Investment Rating - The industry investment rating is Attractive [6] Core Insights - The 11th round of National Drug Volume-Based Procurement (VBP) is approaching, with a preliminary list of 75 generics proposed, including 14 drugs for further evaluation [9] - Drug selection criteria aim to balance pricing with clinical practice considerations, focusing on generics with narrower indications or higher clinical risks [2][9] - Huadong Pharmaceutical has key drugs at stake, with indobufen and alogliptin accounting for 16% and 3% of its total drug sales in 2024, respectively [3] Summary by Sections Drug Evaluation - Among the 75 drugs proposed, 14 will undergo further evaluation, including five with narrower indications and nine generics considered high risk in clinical practice [2][4] - The official guidelines for the VBP will be announced soon, with adjustments made to bidding guidelines to consider clinical use and safety [9] Company Impact - Huadong is particularly exposed due to its key drugs, but the overall impact on other pharmaceutical companies is expected to be manageable [3][10] - The report outlines the potential impact on various companies, indicating that Huadong's drugs are under patent litigation, which may affect their inclusion in the final VBP list [11] Market Context - The report highlights the market sizes for specific drugs in China, such as Vancomycin (Rmb2 billion), Ceftazidime-avibactam (Rmb1.3 billion), and Mycophenolate (Rmb1.7 billion) [4][5] - The analysis indicates that the impacts of the VBP are generally anticipated and not surprising to the pharmaceutical coverage universe [9]