China Healthcare_ Plasma 3Q24 Wrap-up_ Albumin under pressure but IVIG stronger; three debates to address

Summary of the Conference Call on China's Plasma Industry (3Q24) Industry Overview - The conference call focused on the plasma product industry in China, specifically analyzing the performance of seven A-share listed plasma product companies in their 3Q24 reports [2][4]. Key Points and Arguments 1. Revenue Growth Stability: Most companies in the plasma product sector reported stable year-over-year (yoy) revenue growth, with Hualan being the best performer due to its capacity investments in plasma collection centers [2][4]. 2. Market Demand for Albumin: There is a debate regarding the softness of market demand for albumin this year, with a noted decrease in the number of batches issued and a single-digit decline in retail prices [4][6]. 3. IVIG Performance: In contrast to albumin, the price of Intravenous Immunoglobulin (IVIG) has increased by a high single-digit percentage yoy, indicating stronger demand, particularly due to the increased need for COVID-19 treatments in the first half of 2023 [4][6]. 4. Impact of VBP Policy: The volume-based procurement (VBP) policy has had a moderate impact on prices for plasma products, with significant price drops only observed in tetanus immunoglobulin. Other products like albumin and IVIG have seen only moderate price cuts [6][7]. 5. Future Price Risks: Major products such as albumin and IVIG are expected to have less exposure to VBP price cut risks due to stronger demand, while niche products like fibrinogen may face more pressure [7][8]. 6. Recombinant Albumin Concerns: The development of recombinant human serum albumin by Oryzogen poses a potential disruption to the albumin market in China, raising concerns among investors about its cost advantages [11][12]. 7. Comparison with Factor VIII: Historical data shows that both plasma-derived and recombinant Factor VIII experienced concurrent growth, suggesting that recombinant albumin may not fully replicate the clinical effects of plasma-derived albumin due to its complex mixture [12][13]. Financial Performance of Companies - Hualan Biological Engineering: Rated as a "Buy" with a 12-month target price of Rmb22, reflecting an upside potential of 24.7% from its current price of Rmb17.64. The company is seen as undervalued with improving growth prospects driven by new plasma collection stations [15][17][16]. Risks and Catalysts - Key Risks: Stricter controls on albumin prescriptions, potential increases in IVIG ex-factory prices, rising accounts receivable days leading to asset impairments, and intensified competition in the flu vaccine market [16]. - Catalysts to Watch: Sustainable growth in plasma product demand and the uptake of influenza vaccines in China [15]. Additional Insights - The overall sentiment in the plasma products industry is diverging, with albumin under pressure while IVIG shows stronger momentum. This reflects a fragile balance in supply and demand for albumin, contrasting with the increasing demand for IVIG [4][6]. This summary encapsulates the key discussions and insights from the conference call regarding the plasma product industry in China, highlighting both opportunities and risks for investors.