Even after a plunge last month that wiped $46 billion off Chinese health-care stocks, domestic drug makers may be far from their floor as a Beijing-led policy shift gathers pace.
China's plan to drive down generic drug prices through a centralized bulk procurement program is set to redraw the industry by forcing its thousands of small generic drug makers to streamline and consolidate after decades of enjoying outsized profit margins.
"There won't be a second act for traditional generic drug makers in China," said Dai Ming, Shanghai-based fund manager at Hengsheng Asset Management Co. "In the past, there was hope that these companies would benefit from more government investment in health care due to the aging population, but now these health-care stocks will be further hurt by policy and undergo a greater correction."