Core Viewpoint - The Asian Pet Expo reflects the rapid growth of the domestic animal health industry, which is facing challenges such as price wars and product homogenization, while innovative pet pharmaceuticals are emerging as a new growth engine [1][2][4] Industry Overview - The Chinese animal health industry has grown to nearly 70 billion yuan, with sales increasing from 50.4 billion yuan in 2019 to 69.7 billion yuan in 2023, representing a compound annual growth rate of 8.4% [1] - However, market growth has slowed due to intensified competition, leading to declining profit margins and a situation where revenue increases do not translate into profit growth [1][4] Product Homogenization and Price Wars - The market for cat trivalent vaccines has seen significant competition, with over twenty domestic manufacturers entering the market, leading to prices dropping to as low as 10 yuan per dose [2] - The price of imported vaccines has also decreased, with promotional packages for the previously dominant product dropping to around 50 yuan per dose [2] Strategic Shifts in Companies - Companies like Haizheng Animal Health are shifting focus towards higher-margin pet pharmaceuticals, anticipating that sales from pet medications will exceed 50% by 2025 [6][7] - The company is prioritizing innovation in drug development, particularly in the pet health sector, as the market for generic drugs becomes saturated [6][8] Innovation in Pet Pharmaceuticals - There has been a notable increase in the approval of new veterinary drugs, with three new veterinary drug certificates issued in the first quarter of 2025 alone [7] - The development of mRNA vaccines for pets is gaining momentum, with several companies receiving clinical trial approvals for innovative vaccines [7][8] Market Dynamics and Future Outlook - The traditional correlation between the profitability of the animal health industry and the pig farming sector is weakening, with leading pig farming companies reporting significant profit increases while many animal health companies face declining performance [5][6] - The industry is experiencing a "Matthew Effect," where stronger companies are growing larger while weaker ones are being eliminated from the market [4][6]

Group 1 - The domestic animal health industry is experiencing structural adjustments, with sales growth slowing to 3.7% from 2020 to 2023 and gross profit declining by 3.2% [1] - The "Matthew effect" is intensifying, leading to increased pressure on small and medium-sized animal health companies, while leading firms are expected to gain larger market shares through diverse product matrices, continuous R&D investment, and improved after-sales service [1] - The average gross profit per head for self-breeding pig farming is projected to improve significantly to 170 yuan in 2024, with leading companies like Muyuan Foods and Wens Foodstuffs reporting substantial profit increases [2] Group 2 - The pet medical market is expected to reach approximately 840 billion yuan in 2024, driven by rising health awareness among pet owners and increasing demand for disease prevention and treatment [3] - Domestic animal health companies' sales of pet and other biological products currently account for only 6.0% of the market, but this is expected to accelerate with the introduction of domestic vaccines and deworming drugs [3] - The export of innovative pet drugs is anticipated to become a significant breakthrough for domestic animal health companies, with notable products like "Hailiwang" marking substantial progress in international markets [3] Group 3 - Some listed animal health companies are experiencing declining performance due to disordered competition, while others are achieving revenue growth through integrated strategies [2] - The importance of product and technological innovation is highlighted as a key factor for success in the industry [2] - Companies to watch include Ruipu Biological, Kexin Biological, Huisheng Biological, and others, indicating potential investment opportunities in the sector [4]

Investment Rating - The report does not explicitly state an investment rating for the animal health industry, but it highlights potential growth areas such as pet pharmaceuticals and international expansion [1]. Core Insights - The animal health industry is experiencing a slowdown in growth, with increasing competition leading to a "Matthew Effect" where larger companies gain more market share at the expense of smaller firms [3][39]. - The industry is shifting back to a research and development-driven model, with innovation becoming crucial for future growth [4][83]. - The pet pharmaceutical market and international expansion are identified as key areas for long-term growth, with pet medical consumption projected to reach approximately 84 billion yuan in 2024 [5][78]. Summary by Sections 1. Overview of the Animal Health Industry - The animal health industry, also known as the veterinary drug industry, includes a wide range of products such as vaccines, antibiotics, and feed additives [11][12]. - The market size has grown from 50.395 billion yuan in 2019 to 69.651 billion yuan in 2023, with a CAGR of 8.43% [3][12]. 2. Increasing Competition and Market Dynamics - The industry is facing a slowdown in growth, with sales increasing from 62.095 billion yuan in 2020 to 69.651 billion yuan in 2023, while average gross profit has decreased from 21.998 billion yuan to 21.297 billion yuan [3][39]. - The "Matthew Effect" is evident as larger companies leverage their product portfolios and R&D investments to capture more market share [3][52]. 3. Shift Towards R&D and Innovation - The industry is moving away from its cyclical nature, with a focus on integrated strategies and innovation to counteract competitive pressures [4][69]. - The average profit per head in self-breeding pig farming is expected to improve significantly in 2024, indicating potential for recovery in related sectors [4][62]. 4. Growth Opportunities in Pet Pharmaceuticals and Exports - The pet medical market is projected to grow rapidly, with a significant increase in demand for preventive care and treatment as pet owners become more health-conscious [5][78]. - The report highlights the successful export of domestic pet pharmaceuticals, marking a breakthrough in international markets [5][78]. 5. Key Companies to Watch - Companies such as 瑞普生物 (Reap Bio), 科前生物 (KQ Bio), and 回盛生物 (Hui Sheng Bio) are recommended for attention due to their innovative approaches and market positioning [6].

Group 1: Market Growth and Potential - The number of pets in China is projected to grow from 310 million in 2020 to 430 million by 2024, with a compound annual growth rate (CAGR) of 8.2% [1] - By 2029, the number of pets is expected to reach 570 million, with a CAGR of 5.8% from 2025 to 2028 [1] - The pet medical industry is experiencing rapid growth due to the increasing number of pet-owning households in China, which is still lower compared to Western countries [1] Group 2: Pet Medical Institutions and Market Size - The number of pet medical institutions in China is expected to increase from 16,000 in 2020 to 26,000 by 2024, with a CAGR of 12.9% [3] - By 2029, the number of pet medical institutions is projected to reach 44,000, with a CAGR of 10.4% from 2025 to 2028 [3] - The pet medicine market in China is anticipated to grow from 9.39 billion yuan in 2020 to 20.95 billion yuan by 2024, with a CAGR of 22.2% [3] Group 3: Innovation in Pet Medicine - Only two domestically developed innovative pet drugs have been approved in China, indicating a nascent stage in the country's ability to develop innovative pet medications [4] - The majority of the pet medicine market is dominated by foreign companies, highlighting the need for domestic firms to overcome challenges in innovation [4][6] - The complexity of developing pet innovative drugs is reportedly higher than that of human drugs, due to a lack of foundational research and clinical trial facilities [7][8] Group 4: Market Opportunities in Specific Conditions - There is significant market potential in treating skin diseases, aging-related diseases, and tumors in pets, which are currently under-addressed [10][11] - The market for pet skin diseases is particularly promising, with a notable increase in cases and a low diagnosis rate compared to Western countries [10] - The aging pet population is expected to create demand for medications related to digestive, metabolic, cardiovascular, and neurological diseases [10] Group 5: Challenges in Drug Development and Commercialization - The high cost and lengthy development cycle (6-8 years) for innovative pet drugs pose significant challenges for startups in the pet medicine sector [8] - Balancing innovation with pricing strategies is crucial for the commercialization of pet medicines, as regulatory frameworks and insurance coverage are still developing [13][14] - The pet medicine market is likened to the consumer healthcare market, where pet owners often rely on commercial insurance to cover medical expenses [13] Group 6: Global Market Considerations - There is a growing trend for Chinese pet medicine companies to explore international markets, particularly in regions with higher acceptance of pet medications [15] - Collaborations between domestic companies and foreign multinationals are emerging as a strategy for entering global markets [15]