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In the short term, the new coronavirus vaccine has accelerated to sea, pharmaceutical equipment continues to be in short supply, and Sinopharm and Kexing new coronavirus vaccine have been certified by WHO. In June, Kexing new coronavirus vaccine was granted emergency use certification by the World Health Organization. In addition to the two Chinese vaccines, the WHO has previously issued emergency use certification to a number of new coronavirus vaccines, including: the new coronavirus vaccine jointly developed by Pfizer Pharmaceutical Co., Ltd. of the United States and new biotechnology company of Germany, and the two versions of AstraZeneca vaccine jointly developed by AstraZeneca of the United Kingdom and Oxford University, the new coronavirus vaccine developed by Johnson & Johnson’s Janssen Pharmaceutical Company and the new coronavirus vaccine developed by Modena company.
The export of new coronavirus vaccines to the sea has accelerated. In the first half of the year, China’s export of vaccines for human use reached 4.64 billion US dollars. According to the import and export data of the General Administration of Customs of China, in the first half of 2021, the total export value of human vaccines (customs code 30022000) in China reached 4.64 billion US dollars (equivalent to about 30 billion yuan), and the export value of human vaccines in 2021H1 exceeded any previous year in history. Exports, most of which are expected to be contributed by Covid-19 vaccines.
The composition of the new coronavirus vaccine production line: stock solution preparation, liquid dispensing engineering, aseptic sub-packaging, and post-test packaging. The production of new coronavirus vaccine usually involves 4 processes: 1) stock solution preparation (for inactivated vaccines, P3 laboratory, P3 workshop); 2) solution engineering; 3) aseptic packaging; 4) packaging after testing. The first two processes involve static equipment, and the main suppliers of domestic pharmaceutical companies are Tofflon, Chutian Technology, Aoxing Life Technology, Morison International, etc.; the latter two processes involve dynamic equipment, and the main suppliers of domestic pharmaceutical companies are: Chutian Technology (occupying about 80% of the market share of the new coronavirus vaccine production line), Tofflon, and overseas companies.
The construction cost of a single production line is ~200 million yuan (30 million doses). It is expected that the demand for new coronavirus vaccine will bring a market space of 15-20 billion yuan to my country’s pharmaceutical equipment industry. Taking a vaccine company building a production line with a capacity of 30 million doses as an example, the construction cost of stock solution preparation is about 20 million yuan, the construction cost of liquid dispensing project is about 20 million yuan, and the construction cost of aseptic sub-packaging is about 15 million yuan. The packaging construction cost is about 25-35 million yuan, plus related supporting facilities, the total construction cost is about 200 million yuan. Assuming the actual production capacity of 2.2-3 billion pieces, it is expected to bring a market space of 15-20 billion yuan to my country’s pharmaceutical equipment industry.
Long-term perspective: The epidemic provides an opportunity to cut in, and the replacement of domestic equipment to accelerate equipment demand: global~500 billion yuan, China~90 billion yuan. According to the analysis data of CIC, the global pharmaceutical equipment, process system and service market size in 2019 was about 505.9 billion yuan, with a compound growth rate of 8.0% from 2015 to 2019; in 2019, China’s pharmaceutical equipment, process system and service market size was about 913% 100 million yuan, with a compound growth rate of 14.3% from 2015 to 2019, much higher than the global overall level.
Policies and regulations have become stricter, and demand for high-end equipment is strong. In 2017, the International Council for Harmonization of Pharmaceuticals for Human Use (ICH) passed the application and approval of my country’s State Food and Drug Administration to become a full member, which means that Chinese pharmaceutical companies will increase the demand for the transformation and upgrading of pharmaceutical equipment and process systems; since then, a series of policies and regulations such as the appendix of GMP “Biological Products” and “General Requirements for Biosafety of Vaccine Production Workshops” have been issued. China’s production supervision of the biopharmaceutical industry has become more and more stringent, the requirements for pharmaceutical equipment are standardized, and the demand for high-end equipment is increasingly strong. In 2024, the market size of China’s pharmaceutical equipment, process systems and services will reach 174 billion yuan, and the proportion of the high-end market will further increase.
The COVID-19 outbreak + the demand for biomedical expansion is strong, and the import substitution of medical equipment is accelerating. Product performance is closely related to the level of equipment. Due to the strict requirements of the pharmaceutical industry on quality, impurities, stability, etc., although domestic equipment manufacturers have obvious price advantages, pharmaceutical companies are less sensitive to the price of pharmaceutical equipment. Domestic pharmaceutical equipment, especially high-end Equipment has long been occupied by imported manufacturers. Due to the slow international logistics and restricted product exports under the epidemic, the upstream pharmaceutical equipment that was previously slow to import substitution is expected to cut into the domestic industrial chain at one fell swoop, realize rapid substitution, and superimpose the demand for domestic biological product capacity expansion.
The market share of domestic leaders is still at a low level, and there is huge room for increased concentration and import substitution. On the one hand, the domestic leading performance continued to be realized. The net profit of Tofflon, Chutian Technology, and Aoxing Life Technology in 20 years went against the trend and increased by 360%, 208%, and 309% year-on-year respectively; the high growth in 21 years continued. The net profit attributable to the parent company of Dragon and Chutian Technology increased by 134% and 433% year-on-year respectively. The 21H1 Tofflon’s performance forecast achieves a net profit attributable to the parent company of 310-340 million yuan, an increase of 80%-100% year-on-year, and the industry has entered a new wave of industry prosperity cycle. On the other hand, considering the market share, the current domestic leading market share is still at a low level. The domestic revenue of Tofflon and Chutian Technology in 2020 will be 2.18 billion yuan and 2.02 billion yuan respectively. The market size of process systems and services is estimated to be about 100 billion yuan, and the combined market share of the two companies is only 4%. There is huge room for increased concentration and import substitution. It is recommended to pay attention to excellent targets for undertaking industrial transfer and import substitution: Chutian Technology, Tofflon, Morison International, Aoxing Life Technology, etc.
Key Events
Event: All tertiary general hospitals will set up TCM departments. On July 23, the National Health and Medical Commission held a press conference. At the meeting, Yan Huaguo, deputy director of the Department of Medical Affairs of the State Administration of Traditional Chinese Medicine, said that the next step will be to set up TCM departments in all tertiary general hospitals, and support the establishment of TCM departments in secondary general hospitals. Strengthen the allocation of traditional Chinese medicine personnel in general hospitals and the establishment of traditional Chinese medicine pharmacies. Strengthen the collaboration of traditional Chinese and Western medicine in clinical departments of general hospitals, so that patients can receive combined Chinese and Western medicine diagnosis and treatment services in clinical departments. Rotation training of traditional Chinese medicine professional knowledge is carried out for clinical physicians. Focus on major and difficult diseases such as cancer, and strive to form about 100 integrated Chinese and Western medicine diagnosis and treatment programs within five years.
Opinion: Policies are followed by rules, and measures to encourage the development of traditional Chinese medicine are expected to be gradually concreted. On May 12, President Xi Jinping visited Nanyang City, Henan Province to learn about the development of traditional Chinese medicine and the development of wormwood products industry. On May 13, seven departments including the Ministry of Commerce and the Administration of Traditional Chinese Medicine jointly issued the “Notice on Several Measures to Support the High-Quality Development of National Traditional Chinese Medicine Service Export Bases”, proposing 18 policies and measures in five aspects to support traditional Chinese medicine service export bases high-quality development. In July, the “Opinions on Further Strengthening the Work of Traditional Chinese Medicine in General Hospitals to Promote the Coordinated Development of Traditional Chinese and Western Medicine” and the “Implementation Plan for the Construction of a High-quality and Efficient Medical and Health Service System during the Fourteenth Five-Year Plan” were released successively. Since the beginning of this year, a number of policies to encourage the development of traditional Chinese medicine have been introduced, and they have been gradually specified and refined, which is expected to open a new round of business cycle for the sector.
Event: The protein structure database predicted by the artificial intelligence system AlphaFold was released, which can predict 98.5% of the human protein structure. The DeepMind team under Google and the European Bioinformatics Institute (EMBL-EBI) have released the AlphaFold ProteinStructure Database predicted by the artificial intelligence system AlphaFold. This database will be freely available to researchers around the world for open use. Just as the release of the Human Genome Map represents the beginning of a revolution in genomics, the release of this database is also expected to revolutionize life sciences, the release notes. Previously, the DeepMind team published a paper in the journal Nature, disclosing the source code of the optimized AlphaFold artificial intelligence system and describing its design framework and training method in detail. The AlphaFold system performed amazingly in the International Competition for Protein Structure Prediction (CASP) in 2020. Among the nearly 100 protein targets tested, the predicted structures and experimental methods given by the AI system for two-thirds of the protein targets were obtained. The structure is almost the same.
Viewpoint: From drug discovery to medical services, the role of AI technology in the field of biomedicine has gradually become prominent. In the human proteome, AI has predicted the structure of 98.5% of human proteins. Previously, after decades of effort, the protein structure solved only covered 17 percent of the amino acids in the human protein sequence.
Large-scale accurate structure predictions promise to provide scientists with an important tool. In addition to the field of drug discovery, medical AI is also booming, welcoming the first year of commercialization, and is mainly used in multiple auxiliary diagnosis or treatment fields such as ophthalmology, cardiovascular, and brain. Recommended attention: Eagle Eye Technology (unlisted), Keya Medical (unlisted), etc.