According to the Zhitong Finance APP, on July 1st, the A-share Tonghuashun innovative drug sector rose by 3%, with a year-to-date increase of 25%. Related concept stocks continued to rise in the afternoon, with Frontier Biotechnologies (688221.SH) hitting the daily limit, ALK (002940.SZ) achieving a historical high with two boards in three days, and Kexing Pharmaceutical (688136.SH) also experiencing significant gains. On the news front, on June 30th, the National Healthcare Security Administration and the National Health Commission jointly issued the "Several Measures to Support the High-Quality Development of Innovative Drugs" (hereinafter referred to as "Measures"), targeting the core pain points of the entire chain of the innovative drug industry from "laboratory" to "bedside," and introducing 16 targeted measures.

Analysis points out that this heavyweight document, regarded by the industry as a "timely rain," aims to solve the longstanding issues of "difficult R&D, difficult payment, and difficult hospital access" for innovative drugs through breakthroughs in multiple dimensions such as data openness, payment innovation, and relaxed access. It aims to ignite the local pharmaceutical innovation engine.

Specifically, from the perspective of R&D sources, the opening of healthcare insurance data marks the first time that the "Measures" provide a "navigation" for innovation.

In the past, pharmaceutical companies often found R&D to be like "finding a needle in a haystack," with unclear directions. The "Measures" clearly state for the first time that, under the premise of ensuring safety and compliance, they will explore the opening of core data resources such as disease spectrum and clinical medication needs on a nationwide unified healthcare insurance information platform. This means that pharmaceutical companies and research institutions are expected to gain "precise navigation" from the real world, allowing them to more efficiently lock in R&D targets, optimize R&D pipeline layouts, and reduce the blind spots and risks in R&D.

At the same time, the policy encourages commercial health insurance to inject "patient capital" into innovative drug R&D through the establishment of innovative drug investment funds, addressing the bottleneck of long-term funding shortages. Even more encouraging for pharmaceutical companies is that once a new drug application is accepted by the drug regulatory authority, they can simultaneously apply to the healthcare insurance department for "point-to-point" policy guidance, clarifying the key elements of healthcare insurance access (such as main specifications, reference drugs, payment scope) in advance, allowing companies to avoid detours.

From the perspective of dual-track payment, the "Measures" provide a new path for high-value innovative drugs with a "commercial insurance catalog."

The dilemma faced by many high-value innovative drugs is that the price reduction for "entering healthcare insurance" is significant, while not entering healthcare insurance makes it difficult to open up the market. In this regard, the "Measures" have proposed a "dual-track" prescription.

The National Healthcare Security Administration plans to achieve simultaneous declaration and adjustment of the commercial insurance innovative drug catalog and the healthcare insurance catalog, with basically consistent procedures, allowing companies to independently declare inclusion in the healthcare insurance drug catalog, the commercial insurance innovative drug catalog, or simultaneously declare both.

The most groundbreaking aspect is the first proposal to establish a "commercial health insurance innovative drug catalog." This independent catalog will focus on including innovative drugs with significant clinical value but beyond the basic healthcare insurance coverage, providing references for commercial health insurance and medical mutual assistance. Drugs within the catalog will enjoy special treatment: price negotiation confidentiality, exclusion from basic healthcare insurance self-payment rate assessment, exemption from centralized procurement substitution monitoring, etc. This opens up a new payment channel for those breakthrough therapies that are temporarily difficult to enter healthcare insurance or are priced relatively high, achieving complementarity with the healthcare insurance catalog.

It is worth mentioning that this time the "Measures" reiterate that medical institutions cannot restrict the allocation of innovative drugs based on "drug proportion," the number of drugs in the catalog, and other reasons. More critically, drugs negotiated for healthcare insurance and those in the commercial insurance catalog can break the "one product, two specifications" restriction (i.e., the same generic drug can only have two specifications), greatly increasing the chances of high-value innovative drugs entering hospitals It is foreseeable that with the implementation of this policy supporting the entire lifecycle of innovative drugs, Chinese patients are expected to access more breakthrough "life-saving drugs" and "good drugs" faster and more easily, and the local pharmaceutical innovation ecosystem will usher in a new round of high-quality development opportunities.

Looking ahead to the innovative drug market, Founder Securities believes it is not yet over, and a few points need to be emphasized again:

1. This round of innovative drug market is a recognition of the business model of innovative drugs, based on the understanding that many leading companies such as BeiGene, Innovent Biologics, and Hansoh Pharmaceutical will turn losses into profits through business development (BD) or globalization in 2024 or Q1 2025. It is a typical beta market recognized and bought by long-term capital, representing a clearly defined industrial trend investment, with market confidence in the sustainability of the profit model of innovative drug companies improving, and the industry fundamentals showing a positive improvement trend.

2. The collective rise of leading innovative drug stocks reflects the market's systematic reassessment of the long-term value of their R&D investments. The value of R&D assets accumulated over the past years is gradually being recognized, driving the overall valuation center of the innovative drug sector upward. The driving force of this round of market is mainly derived from long-term expectations of industrial upgrading, rather than solely relying on data disclosure events from academic conferences. Even after the academic conference cycle ends, the core logic supporting the market—the continuous realization of R&D value and the clarification of industrial trends—is still expected to continue.

3. Today's innovative drug market is priced based on data assets rather than BD pricing; BD acts as a catalyst for accelerating data value rather than a pricing benchmark. As long as the R&D asset data is of high quality and globally leading, the market will naturally assign it a reasonable market value, even if the BD rhythm fluctuates in the short term, the overall innovative drug market will not be significantly affected.

The firm pointed out that it remains firmly optimistic about the innovative drug market, and the revaluation of innovative drug assets will continue, with the compensation for R&D asset valuations far from over.

Tianfeng Securities stated that looking to the future, Chinese innovative drugs have already taken the lead in some areas in the new mechanisms and new targets; in the Chinese market, foreign enterprises still occupy a large part of the domestic market, and under the dual factors of policy support and product strength enhancement, Chinese innovative drugs are expected to continue to achieve domestic substitution in the local market.

Related concept stocks:

Hansoh Pharmaceutical (01276): The company is a globally leading innovative pharmaceutical enterprise rooted in China. In 2024, the company's revenue is expected to be 27.985 billion yuan (+22.6%), with a net profit attributable to the parent company of 6.337 billion yuan (+47.3%), and a gross margin increase of 1.6 percentage points to 86.2%. The core growth engine is the revenue from innovative drugs, with the percentage of innovative drug sales revenue in total revenue increasing from 38.1% in 2022 to 43.4% in 2023, and further increasing to 46.3% in 2024. Among them, major products such as PD-L1 & TGF-β and HER2ADC are about to continue to ramp up, combined with overseas licensing cooperation, forming a "domestic ramp-up + overseas licensing" dual-drive.

3SBio Inc. (01530): 3SBio has made breakthroughs in both international cooperation and clinical progress for innovative drugs: On May 20, it reached an overseas rights authorization agreement with Pfizer for the PD-1/VEGF dual antibody SSGJ-707, with a total amount of up to $6.15 billion (including a $1 billion strategic investment), setting a record for local dual antibodies going overseas On June 1st, ASCO announced the Phase II data of the drug for monotherapy in advanced NSCLC, with objective response rates of 75% for squamous cell carcinoma and 64% for non-squamous cell carcinoma, a disease control rate of 97%, and only 24.1% of treatment-related adverse reactions of grade 3 or higher. This collaboration fully demonstrates the clinical value of the company's dual antibody platform, and the company will continue to focus on the development of innovative drugs in high-demand areas such as oncology, autoimmune diseases, and nephrology. Future key focuses include the clinical data readout of the PD-1/VEGF (707) dual antibody and Pfizer's overseas clinical progress.

Kangfang Biotech (09926): Recently, the company announced the data from the Ivosidenib HARMONi-2OS study, announced the approval of Ivosidenib for the indication of LPD-L1+NSCLC in China, and announced that the HARMONi-6 trial achieved its primary endpoint for PFS, which has enhanced confidence and predictability for the future success of Ivosidenib in international Phase III trials