11th Annual Client Event 2014

Transcription

1 11th Annual Client Event September, Beijing & Tianjin Elizabeth Wu Assistant Vice President, APS China Research, Shanghai

2 HEALTH IS WEALTH Pill$ = Bill$ 2

3 Outline I. Who s Meeting China s Rising Health Care Costs II. The Government s Visible Hand III. APS s Stock Pick Strategy IV. Tasly Pharmaceutical This material must be read in conjunction with the Important Notice Statement 3

4 I. Who s Meeting China s Rising Health Care Costs? Rising Health Care Demand Demographic evolution Disease prevalence 4

5 Who s Meeting China s Rising Health Care Costs? Rising Healthcare Demand--Demographic Evolution Population Above Age E 2030E % of Total Population Sources: National Health and Family Planning Committee (NHFPC), APS 5

6 Who s Meeting China s Rising Health Care Costs? Rising Healthcare Demand--Top Fatal Diseases 6

7 Who s Meeting China s Rising Health Care Costs? Rising Healthcare Demand--Chronic Disease Prevalence Rate 7

8 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bill Total Health Care Expenditure Government s Health Care Expenditure Government s Subsidy to State-owned Health Care Service Providers Two National Medical Insurance Schemes 8

9 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bill--Climbing Health Care Expenditure Sources: NHFPC, APS 9

10 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bill--China vs Other Countries Sources: NHFPC, APS 10

11 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bill The Chinese Government is Footing More and More of the Cost Sources: NHFPC, APS 11

12 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bill--Rising Government Investment in Health Care Sources: NHFPC, APS 12

13 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bill--Rising Government Investment in Health Care Sources: NHFPC, APS 13

14 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bill--State-owned Hospitals Still Dependent on Subsidies FY2012 State-Owned Hosptial Funding Source Breakdown 39% 31% From Medical Service From Drug Sales From Direct Fiscal Subsidy 30% Sources: NHFPC, APS 14

15 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bill--Rural Cooperative Medical Scheme Sources: NHFPC, APS 15

16 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bill--Urban Employees Medical Insurance Scheme Sources: NHFPC, APS 16

17 Who s Meeting China s Rising Health Care Costs? Increasing Medical Bills--Urban Employees Medical Insurance Sources: NHFPC, APS 17

18 Who s Meeting China s Rising Health Care Costs? Good-bye to 20+% industry growth! If healthcare expenditure under the two insurance schemes continued to grow at 20% CAGR: For Rural Cooperative Medical Insurance Scheme the expense ratio would exceed 100% by FY2016, assuming additional premiums of RMB 60 per year and number of participants stabilizing at 0.8 billion. For Urban Employees Medical Insurance Scheme the expense ratio would exceed 100% by FY2016, assuming 10% p.a. premium growth, and number of participants increasing at 3% per year. 18

19 II. The Government s Visible Hand 19

20 II. The Government s Visible Hand 1. Intervention in Doctors Prescription Behavior Essential Drug List (EDL): Rising usage ratio Digitize doctors diagnosis and prescription records Crackdown on abuse: e.g. antibiotics, stents To gradually abolish 15% surcharge on drug sales 2. Price Cuts EDL: 45% of enlisted drugs with 12% average price cut on max. retail price Foreign branded drugs price premium over local generics to be narrowed: GSK incident 3. Opening-up of Medical Service Sector to Private Capital 2010: The Opinion on Further Encouraging and Introducing Social Capital to Build and Operate Medical Institutions by the State Council 2012: Non-state owned medical institutions beds to reach 20% of total by 2015, as planned by the State Council 2014: To accelerate the involvement of social capital in operating medical institutions, as announced by the NHFPC and the State Council 20

21 Implications Diminishing pricing power for pharmas Regular price cut Intensifying competition in the domestic market Accelerating replacement of foreign branded drugs Emerging role of private healthcare provision Supportive policy Increasing affluence Better informed consumers 21

22 III. APS s Healthcare Sector Strategy 22

23 III. APS Healthcare Sector Strategy 1) Strong R&D capacity First-to-market generics or me-too/me-better innovative drugs Hengrui Pharma ( CH), Hisun Pharma ( CH), Kelun Pharma ( CH), Tiger Med ( CH) 2) Early movers into overseas markets New markets + favorable pricing in domestic market Hengrui Pharma ( CH), Huahai Pharma ( CH), Tasly Pharma ( CH) 3) Emerging private medical service providers Specialty hospital chain Aier Eye Hospital Group ( CH) High-end health care service provider Fosun Pharma ( CH) 4) Out-of-pocket consumption Nutritional supplements By-Health ( CH), Kangmei Pharma ( CH) Household medicare equipment YuYue Medical Devices ( CH) 23

24 IV. Tasly Pharmaceutical 24

25 Tasly Pharmaceutical Modernization of Chinese Medicine Internationalization 25

26 Tasly Pharmaceutical Modernization Standardized Production Procedure 26

27 Internationalization- First Compound Chinese Medicine undergoing FDA phase III Study Time Progress Notes 1996 Submitted IND application to FDA Received IND approval 2006 Revised indication and received new approval accordingly Started Phase II clinical study Official Title: A Phase II, Double Blind, Placebo-controlled, Randomized, Multi-Center, Parallel Group Study to Evaluate the Efficacity and Safety of T89 in Patient With Chronic Stable Angina Pectoris Clinical Trials. Gov Identifier: NCT Completed Phase II clinical study in Jan, and submitted research report in May End of Phase II (EOP2) meeting hosed by FDA, which recognized the positive results and issues Special Protocol Assessment for Phase III study Confirmed the protocol of Phase III study Signed contract with global Contracted Research Organization (CRO) ICON (5 th largest CRO in the world) and Paraxel to conduct the study Started Phase III study Tasly Pharmaceutical Ex-FDA officer Mr. Sun He was hired to lead the project. After rounds of communication with FDA, the final indication was defined as to prevent and treat Chronic Stable Angina Pectoris Phase I Clinical trial to evaluate the safety of the drug was exempted as 1) the drug was approved by the State Food and Drug Administration (SFDA) of China in 1993, and there were more than 2 billion doses have been prescribed or used in about 10mn subjects, in short and long-term administration worldwide; 2) the product is also marketed, as a drug, in Russia, South Korea, Mongolia, Singapore, Vietnam, and South Africa subjects were enrolled in 15 U. S clinical trial centers, with 71% Caucasian Study cost per subject was USD15~20 K. Based on primary outcome measures, the efficacy of the drug is statistically and clinically significant. And the occurrence of mild side effect is even lower than the placebo. Under special protocol assessment, FDA will evaluate within 45 days certain protocols and issues relating to the protocols to assess whether they are adequate to meet scientific and regulatory requirements identified by the sponsor. 960 subjects to be enrolled in clinical centers located in 9 countries and regions (60% in U. S and the rest from Republic of Belaru, Ukraine,Canada, Australia, Japan, South Korea etc) 27

28 Tasly Pharmaceutical RMB Mn Year Revenue Revenue (Y- O-Y ) Gross margin Net Profit Pretax Profit Net Profit Total Equity Margin Total Asset ASSET TURNOVER 2009A 3, % 32.70% % 2,033 4, % 2010A 4, % 33.70% % 3,307 5, % 2011A 6, % 30.00% % 3,604 6, % 2012A 9, % 34.00% 742 1, % 4,245 8, % 2013A 11, % 36.50% , % 3,832 10, % 2014E 12, % 38.00% 1,341 1, % 5,971 13, % 2015E 14, % 39.40% 1,709 2, % 7,167 15, % NET No. of EPS AVERAGE AVERAGE EPS Grow th BPS (RMB) DEBT(CASH) Shares (Mil) ROE ROA Year (RMB) P/E P/B / EQUITY 2009A % % 8.20% 21.80% 2010A % % 9.20% % 2011A % % 8.80% 2.90% 2012A % % 10.00% 13.80% 2013A % % 11.10% 50.10% 2014E % % 11.50% 40.00% 2015E % % 12.10% 37.90% 28

29 Conclusion 1. Fundamental health care demand in China is strong. 2. Local pharmaceutical companies need innovation to withstand regular drug price cut, and globalization to explore new markets. 3. Private medical services will boom with supportive policies. 4. The population & government are wising up to nutritional supplements and regular disease monitoring as ways to reduce medical costs in the long run. 5. Big Data and Mobile Internet may help to bring down healthcare costs by increasing healthcare service efficiency. 29

30 Thank You Your Questions Are Welcome 30

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