德银港股医疗保健行业2018展望我们仍在寻找机会2017120859页

8December2017HealthCare2018OutlookHealthCareHealthCareIndustryUpdateAsiaChinaHongKongIndustry2018OutlookDate8December2017DeutscheBankMarketsResearchWestillseeopportunitiesWepreferqualitynameswithrobustpipelines,andmispricedopportunitiesOurtoppicksincludeSinoBiopharm,JointownandUniversalMedical,whilewetakeHengruioffthetoplistduetovaluation.Webelievequalitymanufacturerswithastrongpipelineshouldcontinuetooutperform,whileSBPhasmultiplepositivecatalystsonkeypipelinedrugsthathavenotbeenproperlyreflectedinthestock.Wealsobelievetherearestillmispricedopportunities,suchasJointown.Whileconsensushaspenalizedtheentiredistributionsector,weseeJointownemergingasawinnerfromthezero-sumgameoftwoinvoices.MultiplepositivecatalystsaheadWeexpectNRDLimpactonP&Lstarting1Q18,andacceleratedregulatoryapprovalsaskeycatalystsforlarge-capstocks.WehighlightthatSBP,CSPCand3SBiohave12,6,and3drugsthatwereincludedinthenewNRDL,representingabout19%,26%,and56%ofYTD3Q17revenue,respectively.Wealsoexpect3-4blockbusterapprovalsforSBPandHengruirespectively,and2-3keydrugapprovalsfromCSPCin2018.Additionally,webelievetheongoingtwo-invoicereformwillcreateanadirduring3Q17to2Q18,whileaninflectionpointishighlylikelyin2H18.Webelieveitwouldbeagoodtimetore-examineopportunitieswithinthedistributionsegmentinthenextfewquarters.ExpectimprovingregulatoryframeworkandreboundofapprovalsRegulatorydataindicatedarapidlyrisingnumberofinnovativedrugapprovalsYTD17,alongwithmuchshorterreviewtimes.35innovativedrugs(class1.1)havebeenapprovedYTD17,vs.6,6,3in2016,2015and2014.Wehaveobservedmuchshorterreviewperiodswherefewhigh-profiledrugswereapprovedwithin2-3monthsoffiling,anewrecordfortheCFDA.Wehighlighttherewasonedomesticclass1.1drugapprovalandonlyafewFTMgenericsin2017,likelyleadingtoareboundofregulatoryapprovalsin2018.Notably,ofthe142applicationsfromdomesticplayersthatareunderpriorityreviewforproduction,Hengrui,SBPandCSPCown10,8and4compoundsrespectively.Expectvaluationgaptowidenforlargecapnames;valuationandrisksHeadinginto2018,weanticipatetradingmultiplesonlarge-capnamesarelikelytodifferentiateasinvestorsdigdeeperonkeyvaluationvariablessuchasPOSandpeaksales.Currentsectorvaluationappearstobeslightlyhigh,astheMSCIChinaHCIndexistradingat18.9xFTMEPS,aboveitsthree-yearaverageof17.7x.Keyrisksincludepriceerosion,reimbursementreformandregulatorydelays.JackHu,Ph.D.ResearchAnalyst+852-22036208MeganXuResearchAssociate+852-22035928ToppicksJointownPharmaceuticals(600998.SS),CNY18.59BuyUniversalMedical(2666.HK),HKD6.94BuySinoBiopharmaceutical(1177.HK),HKD10.22BuySource:DeutscheBankCompaniesfeaturedJointownPharmaceuticals(600998.SS),CNY18.59Buy2016A2017E2018EP/E(x)37.733.028.2EV/EBITDA(x)16.813.010.5Price/book(x)3.022.172.03UniversalMedical(2666.HK),HKD6.94Buy2016A2017E2018EP/E(x)9.98.76.4EV/EBITDA(x)20.319.417.0Price/book(x)1.41.41.2SinoBiopharmaceutical(1177.HK),HKD10.22Buy2016A2017E2018EP/E(x)20.232.428.3EV/EBITDA(x)10.416.714.4Price/book(x)4.67.36.0Source:DeutscheBankDeutscheBankAG/HongKongDeutscheBankdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Thus,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.DISCLOSURESANDANALYSTCERTIFICATIONSARELOCATEDINAPPENDIX1.MCI(P)083/04/2017.THECONTENTMAYNOTBEDISTRIBUTEDINTHEPEOPLE'SREPUBLICOFCHINA(“THEPRC”)(EXCEPTINCOMPLIANCEWITHTHEAPPLICABLELAWSANDREGULATIONSOFPRC),EXCLUDINGSPECIALADMINISTRATIVEREGIONSOFHONGKONGANDMACAU.Distributedon:08/12/201702:51:11GMT0bed7b6cf11c8December2017HealthCare2018OutlookExecutivesummary2018outlookWestillseeopportunitiesAslarge-capmanufacturersralliedsignificantlywithonlysporadicupwardearningsrevisionsin2017,weseefeweropportunitieswithcompellingrisk-rewardprofilesvs.YE2016.Atpresent,wepreferqualitynameswitharobustpipeline,alongwithmispricedopportunities.ForSinoBiopharm,weexpectthefollowingcatalysts:fourpotentialblockbusterapprovals;improvingvisibilityonitsearlystageinnovativepipeline(TQseries)andbiosimilarpipeline;andpotentialbusinessdevelopment/M&Aopportunities.ForJointown,weexpectthefollowingcatalysts:continuousmarket-sharegainundertwo-invoice;outflowofoutpatienttraffictolower-tierinstitutions;andoutflowofprescriptiondrugstodrugstoresfromhospitals.AsJointownhas85%revenueexposureintier2andbelowhospitals,thebenefitsoverweighthelimitedimpactfromthetwo-invoicepolicy.Assuch,webelievethisisamispricedopportunityinthemid/longterm.AnticipateNRDLbenefitandreboundofregulatoryapprovalsWeestimatemeaningfulbenefitsfromNRDLtomaterializeoncompanyP&Lsfrom1Q18,asNRDLimplementation,whichstartedinSeptember2017,hasbeendelayedathospitallevel.WehighlightthatSBP,CSPCand3SBiohave12,6,and3drugsnewlyincludedinthe2017NRDL,representingabout19%,26%,and56%ofYTD3Q17revenue,respectively.WealsoexpectareboundofapprovalsfordomesticinnovativedrugsandFTM/STMgenerics,asavailabledataindicatedthatonlyMNCshavetakenadvantageofacceleratedapprovalsfromCFDAsofar.Sincetheintroductionofpriorityreviewin2016,atotalof323applicationshavebee