, the average fee for each hospital in 2022 was 5.99 million yuan per year. In terms of market space, according to estimates of the penetration rates of hospitals at different levels, the scale is expected to reach 13.5 billion yuan in 2025. Judging from the competitive landscape, Sinopharm Holdings was the first to enter the market. Currently, it holds 41% of the SPD market share dominated by all commercial medical device companies. It has a large market share, and is expected to further expand its advantages. Major pharmaceutical distribution companies have entered the SPD market one after another, such as Celi Healthcare, Guoke Hengtai, Shanghai Pharmaceutical, and Kyushu Express. Among them, Celi Healthcare's SPD business in 2022 was relatively high, reaching 29.8%. Judging from the distribution of provinces, Shandong Province, Guangdong Province, and Zhejiang Province ranked first for publicly tendered SPD projects.

Risk warning:In-hospital pharmaceutical sales are slowing, and the performance of SPD related companies may fall short of expectations.