CMB International: Drug price policy is expected to be optimized. Medical AI accelerates commercial deployment.

China Merchants International released a research report stating that the pharmaceutical industry is expected to continue to see valuation recovery in 2025, benefiting from the optimization of domestic drug pricing policies, improvement in the domestic macro environment, and expectations of interest rate cuts overseas. The Class B medical insurance catalog is expected to be implemented this year, providing a better payment environment for innovative drugs. The acceleration of medical device bidding will drive the profit recovery of domestic medical device companies. The bank expressed optimism about the industry's valuation recovery and recommended buying shares of INNOVENT BIO (01801), BEIGENE (ONC.US), 3SBIO (01530), Shanghai United Imaging Healthcare (688271.SH), GIANT BIOGENE (02367), WuXi AppTec (02359, 603259.SH), and SKB BIO-B (06990). Key points from China Merchants International include: The pharmaceutical pricing policy is expected to be optimized, presenting greater opportunities for innovative drugs. Recently, a document on improving the drug pricing mechanism has been circulating on the internet, drawing significant market attention. Given the recent public opinion on the quality of centrally-purchased drugs, the bank believes that future drug pricing policies are likely to be moderate, helping the profitability recovery of pharmaceutical companies. According to the leaked document, the policy encourages commercial insurance companies to establish investment funds for innovative drugs, or clearly specify existing investment funds to focus on investing in the innovative drug industry. Companies with equity investments in innovative drugs accounting for 5% of total assets at the end of the previous quarter are considered innovative-supporting commercial insurance companies, eligible for tax benefits, etc. In addition, the document mentions that the autonomy of innovative drug initial prices will increase, allowing innovative drugs with high barriers to access to receive higher premiums. The document also states the improvement of a multi-level medical security system, encouraging enterprises to purchase commercial health insurance for employees. Moreover, qualified high-level innovative drugs will be included in the Class B catalog, supporting the inclusion of Class B catalog drugs at appropriate negotiated prices into the medical insurance catalog. The document also mentions optimizing centralized procurement rules in accordance with the characteristics of various types of drugs, standardized renewal rules, which the bank believes will help reduce irrational price reductions of generic drugs, avoid malicious competition, and stabilize enterprise profit expectations. Medical AI commercialization accelerates. Currently, the in-depth application of AI in medical imaging, drug research and development, intelligent diagnosis and treatment, and health management will bring profound impacts on the industry in terms of cost reduction, efficiency improvement, and optimization of medical resources. The bank recommends focusing on companies with technological barriers and clear business models, such as XUNFEIHEALTH (with large-scale medical model capabilities, widely used in grassroots medical institutions, hospitals, empowering doctors, hospitals, government agencies), MEDLIVE (AI-driven medical knowledge database, providing information support and efficiency tools for doctors), and Shanghai United Imaging Healthcare (synergizing with United Imaging Intelligent, empowering various imaging devices with AI, improving device performance and doctor diagnostic efficiency). Looking ahead, the bank believes that data capabilities and commercialization will be the core barriers for China's medical AI. Due to the sensitivity of medical data, the professionalism of medical knowledge, and the seriousness of medical regulations, the bank believes that specialized medical models will outperform general AI models in performance and commercial applications. The bank is optimistic about the leading capabilities of existing medical AI companies in data accumulation and commercial scene deployment.