Policy Headlines Spark a Modest Sell-Off in Chinese Drugmakers

On Nov. 28, China’s National Healthcare Security Administration, or NHSA, released an update to its national reimbursement drug list, or NRDL. It expanded the negotiated list of reimbursable medicines from 43 drugs to 95 drugs, and newly added drugs entered with an average price cut of 60.7%. Separately, on Nov. 29, a list of 35 drugs earmarked for the next round of centralized procurement was circulated. CSPC underperformed its cohort in the sell off, which we attribute to the inclusion of its blockbuster drug Keaili (albumin-bound paclitaxel) in the centralized procurement list. Although we do not think these two announcements themselves are material to any of the large drugmakers’ valuations, including CSPC, the consecutive announcements have soured market sentiment. Many of the top-tier drug manufacturers have sold off by more than 10% in the past two trading sessions.