Orient: Low-price competition in centralized procurement is easing; domestic substitution is extending to biliary and pancreatic areas.

Orient issued a research report stating that the impact of this round of centralized procurement on the pharmaceutical and biotech industry: 1) Abnormal low prices are constrained, which helps ease price pressure on conventional consumables; 2) Mature products such as hemostatic clips will focus on stabilizing share, while snares, injection needles, and high-value biliary and pancreatic interventional products will become the focus for companies seeking incremental growth. Two types of companies are recommended for attention: 1) Companies with leading reported volumes in major high-frequency products, capable of covering hospitals nationwide and ensuring stable supply; 2) Companies with reserves of biliary and pancreatic interventional products and overseas proprietary brand businesses. Orient's main points are as follows: Event In September 2026, the selected results of the seventh batch of state-organized centralized volume-based procurement of medical consumables were officially announced. All regions will begin implementation in January 2027, with the procurement cycle lasting until December 31, 2029. This round of centralized procurement includes 23 types of digestive interventional consumables. Marginal easing of low-price competition, industry expectations stabilizing This round no longer follows the previous method of determining the price anchor at 65% of the average quote, but instead identifies abnormal low prices through standard deviation. Products priced one standard deviation below the average quote of the bidding group do not participate in anchor calculation, and products priced two standard deviations below do not receive agreed procurement volume even if selected. The bank judges that the room for companies to secure procurement volume through extreme quotes has clearly narrowed, and the price gap among selected products is also expected to shrink. For leading companies, the improvement in this round's rules is first reflected in eased price pressure, and the cost advantage brought by scale production can be better preserved. For companies relying on a single low-priced product to compete, even if they obtain selected status, it will be difficult to secure sufficient procurement volume. Low-price competition in the industry is expected to cool down. High concentration in hemostatic clips, greater elasticity in snares and injection needles In this round, medical institutions reported approximately 19.27 million units in the first year, with hemostatic clips, hot biopsy snares, and injection needles reporting 10.89 million units, 4.46 million units, and 2.02 million units respectively, accounting for about 90.1% in total. The top three in hemostatic clipsMICRO-TECH, Weidekang, and Hangzhou AGS Medtechtogether accounted for about 81.3%, while the top three in hot biopsy snares and injection needles accounted for about 52.0% and 57.1% respectively. The bank believes that hemostatic clips have already formed a relatively stable leading landscape, and the room for further increasing concentration is relatively limited; snares and injection needles have many long-tail suppliers, making share redistribution more likely after centralized procurement. For leading companies, incremental domestic business is expected to come mainly from snares and injection needles. Companies with complete product specifications, coverage of more hospitals, and nationwide supply capabilities are more likely to take over procurement volume released by small and medium-sized manufacturers. Domestic products dominant in basic consumables, biliary and pancreatic intervention determines growth elasticity Among the 23 procurement categories in this round, 13 categories already have domestic brands ranking first in reported volume by medical institutions, indicating that domestic companies have established strong channel and cost advantages in conventional consumables. The competitive landscape for high-value biliary and pancreatic interventional products is clearly different: Boston Scientific's shares in rapid-exchange papillotomes, lithotripsy baskets, and biliary polymer stents are about 73.0%, 66.6%, and 46.5% respectively, while Cook's share in pancreatic duct stents is about 76.0%. This round sets characteristic coefficients of 1.15-1.50 for some special-function products, preserving a certain price differential for products with higher clinical value. The bank judges that domestic substitution in conventional consumables has entered the stage of share consolidation, and biliary and pancreatic intervention is the main area that will differentiate companies in the next stage. Whether companies can leverage the existing channels of digestive endoscopy departments to sell biliary and pancreatic interventional products, and whether they can establish proprietary brands in overseas markets, will determine their revenue and profit elasticity to a greater extent. Risk warnings Actual procurement volume from centralized procurement may fall short of expectations; the decline in selected prices may exceed companies' cost reduction; the concentration of snare and injection needle shares may fall short of expectations, among other risks.