"Rush To Buy" Chinese API: Short Term Prices Rose Slightly, And Overseas Orders Surged.

The change of short-term supply and demand under the new crown disease has become a "hot" catalyst for the bulk drug industry.

In April 7th, India, the world pharmacy, decided to cancel the export ban on 24 kinds of API and its pharmaceutical preparations. Behind this, the global API is facing a crisis of "breaking the supply". Since March 25th, the implementation of the national blockade in India has exacerbated the global pharmaceutical supply chain tension.

EU governments and the United States have begun to tackle the risk of drug shortages in the epidemic. In the increasingly controlled epidemic situation in China, more and more API production enterprises have resumed production, and all kinds of API with "made in China" label have opened the global chain.

Since the end of last year, the demand for paracetamol in foreign markets has increased, and the number of orders for many domestic raw materials companies has increased by 30%-50%. The unit price of some exported API also increased by 20%. But in the long run, Apis still belong to the traditional chemical industry with low gross profit. Under the pressure of environmental protection, the whole industry still needs to think about change. " In April 9th, a head of API in eastern China said to the twenty-first Century business reporter.

Sustained rise in prices

From the perspective of industry chain, the pharmaceutical industry involves three links: pharmaceutical raw materials, pharmaceutical research and development, manufacturing and pharmaceutical circulation. The upstream of Western medicine industry chain is usually used as raw material for production preparation. API is a chemical substance with certain pharmacological activity and used as a production agent. The intermediate products in the process of producing API are called pharmaceutical intermediates (also known as chemical intermediates), and API can only be processed into pharmaceutical preparations before they can be used for clinical application.

As the world's largest producer and exporter of API, China is facing the market demand driven by the epidemic. A number of API manufacturers in Zhejiang, Shandong, Hebei and Anhui have indicated that export orders have increased since the beginning of this year.

"Our experience in the prevention and control of new crown pneumonia has been widely recognized worldwide. The new coronavirus pneumonia diagnosis and treatment plan will also enhance the international market demand for related drugs including bulk drugs, and the demand for other drugs directly related to the prevention and treatment of pneumonia will also increase. Zhu Renzong, Deputy Secretary General of the Chinese medicine and health products import and Export Chamber branch, analyzed.

The popularity of raw materials has continued in recent years. Despite the impact of the new crown epidemic, the demand for API in the international market has been booming in recent years, and the export volume of China's raw materials has been growing rapidly. According to the statistics of China's medical and health products import and export chamber, in 2019, China exported 10 million 118 thousand and 500 tons of API to 189 countries and regions in Asia, Europe and North America, and the total export volume reached 33 billion 683 million US dollars.

"Our APIs are specific for the treatment of hypertension. The product line is relatively fixed, and the impact on the market depends on the release of the quarterly report." Huahai pharmaceutical industry secretaries office told reporters on twenty-first Century economic report. A raw material company in East China indicated that the market is changing drastically and the concentration of this industry is further improving. In the long run, there is the logic of product price increase.

Market speculation

Under the expected price rise of the specific varieties, the API plate in the capital market continued to rise.

According to Shen Wan industry index, the index of chemical raw materials increased from 6659.25 points in January 2, 2019 to 7999.38 points in March 26, 2020, or 20.12%, while the overall performance of the pharmaceutical and biological industry increased by 9.19%.

In addition to changes in supply and demand, affected by the new crown pneumonia epidemic, the global cost of raw material medicine industry chain travel expenses has increased, and has also become a push for the price of raw material drugs.

Zhu Renzong analysis pointed out that, "affected by the epidemic, the number of flights between countries has been greatly reduced, shipping companies have postponed or cancelled part of the ship trips, and increased land transport quarantine and control measures, resulting in limited international logistics, serious shortage of transport capacity, prolonged delivery of raw materials, and increased freight charges, showing a tight supply of raw materials and increased prices."

Sales of bulk pharmaceutical products such as antibiotics, vitamins, hormones and other products often sign long term orders. The unit price of the order is often composed of the agreement base price and the unit price maneuver range clause. The buyers and sellers can negotiate and adjust the unit price maneuver scope according to market conditions and quantity.

"Everyone is a long-term strategic partner. When the market is good, we will not ask customers for high prices. When the market is not good, our customers will not let us lose too much ". The head of a raw material drug company in Shijiazhuang, Hebei, explains the unit price maneuver.

With the improvement of China's epidemic situation, the resumption of labor and production has been carried out in various places, and the contradiction between supply and demand of raw materials has eased.

According to the latest research report of the Chinese medicine and health products import and Export Chamber of Commerce, at present, the recovery rate of raw materials and upstream chemical intermediates in China is generally over seven or eight, and domestic logistics has gradually returned to normal. The shortage of upstream chemical raw materials has obviously eased, and the utilization rate of API enterprises has gradually increased. 。

China is the second largest raw material drug producer and the first largest exporter of API. The export of API is nearly 20% of the market share of the world's API, and the bulk raw material is the main raw material. The level of antibiotic production in China is leading internationally. Antibiotic raw materials occupy 30% of the international market. The antipyretic analgesics, such as paracetamol, aspirin and amialin, are higher in production. Paracetamol production is 50% of the world's total output. Lead.

However, there are also insiders pointed out that the export volume of bulk raw materials in China has seen a continuous negative growth. The pressure of China's environmental protection has increased the cost of raw material drug enterprises, and the international bad economic situation, and the price of raw materials and drugs companies has been shipped out, leading to a decline in the export prices of API. Although the recent benefit from the supply side reform superimposed environmental supervision related enterprises suspend production or production capacity reduction, the price of raw material drugs has risen, but it is still not optimistic for a long time.

The characteristic raw material industry is a technology driven industry. The industry companies have higher R & D personnel share, R & D fee rate and relatively stable net interest rate, which reflect that the industry itself is characterized by technology driven and high cost of customer switching, and has created a higher entry barrier (safety, environmental protection, quality, cost control, cooperative reputation, etc.). Purchasing with quantity reduces channel barriers, emphasizes cost control and stable supply. Compared with backward integration, the API industry is more competitive.

Minsheng securities research report pointed out that the long-term logic of the domestic specialty drug industry is the process from the depression dividend to the global profitability. The core premise is that the scale advantage of API in China lays the cost advantages of intermediates, APIs and pharmaceuticals, thereby enhancing the competitiveness of the world. This process is accompanied by the regulation of the domestic market and the clearing of the low end capacity of the generic drug industry, which is also the long-term core logic of the industry.

The technical strength of domestic API should be further improved. Compared with overseas mature pharmaceutical companies, the horizontal expansion of domestic API products is not enough, and product R & D is relatively concentrated. The foundation of product layout may affect the above logic at a certain stage. In the medium and long term, there are investment value continuously, but the fundamentals are clocked in rhythm, because there are great differences in the development stages of each company, the rhythm of capacity layout, the competitive environment and the technological strength of the stock business.

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