I'm LongbridgeAI, I can summarize articles.Huafu Securities released a research report indicating that the Chinese medicine sector is expected to improve quarter by quarter in the second and third quarters of 2025, as the high base pressure in Q1 has been eliminated. Despite facing the impact of centralized procurement in hospitals and price comparisons, the demand for Chinese medicine has not significantly decreased. It is recommended to pay attention to companies with innovative pipeline layouts, especially those Chinese medicine innovative drugs that may be included in the medical insurance catalog. In 2024, both revenue and net profit in the Chinese medicine sector are expected to decline, but medical insurance policies support the development of the Chinese medicine market
According to the Zhitong Finance APP, Huafu Securities released a research report stating that the pressure from the high base in the Chinese medicine sector in Q1 has been cleared, and it is currently clearly undervalued and underweighted, with expectations for gradual improvement in Q2-3 of 2025. In H2 2024, the continuous price reduction from centralized procurement in hospitals and price comparison will further impact the market, but most Chinese medicine varieties are not significantly affected by the price policy, and terminal demand has not decreased significantly. Since 2025, the sector has been continuously attracted by technology AI and innovation, with valuations and allocations adjusted to low levels. As the pressure from the base clears in Q2-3, the sector's performance is expected to improve quarter by quarter, and it is recommended to pay attention to leading state-owned enterprises. New drug approvals are on the way, and it is suggested to focus on innovative Chinese medicine varieties that may be included in this year's medical insurance catalog. In terms of innovative drugs, it is recommended to pay attention to companies with innovative pipeline layouts, approval expectations, and data readout expectations.
The main points of Huafu Securities are as follows:
Performance of Innovative Chinese Medicine Sector
In 2024, revenue reached 30.53 billion yuan (down 14.7% year-on-year), with a net profit attributable to the parent company of 1.25 billion yuan (down 69.3% year-on-year). In Q4 2024, revenue for the single quarter was 5.76 billion yuan (down 27.1% year-on-year), with a net profit attributable to the parent company of -1.46 billion yuan (down 665.3% year-on-year). In Q1 2025, revenue for the single quarter was 8.22 billion yuan (down 8.8% year-on-year), with a net profit attributable to the parent company of 1.09 billion yuan (down 1.1% year-on-year).
Payment Side
The inclusion of traditional Chinese medicine in medical insurance continues to expand. In 2024, the national medical insurance catalog included a total of 1,394 varieties of traditional Chinese medicine and 892 varieties of Chinese medicinal herbs, among which there are 246 Class A traditional Chinese medicine products and 1,148 Class B traditional Chinese medicine products. From the perspective of medical insurance payment, the varieties in the catalog perform well in terms of payment, supporting the steady development of the Chinese medicine market. The approval rate for negotiations on traditional Chinese medicine is relatively high. The negotiation approval rates for traditional Chinese medicine outside the catalog from 2021 to 2024 were 38%, 53%, 64%, and 58%, respectively; the average reduction for traditional Chinese medicine outside the catalog in 2024 was 67.9%.
Review Side
There is a clear upward trend in the acceptance of IND and NDA for innovative Chinese medicine. From 2020 to 2024, the number of INDs for innovative Chinese medicine was 17, 44, 39, 54, and 80, while the number of NDAs was 6, 10, 10, 8, and 11. In Q1 2025, a total of 556 new Chinese medicine registration applications were accepted, an increase of 19.6% year-on-year; among them, there were 20 INDs and 13 NDAs for innovative Chinese medicine.
Access Side
The new registration classification separately lists innovative Chinese medicine, accelerating the approval and listing process. Between 2021 and 2024, a total of 40 new Chinese medicines were approved for listing in China. Among them, 9, 5, 5, and 3 Class 1 innovative Chinese medicines were approved from 2021 to 2024. Since 2025, 11 new Chinese medicines have been approved for listing, including 5 Class 1 innovative Chinese medicines.
Expectations for Basic Drug Catalog Adjustments Favor Innovative Chinese Medicines in Hospitals
The "2025 Drug Policy Work Points" mentions the revision of the "National Basic Drug Catalog Management Measures," which may extend to adjustments in the basic drug catalog.
With the Addition of Innovative Drug Platforms, Chinese Medicine Companies Are Gearing Up
It is recommended to pay attention to Jiuzhitang - stem cell therapy, Zhenbaodao - anti-CD20 ADC drug TRS005, YKYY - PCSK9 siRNA therapy drug YKYY015, and Jichuan Pharmaceutical - flu drug Masevir tablets, etc Risk Warning: Negative policy exceeds expectations; competition intensifies beyond expectations; performance falls short of expectations; price volatility risk; new product development and promotion fall short of expectations