HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<ul>
<li>China healthcare can be mainly divided into the following segments: pharmaceuticals, medical devices, medical services, To B Supply Chain. Investment logic and business characteristics in these fields are completely different.</li>
<li>“High standardization+low dependence on doctors” help pharmaceuticals gain a more favorable commercial value than medical devices in distribution process. Profit margin/cross-regional expansion capability of medical services have always been questioned.</li>
<li>The business characteristics of “To B supply chain” indicate strong cyclical characteristics due to supply rigidity and demand fluctuations, which are easily affected by changes in demand trends.</li>
</ul>


China healthcare can be mainly divided into the following segments: pharmaceuticals, medical devices, medical services, To B Supply Chain. Investment logic and business characteristics in these fields are completely different.
“High standardization+low dependence on doctors” help pharmaceuticals gain a more favorable commercial value than medical devices in distribution process. Profit margin/cross-regional expansion capability of medical services have always been questioned.
The business characteristics of “To B supply chain” indicate strong cyclical characteristics due to supply rigidity and demand fluctuations, which are easily affected by changes in demand trends.


The “Game Rule” of China Healthcare - Pharmaceuticals Vs Medical Devices Vs Medical Services

<ul>
<li>Thirteen important departments formulated the “Work Plan for Supporting the High-quality Development of State-owned Enterprise (SOE)-run Medical Institutions”(the “Work Plan”), which reflects a significant change in government's attitude towards SOE-run hospitals.</li>
<li>The core goal of “Work Plan” is to make public medical system bigger and stronger.Changes will occur with the participation of central enterprises. It's time to change the thinking mode.</li>
<li>Government-Run hospitals/SOE-run hospitals are still the main force of China's medical service market. Their status will be higher than that of private hospitals, whose development space would be further squeezed.</li>
</ul>


Thirteen important departments formulated the “Work Plan for Supporting the High-quality Development of State-owned Enterprise (SOE)-run Medical Institutions”(the “Work Plan”), which reflects a significant change in government's attitude towards SOE-run hospitals.
The core goal of “Work Plan” is to make public medical system bigger and stronger.Changes will occur with the participation of central enterprises. It's time to change the thinking mode.
Government-Run hospitals/SOE-run hospitals are still the main force of China's medical service market. Their status will be higher than that of private hospitals, whose development space would be further squeezed.


Reform in China's Medical Service Industry: SOE-Run Hospitals Usher in a Critical Turning Point

<ul>
<li>China issued the “Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035)”, where some statements are different from those in the  "14th Five-year Plan" and the 20th National Congress report.</li>
<li>We analyzed our interpretation and speculated the “wind direction” behind the difference in statements, so as to identify some possible changes in China healthcare industry in 2023.</li>
<li>
<em> The Outline</em> is not only in line with the adjustment of COVID policies,but also highly relevant to the major contradictions/changes in internal and external situations. Investors need to follow the trend.  </li>
</ul>


China issued the “Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035)”, where some statements are different from those in the  "14th Five-year Plan" and the 20th National Congress report.
We analyzed our interpretation and speculated the “wind direction” behind the difference in statements, so as to identify some possible changes in China healthcare industry in 2023.

 The Outline is not only in line with the adjustment of COVID policies,but also highly relevant to the major contradictions/changes in internal and external situations. Investors need to follow the trend.  


Identify New Directions of China Healthcare in 2023 – Major Changes In Highest Level Policy Document

<ul>
<li>Fujian will lead 27 provinces to launch the centralized procurement of electrophysiological medical consumables. Its scale is comparable to the national VBP. Unlike many people's optimism, we see potential concerns.</li>
<li>The centralized procurement of orthodontic materials and brackets led by Shaanxi Province has made new progress, which is beyond the expectations of many people since invisible braces are included.</li>
<li>We analyzed China HPV market potential and valuation logic. We expected that the valuation of related companies would have a significant downward space ahead.</li>
</ul>


Fujian will lead 27 provinces to launch the centralized procurement of electrophysiological medical consumables. Its scale is comparable to the national VBP. Unlike many people's optimism, we see potential concerns.
The centralized procurement of orthodontic materials and brackets led by Shaanxi Province has made new progress, which is beyond the expectations of many people since invisible braces are included.
We analyzed China HPV market potential and valuation logic. We expected that the valuation of related companies would have a significant downward space ahead.


China Healthcare Weekly (Oct.21) - Electrophysiology VBP; Orthodontics VBP New Progress; HPV Vaccine

<ul>
<li>We still haven’t seen the “industry clearing”. When an industry no longer has entry barriers/first mover advantage, it will inevitably bring about the collapse of expectations for the future.</li>
<li>If the total retail sales of consumer goods do not maintain well, the probability of endogenous growth problems is high, which will be reflected in the decline of companies’ valuation.</li>
<li>It’s more reasonable for the share prices of those companies that have entered VBP to rise. For those that haven’t been included in VBP, the risk is much higher.</li>
</ul>


We still haven’t seen the “industry clearing”. When an industry no longer has entry barriers/first mover advantage, it will inevitably bring about the collapse of expectations for the future.
If the total retail sales of consumer goods do not maintain well, the probability of endogenous growth problems is high, which will be reflected in the decline of companies’ valuation.
It’s more reasonable for the share prices of those companies that have entered VBP to rise. For those that haven’t been included in VBP, the risk is much higher.


China Healthcare Weekly (Sep.16) - Industry Clearing, Bottom of Healthcare Sector, Endogenous Growth

China

Topchoice Medical Investment Corporation provides dental and oral health care services.

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Topchoice Medical (600763 CH)

The “Game Rule” of China Healthcare - Pharmaceuticals Vs Medical Devices Vs Medical Services

China healthcare has distinct segments with different investment logic/characteristics.The pecking order is drugs>medical device>medical...

Xinyao (Criss) Wang

Reform in China's Medical Service Industry: SOE-Run Hospitals Usher in a Critical Turning Point

Government's attitude towards SOE-run hospitals has a significant change as new policy is released,aiming to make public medical system bigger...

Xinyao (Criss) Wang

Identify New Directions of China Healthcare in 2023 – Major Changes In Highest Level Policy Document

China issued the Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035), where some statements have changed, leading to the change...

Xinyao (Criss) Wang

China Healthcare Weekly (Oct.21) - Electrophysiology VBP; Orthodontics VBP New Progress; HPV Vaccine

Unlike others' optimism,we see potential concerns in electrophysiology VBP; Orthodontics VBP is beyond expectation since invisible braces are...

Xinyao (Criss) Wang

China Healthcare Weekly (Sep.16) - Industry Clearing, Bottom of Healthcare Sector, Endogenous Growth

We still haven’t seen the “industry clearing” of healthcare. The decline of total retail sales of consumer goods will lead to endogenous growth...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

The “Game Rule” of China Healthcare - Pharmaceuticals Vs Medical Devices Vs Medical Services

​China healthcare has distinct segments with different investment logic/characteristics.The pecking order is drugs>medical device>medical...

Xinyao (Criss) Wang

Reform in China's Medical Service Industry: SOE-Run Hospitals Usher in a Critical Turning Point

Government's attitude towards SOE-run hospitals has a significant change as new policy is released,aiming to make public medical system bigger...

Xinyao (Criss) Wang

Identify New Directions of China Healthcare in 2023 – Major Changes In Highest Level Policy Document

China issued the Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035), where some statements have changed, leading to the change...

Xinyao (Criss) Wang

China Healthcare Weekly (Oct.21) - Electrophysiology VBP; Orthodontics VBP New Progress; HPV Vaccine

Unlike others' optimism,we see potential concerns in electrophysiology VBP; Orthodontics VBP is beyond expectation since invisible braces are...

Xinyao (Criss) Wang

China Healthcare Weekly (Sep.16) - Industry Clearing, Bottom of Healthcare Sector, Endogenous Growth

We still haven’t seen the “industry clearing” of healthcare. The decline of total retail sales of consumer goods will lead to endogenous growth...

Xinyao (Criss) Wang

China healthcare has distinct segments with different investment logic/characteristics.The pecking order is drugs>medical device>medical...