Sinolink: Clear policy turning point, recommend increasing pharmaceutical allocation now.

Sinolink released a research report stating that since the beginning of 2024, multiple pharmaceutical and medical insurance policies have been implemented, stabilizing expectations while actively supporting the development of the pharmaceutical industry. The solid foundation of pharmaceutical total growth, along with stable market policy expectations and reversal, is a clear trend. The pharmaceutical sector is expected to start the reversal process ahead of schedule, and it is recommended to increase the allocation of the pharmaceutical sector. In terms of sub-industries, it is recommended to focus on innovative drugs and the left-side sectors (such as medical devices, traditional Chinese medicine, consumer healthcare, chain pharmacies) facing reversal challenges. Sinolink's main points are as follows: On January 17, the National Medical Insurance Administration held a press conference In terms of total volume, the continuous growth of medical insurance fund expenditure not only provides solid protection for the lives and health of all people but also injects new amounts into medical institutions, the pharmaceutical industry, and economic and social development. The significant growth rate of medical insurance expenditure should instill confidence in the long-term growth prospects of the pharmaceutical industry and avoid excessive pessimism. In terms of medical insurance coverage, medical insurance will help innovate Category C drugs. Category C directory, as a supplement to the basic medical insurance drug catalog, focuses on drugs with high innovation but temporarily excluded from the medical insurance catalog due to exceeding the "basic protection" function and plans to release the first version by 2025. There are three levels of reversal in the pharmaceutical sector, namely policy reversal, performance reversal, and capital reversal. Since the beginning of 2024, multiple pharmaceutical and medical insurance policies have been implemented, providing stable expectations while actively supporting the development of the pharmaceutical industry. The solid foundation of pharmaceutical total growth, along with stable market policy expectations and reversal, is a clear trend. Once the market's excessive concerns about medical insurance are alleviated, there is significant room for the valuation restoration of the pharmaceutical sector. Regarding performance, some companies have recently announced performance forecasts, and we believe the market has a sufficient understanding of the high base situation in 2024Q4 and 2025Q1 and the short-term operational pressure of listed pharmaceutical companies. However, considering the clearing of high bases, the implementation of centralized procurement cost control, and the recovery of in-hospital and consumer healthcare, the performance of the pharmaceutical sector in 2025Q2 and Q3 is a very certain event. Therefore, as long as the market is fully convinced that policy expectations have begun to reverse, the pressure on the performance side has been fully anticipated, and the pharmaceutical sector is expected to start the reversal process ahead of schedule. It is recommended to increase the allocation of the pharmaceutical sector. Segmentation by Sub-Sector: Innovative Drugs: FDA approves potential blockbuster ADC Dato-Dxd on the market, worth watching for Kelun Boa...