Guolian Minsheng Securities has released a special research report on the building materials industry.

The tenth batch of national drug procurement bidding will be held in December 2024, involving 62 drug varieties and 263 product specifications, all of which are drugs that have passed the patent period, produced by multiple enterprises, and have sufficient competition, covering key areas such as hypertension and tumors. 385 products from 234 enterprises have obtained the qualification for selection, and all selected drugs have passed the evaluation of quality and efficacy consistency. The tenth batch of centralized procurement is expected to commence in April 2025.

The centralized procurement of up to ten batches is the core driving force for the increase in boron silicon permeability in medicinal glass

The consumption structure of drugs in China is mainly dominated by generic drugs, and in the past, generic drugs have dominated through centralized procurement. In fact, the national centralized procurement of drugs has promoted the process of consistency evaluation of generic drugs in China and the practice of drug production and circulation in accordance with this requirement. The consistency evaluation of injections usually corresponds to the replacement of their packaging from traditional glass materials to corresponding borosilicate glass packaging. Therefore, centralized procurement is the core reason for the rapid increase in borosilicate permeability in recent years. From the operating situation of pharmaceutical glass manufacturing enterprises represented by Shandong Yaobo/Linuo Pharmaceutical Packaging/Zhengchuan Co., Ltd. in recent years, the penetration rate of borosilicate has shown a sustained and rapid increase since 2021.

Centralized procurement continues to promote imitation instead of original research, and the competitive advantage of leading pharmaceutical packaging enterprises is expected to expand

Looking back at the previous centralized procurement of selected drugs, it is expected that the high priced/large quantity varieties will be basically fully collected (such as the average sales of selected injections last year, which showed a continuous downward trend, with an average of 940 million yuan in the tenth batch of centralized procurement). The report expects that the tenth batch of centralized procurement will continue to promote the process of generic drugs replacing original research drugs (some of the selected injection drugs in the tenth batch had important market shares in the early stage, similar to the previous centralized procurement batches). At the same time, it will help promote the improvement of generic drug quality and the concentration of generic drug enterprises. The competitive advantages of pharmaceutical packaging material enterprises with advantages in scale, product quality, and cooperation foundation with pharmaceutical enterprises are also expected to expand synchronously.

The tenth batch of centralized procurement injections continues to have a high proportion, supporting the prosperity of demand for borosilicate medicinal glass

The proportion of injections in the selected varieties of the tenth batch of centralized procurement was 51.6%, an increase of 4.0% compared to the ninth batch. Starting from the fourth batch of centralized procurement (implemented at the end of April 2021), the proportion of injectable drugs in the selected drugs has significantly increased, and the fifth to tenth batches have remained stable at around 50%. The total first-year procurement volume of each injection in the tenth batch of centralized procurement is 550 million units, which is basically the same as the scale of the ninth batch (the fourth, fifth, seventh, eighth, and ninth batches are 5.0, 7.0, 4.8, 6.0, and 550 million units respectively). The procurement quantity of injection is expected to maintain a relatively large single batch in recent years. The report predicts that the tenth batch of centralized procurement will better support the prosperity of demand for borosilicate, and the penetration rate of borosilicate drug packaging is expected to continue to increase rapidly.

Continue to recommend Shandong Yaobo and follow relevant pharmaceutical packaging leaders

The report predicts that the demand for borosilicate medicinal glass will continue to be prosperous. Shandong's leading position in the field of pharmaceutical glass mold bottle production is stable, and its competitive advantage benefits from the transformation and competition of the pharmaceutical market, which may continue to expand; At the same time, benefiting from the high demand for borosilicate molded bottles, combined with the company's advantages and diversified product layout to support the company's stable growth prospects, we will continue to recommend it. The transformation in the field of generic drugs has a positive significance for leading pharmaceutical packaging companies to consolidate their advantages and achieve growth beyond the industry average. It is recommended to also pay attention to other pharmaceutical packaging leaders.