"In the second quarter, the weight of biopharmaceutical sector held by active equity funds was already very low, but it was unexpectedly further reduced in the third quarter." A pharmaceutical investor reluctantly told the First Financial reporter.



By the end of the second quarter, the proportion of over allocation of publicly held pharmaceutical and biological positions relative to CSI 300 had decreased to 1.5 percentage points, the lowest level since the third quarter of 2009.



Unexpectedly, this data was further reduced to 1.24% in the third quarter. According to many insiders, the continuous decline of stock prices caused by the rumors of centralized purchasing is undoubtedly an important reason for the lack of confidence in this sector in public offerings.



However, with the bottom rebound of biomedicine and the improvement of fundamentals, some medical researchers and medical fund managers seem to have regained confidence: "The proportion of publicly held biomedicine in the fourth quarter may have increased."



The rumor of centralized purchase caused the stock price to dive



According to the data of West China Securities, after the impact of the rise and fall of the divestiture industry, it can be clearly seen that in the third quarter, the active equity funds saw the most significant net increase in their holdings in the defense and military industry, real estate, transportation, computer and other industries, with the increase proportions of 0.79%, 0.59%, 0.56% and 0.40% respectively. At the same time, they saw the largest reduction in their holdings in the pharmaceutical and biological, non bank finance, power equipment and food and beverage industries, with the reduction proportions of 0.78%, 0.77%, 0.49% and 0.48% respectively.



According to the data of China Post Securities, the proportion of active equity funds holding positions in medical and biological products in the third quarter of 2022 was 8.75%, down 1.81 and a half points month on month. After deducting the medical fund, the position ratio was 4.04%, down 1.80 percentage points month on month.



By the end of September 2022, the total market value of pharmaceutical stocks in A shares accounted for 7.93%. The pharmaceutical sector was still in an over allocation state (1.24%, down 0.26 percentage points compared with the second quarter) supported by industry funds, but it was significantly in a under allocation state after deducting pharmaceutical funds.



"In the past, the allocation proportion of public funds for biomedicine was more than 20%. In the past two years, public funds have not been very interested in biomedicine sector. New funds often go to see some windy industries, such as new energy." Zuo Jianming, general manager of Xiaoyu Assets, told the First Financial reporter.



The public offering fund has set a new low in the allocation of pharmaceutical stocks, which is behind the continued downturn of pharmaceutical stocks.



According to the data of China Unicom, as of the end of November 4, there were 431 stocks in the CITIC first-class pharmaceutical sector, with an average decline of 6.76%.



Take "Pharmaceutical Mao" Hengrui Pharmaceutical (600276. SH) as an example. Although the stock price has rebounded recently, as of the closing of November 4, the cumulative decline of its stock price this year has still reached 17.31%, underperforming the market.



On the evening of October 19, Hengrui Pharmaceutical released its third quarter report, which showed that the company's operating income in the first three quarters of this year was 20.199 billion yuan, a year-on-year increase of 4.05%; The net profit attributable to shareholders of the listed company was 4.207 billion yuan, down 1.21% year on year; Non net profit attributable to shareholders of the listed company was 4.149 billion yuan, up 0.19%. From the single quarter data, the company's revenue in the third quarter was 6.901 billion yuan, down 14.84% year on year; The net profit attributable to shareholders of the listed company was about 1.54 billion yuan, down 3.57% year on year; Non net profit attributable to shareholders of the listed company was about 1.502 billion yuan, down 4.87% year on year. The company's net profit has declined year-on-year for two consecutive quarters.



As for the reasons for the decline of the third quarter's performance, Hengrui Pharmaceutical did not give a detailed explanation in the third quarter's report. According to the semi annual report, the net profit attributable to shareholders of listed companies in the first half of this year was about 2.668 billion yuan, a slight increase of 0.21%, a new low since 2003. Since 2018, the company has entered the national centralized procurement of generic drugs with a total of 28 varieties, 18 of which were selected, with an average price drop of 72.6%, which has caused great pressure on the company's performance.



Changchun Gaoxin (000,661. SZ), another leading pharmaceutical enterprise, will lose its share price whenever there is a rumor of centralized purchase.



For example, in the middle of August, the market heard that the Zhejiang Provincial Office of Centralized Purchasing of Pharmaceutical and Medical Consumables in Quantity released the Third Batch of Centralized Purchasing Documents of Medicines in Zhejiang Public Medical Institutions (draft for comments). Although the specific purchased varieties have not been announced, there is a market rumor that this time, there are two groups of differentiation drugs and biological drugs, of which biological drugs include human growth hormone (recombinant human growth hormone).



Although, as a leading growth hormone enterprise in China, Changchun Hi Tech quickly responded on the interactive platform on August 18, saying: "At present, the relevant documents are for comments, and the company has not received the relevant formal notice; for the centralized purchase of growth hormone, from the current Guangdong Alliance, there is no negative impact on the sales of the company's growth hormone products, and the company will further improve the company's product and market coverage according to the final policy."



However, on August 18, the share price of Changchun Hi tech Co., Ltd. suddenly plunged, and fell to the limit of 202.1 yuan per share. By the end of November 4, the company's share price had closed at 174.69 yuan/share, with a cumulative decline of 35.44% this year, which was a big loss.



The proportion of biomedical positions in the fourth quarter may increase



In the middle of September, Haitong Securities held the 11th Pharmaceutical CEO Forum. Yu Wenxin, the chief analyst of Haitong Pharmaceutical and Haitong International Pharmaceutical Group, said that at present, the position of pharmaceutical stocks of public funds has been the lowest in history. Whether institutions will increase their positions in pharmaceuticals depends on two main points: first, whether the policy has warmed up, and second, whether there is a new main line in the sector.

On June 29, 2022, the National Medical Insurance Bureau announced the Rules for Renewal of Negotiated Drugs. According to the analysis of Yu Wenxin's team of Haitong Pharmaceutical, the price reduction of most contract renewal negotiations is between 0% and 15%, which is relatively moderate. The price reduction of new medical insurance varieties may be relatively large, so it is necessary to consider the initial pricing and the strategies of each company. Yu Wenxin said: "Looking back at the time when there was no national medical insurance bureau, newly launched drugs may not be eligible for medical insurance in five or eight years. The medical insurance negotiation is to reduce the price of drugs in exchange for high volume, which is also the reason why enterprises are willing to include drugs in medical insurance. We believe that, on the basis of the current situation, there will be more clear rules for price negotiation in the future. We also believe that the final offer of the medical insurance negotiation in November this year will be an acceptable price reduction in the market." "We don't need to talk about 'centralized purchase'. Any purchase should evaluate the relationship between quantity and price." Yu Wenxin said that the market growth logic of implant teeth is to increase the penetration rate. "In 2021, there will be 4 million dental implants in China. Assuming that each old person has five dental implants, 800000 old people will receive dental implants. However, there may be 300 to 400 million elderly people in China in the future. If the price of each dental implant drops from more than 10000 to 3000, will the dental implant market have 10 times the growth space? Therefore, the impact of centralized procurement is not as big as the market imagined. The focus is on which companies can find this opportunity." After the continuous adjustment of share prices, the A-share pharmaceutical industry has finally rebounded from the bottom since October. The pharmaceutical index (CN6046. SZ) rose 7.87% in October, recording its first monthly rise after three consecutive months of decline. As of the closing on November 4, the index has gained 5.49% so far in November. The First Finance and Economics reporter noticed that as the pharmaceutical market started at the end of the third quarter, some funds began to flow in since October. Among them, fund managers who mainly invested in new energy in the early stage have gradually shifted their positions to the pharmaceutical sector since the second quarter. The data of Orient Fortune Choice shows that, taking Guangfa Xinxiang managed by Zheng Chengran, Golden Eagle National Xinxing managed by Han Guangzhe, and Harvest Environmental Protection Low Carbon managed by Yao Zhipeng as examples, the positions of the above three funds at the beginning of the year were less than 1%, but they chose to bargain when medicine continued to decline in the first half of the year. At the end of the second quarter, the position of Guangfa Xinxiang Pharmaceutical reached 20%. In the first quarter of this year, the top ten positions of the fund were also dominated by new energy tracks. At the end of the second quarter, Tongce Medical (600763. SH) and Changchun Hi Tech (000661. SZ) appeared in the top ten positions for the first time. In addition, the fund has also newly entered Aier Ophthalmology (300015. SZ), Zhifei Biotech (300122. SZ) and Puli Pharmaceutical (300630. SZ), and has significantly increased its position in Wuwu Biotech (300357. SZ), of which Aier Ophthalmology is the 13th largest stock of the fund. At the same time, the medical position of Golden Eagle National Emerging reached 10% at the end of the second quarter, and the medical position of Harvest Environmental Protection Low Carbon reached 8% at the end of the second quarter. In addition, there is the Huaxia revival managed by Zhou Keping, and the Minsheng Bank adding strategy selected by Sun Wei. At the end of the second quarter, nearly seven positions in the pharmaceutical industry were added compared with the beginning of the year. "After this wave of increase, the proportion of publicly held biopharmaceuticals in the fourth quarter may increase." A researcher of the securities dealer in the pharmaceutical industry told the First Financial reporter. "There have been some changes in the fundamentals of the medicine sector. Some institutions want to win or lose by taking medicine as their winning hand. Some of the big institutions that used to focus on consumption and value stocks also want to rely on the medicine market to make a rebound." A private equity investment director told the First Financial reporter.