Investment Highlights:

SW Pharmaceutical and Biotechnology outperformed the CSI 300 Index over the same period. From November 30, 2024 to December 12, 2024, the SW pharmaceutical and biological industry rose by 3.02%, outperforming the CSI 300 Index by about 0.16 percentage points over the same period.

Among the tertiary sub-sectors of the SW pharmaceutical and biological industry, most of the sub-sectors recorded positive returns, among which the medical R&D outsourcing and offline pharmacy sectors were among the top gainers, up 7.54% and 7.46% respectively; The other biologics sector was the top loser, down 0.10%.

Industry news. On December 12, the tenth batch of state-organized centralized drug procurement produced the results of the proposed selection. 62 kinds of drugs have been successfully procured in this centralized procurement, covering hypertension, diabetes, tumors, cardiovascular and cerebrovascular diseases and other fields. Pharmaceutical companies actively participated in this centralized procurement, and 385 products from 234 companies were qualified to be selected. Since 2018, the National Health Insurance Administration, together with relevant departments, has organized 10 batches of state-organized drug centralized procurement, and has successfully procured a total of 435 kinds of drugs.

Maintain an overweight rating on the sector. On December 7, the Armed Services Committees of the Senate and House of Representatives of the United States Congress announced the final agreement text of the annual National Defense Authorization Act (NDAA), and the "Biosecurity Act" was not included, driving the medical R&D outsourcing sector to the top in recent years. On December 12, the tenth batch of centralized procurement was officially opened, and a total of 62 kinds of drugs in the fields of hypertension, diabetes, tumors, cardiovascular and cerebrovascular diseases were included in the centralized procurement.

The focus sectors include medical equipment: Mindray Medical (300760), United Imaging Medical (688271), Aohua Endoscopy (688212), Haitai Xinguang (688677), Kaikai Medical (300633), Jiankai Technology (688356), OPCOM (300595); Pharmaceutical business: Yifeng Pharmacy (603939), Dashenlin (603233), Yixintang (002727), Laobaimin (603883), etc.; Medical cosmetology:

Aimeike (300896), Huadong Medicine (000963), etc.; Scientific services: Nuovezan (688105), Pepsis (301080), Univision (301166); Hospital and diagnostic services: Aier Ophthalmology (300015), Tongce Medical (600763), Jinyu Medical (603882), etc.; Traditional Chinese medicine: China Resources Sanjiu (000999), Tong Ren Tang (600085), Yiling Pharmaceutical (002603); Innovative drugs:

Hengrui Pharmaceutical (600276), Betta Pharmaceutical (300558), Huadong Pharmaceutical (000963), etc.; Biological products: Zhifei Biotech (300122), Walvax Biotech (300142), Hualan Vaccine (301207), etc.; CXO: WuXi AppTec (603259), Gloria (002821), Tigermed (300347), Zhaoyan New Drug (603127), etc.

Risk warning: intensified competition in the industry, product price reduction, product safety and quality risks, policy risks, R&D progress is lower than expected, etc.