The Zhitong Finance app learned that Guoxin Securities published a research report saying that good timing+high returns led the second wave of global innovation. Based on the common sense that long-term demand in the pharmaceutical industry is growing steadily, the bank believes that the third quarter of this year was the absolute bottom of the fundamentals of the industry, and that due to the high level of clearance, it is expected that the competitive pattern in most segments of the pharmaceutical industry will be greatly optimized. The bank believes 2023Q4 is the best time to lay out the pharmaceutical market for the next three years: the pharmaceutical industry is in a major cycle of basic orientation (demand is stable and sustainable, high-quality supply is emerging, general supply continues to exit, and autonomous and controllable capabilities continue to improve) and a clear long-term development path (innovation, compliance, and internationalization).

The main views of Guoxin Securities are as follows:

As domestic pharmaceutical companies' R&D investments gradually materialize, it is expected that the pharmaceutical industry will show a high growth trend in non-profits over the next three years.

Over the past five years, the R&D intensity of domestic pharmaceutical companies has continued to increase. Revenue growth and non-profit growth have been weaker than R&D growth, and the pharmaceutical industry is in the process of continuous transformation and upgrading. Judging from the 2023 data, the industry is about to enter a harvest period for R&D. Revenue growth and non-profit growth are expected to outperform R&D growth and release the dividends of transformation and upgrading. Taking A-share pharmaceutical listed companies as an example, revenue growth is expected to be between 10-15% in the next 3 years. If the non-profit margin increases by 2 points, the pharmaceutical industry's deducted non-profit is expected to increase by 75% in the next 3 years, with a compound annualized growth of more than 20%.

It is recommended to actively lay out the two main lines, global innovation+patient benefit.

The first is the continuous release of domestic pharmaceutical talent dividends to welcome the second wave of innovation and globalization. This wave of innovation and globalization is different from the first wave of CXO and other supporting industries. China's pharmaceutical products will go global, and domestic pharmaceutical and medical device companies are expected to create more pharmaceutical companies with large market capitalization in the next 5-10 years; second, as domestic health care reform continues to deepen, high-quality product/service companies that can provide value centered on patients will stand out. Non-compliant, wasteful, and ineffective products and services will leave the market, and compliant, economical, and effective products and services will be more widely available Market share, companies that can provide high-quality products and services in the fields of pharmaceuticals, devices, and medical services will gain room for long-term growth in the future.

Industry segmentation investment strategy: innovative drugs: focus on differentiated innovation overseas and major domestic products; medical devices: layout of the four main lines of collection, business continuity, pharmaceutical equipment collaboration, and acceleration of overseas travel; traditional Chinese medicine: brand OTC, innovative traditional Chinese medicine, and traditional Chinese medicine resource products; vaccines: layout rich product pipelines, enterprises with strong commercialization and internationalization capabilities, and differentiated pipeline enterprises; CXO: focus on leading enterprises with differentiated competitive advantages, a large share of overseas markets, and leaders in the market segment; upstream life sciences; Focus on products/services that are competitive and are expected to break through the domestic market in the future, Successful international high-quality enterprises; medical services: Focus on the differentiated competitive advantages of specialty care and ICL under the DRGs.

Risk warning: R&D failure or slower progress than expected risk; risk of commercialization falling short of expectations; geopolitical risk; risk of regulatory policy adjustments in the fields of pharmaceuticals, devices, and services.