Shenwan Hongyuan Securities·2025-04-20 12:12Investment Rating - The report rates the pharmaceutical industry as "Overweight," indicating that the industry is expected to outperform the overall market [3][27]. Core Insights - The pharmaceutical sector experienced a decline of 0.4% this week, while the Shanghai Composite Index rose by 1.2%. The pharmaceutical index ranked 24th among 31 sub-industries [4][5]. - A commentary from People's Daily emphasized the need to ensure profit margins for pharmaceutical companies and pharmacies to maintain the long-term supply of quality and affordable medications [14]. - Eli Lilly announced the successful Phase 3 clinical trial of its oral GLP-1 receptor agonist, Orforglipron, which showed a reduction in HbA1c levels by 1.3% to 1.6% after 40 weeks of treatment [15]. - President Trump signed an executive order aimed at lowering prescription drug prices, potentially reducing prices by up to 60% for certain medications [16]. - The report suggests investment in companies involved in the development of small molecule GLP-1 drugs, including Hengrui Medicine, East China Pharmaceutical, and others [4]. Market Performance - The overall valuation of the pharmaceutical sector is currently at 24.2 times PE (2025E), ranking 6th among 31 primary industries [4][8]. - The performance of various sub-sectors this week includes: - Raw materials: -0.0% - Chemical preparations: +0.6% - Traditional Chinese medicine: +0.6% - Blood products: -4.4% - Vaccines: -1.5% [8][10]. Key Events - The commentary from People's Daily on April 18 highlighted the importance of ensuring profit margins for pharmaceutical companies and pharmacies [14]. - Eli Lilly's successful Phase 3 trial of Orforglipron is a significant development in diabetes treatment, with plans for regulatory submissions by the end of the year [15]. - The executive order signed by President Trump aims to adjust drug price negotiations, expanding the scope of price reductions for various medications [16]. Valuation of Key Companies - The report includes a valuation table for key companies in the pharmaceutical sector, with notable companies and their respective PE ratios and market capitalizations [20][21]. - For example, Mindray Medical has a market cap of 263.2 billion yuan with a PE ratio of 20 for 2024E, while Hengrui Medicine has a market cap of 306.2 billion yuan with a PE ratio of 48 for 2024E [20].