“I'm so surprised to see today's stock prices!” At the Kang Fang Biotech news exchange at noon on May 24, the company's chairman Xia Yu said bluntly that she was very surprised by the sharp decline.

This morning, the stock price of Kangfang Biotech, the leading stock of innovative pharmaceuticals in Hong Kong, crashed. At one point, the decline was close to 45%. The sharp decline in leading companies also led to the collapse of the innovative drug sector in Hong Kong stocks. At one point, the innovative drug ETF Shanghai, Hong Kong and Shenzhen fell by more than 5%.

WHAT HAPPENED?

Judging from the news, rumors spread widely in the market that Kangfang Biotech's second-line anti-cancer drug AK112 (evosimab) in phase III clinical data fell short of expectations. AK112 is the world's first PD-1/VEGF bispecific antibody independently developed by Kangfang Biotech.

After closing in the morning, the brokerage firm held an emergency conference call with Kangfang Biotech's management. Xia Yu responded. Phase III clinical trials are still ongoing. Investors need to be patient. Perhaps the market feels that PFS (survival without progression) is not impressive. Until OS (overall survival) data is available, it is recommended to focus on the HR value. The HR data is low, at 0.46, which means that the cancer is well controlled. I hope the market will be patient and wait for the end of the Phase III trial.

Notably, the conference attracted leading domestic and foreign investment institutions such as CITIC Construction Investment, CITIC Securities, Cathay Pacific Junan, Huatai Securities, Morgan Stanley, and CLSA. It can be seen that the market's attention was remarkable.

After explanation from company management,$AKESO (09926.HK)$The decline subsided, and by the close, the decline was 22.89%. The decline in Hong Kong Pharmaceutical ETFs was also mitigated. Innovative Pharmaceutical ETFs between Shanghai and Hong Kong fluctuated upward in the afternoon, closing down 2.77%.

Furthermore, it is worth noting that as a leader in innovative pharmaceuticals, Kang Fang Biotech is a major publicly funded stock. 55 funds in the entire market have heavy stakes on the company, including Gülen's Sino-European medical innovation. Zheng Ning's Bank of China Innovative Pharmaceuticals and Yi Fangda Pharmaceutical, which is jointly managed by Yang Zhenxiao and Xu Zheng, is a fund that holds a large number of Kangfang Biotech.

The company will respond urgently to the afternoon call

Investors were all “baffled” by the decline, and Kang Fang Biotech was even more so. Dr. Xia Yu, chairman of the company, said that she was still being interviewed in the morning. Her colleagues were outside anxiously gesturing to her, and she was very surprised by the stock price performance.

The reason for this sharp decline was that Kangfang Biotech's second-line anti-cancer drug AK112 fell short of expectations in phase III clinical data. What is AK112? Why does it have such a big impact on the company's stock price and the stock price of the pharmaceutical industry?

As a first-line treatment for non-small cell lung cancer, EGFR TKI is widely used in China, but when resistance to this type of drug develops, that is, patients face a situation where there is no cure.

Therefore, various companies are trying to break through the problem of how to continue to receive treatment after EGFR is resistant when treating lung cancer. Among them, Kangfang Biotech's PD1/VEGF dual antibody AK112 is a rapidly progressing variety.

The dual-antibody AK112 has now entered phase III clinical trials, and the test sample was expanded to 322 people. However, according to phase III data, the median PFS was 7.06 months and the ORR (objective remission rate) was 50.6%, all lower than the 8.2 months and 68.4% in the previous phase II clinical trial.

Under market sentiment, the stock price once plummeted by nearly 45%.

Subsequently, Kangfang Biotech made an emergency announcement stating that the National Drug Administration (NMPA) has approved the new drug marketing application for the new bispecific antibody drug Idafang (Evaroxi injection, PD-1/VEGF) independently developed by the company, that is, AK112.

In a conference call where brokerage analysts exchanged with Kang Fang Biotech, senior company officials also said that the summary of the phase III clinical trial report was reported early, everything was in line with expectations, the data was very positive, and some of the data will also be used in overseas clinical trials. Since OS (overall life cycle) data has not been released, the company believes that priority should be given to HR data. The HR value is very low, indicating that the disease control trend is very good. Although many patients have progressed after taking medication, it can be understood that progress is very slow.

The company's senior management hopes that the market can look at the Phase III trial from a long-term perspective. Overall, they believe that the company's PD-1/VEGF dual antibody is better than other PD-1 monoclonal antibodies, and they hope that the market is confident that it can “blow up the bears.”

There are also differences in market opinions. Some industry insiders pointed out that second-line drug treatment targets advanced patients. Second-line drugs should not have included too high market expectations in the first place. Perhaps the reason for the sudden collapse in stock prices is probably because the expectations given by institutions were too high in the past. However, it is clear that companies and institutions did not communicate enough with investors after the report came out.

However, some industry insiders believe that PFS is also an important indicator. Patients progress even after taking medication. Even though the overall life cycle increases, the quality of life declines in the later stages.

Who is selling? Who's buying it again?

Kangfang Biotech's sales volume plummeted, with a turnover of 115 million, a turnover rate of 13.3%, and a total transaction volume of 3,992 billion yuan. In terms of capital flow, the main capital had a net outflow of 61.26 million, a net outflow of capital from oversized orders of 52.915 million, and a net outflow of capital of 8.3469 million from large orders.

Judging from the seats, HSBC Bank, J.P. Morgan Chase, Citibank, and France and Pakistan Securities had the highest net sales. According to market news, foreign investors and domestic private equity firms were selling off in the morning.

In terms of net purchases, Merrill Lynch had the highest seat purchases, followed by the Hong Kong Stock Connect seat. There was an obvious downward movement of capital from the South. In addition, there was also a net inflow of capital from the Morgan Stanley seat. In terms of southbound capital announced after the market, Kangfang Biotech received an additional position of HK$311 million.

The public offering was seriously injured again

As a leader in innovative pharmaceuticals, Kang Fang Biotech's market value still exceeds 32 billion dollars after a sharp drop of 23%. Naturally, it also has quite a few public offering positions.

According to public equity data for the first quarter of this year, 55 funds in the entire market held Kangfang Biotech. The total number of shares held was 42.6411 million shares, an increase of 1.052 million shares over the end of last year, accounting for 4.93% of tradable shares.

Looking specifically at the fund, Gülen's Sino-European Healthcare Innovation holds the most, at 9.38 million shares. It added 700,000 shares in the first quarter of this year, and held a market value of 397 million yuan at the end of the first quarter, making it the fund's 6th largest stock. Furthermore, Bank of China Innovative Pharmaceuticals, managed by Zheng Ning, and Yifangda Pharmaceutical Biotech, which are jointly managed by Yang Zhenxiao and Xu Zheng, ranked second and third respectively.

Although some funds do not hold much, the number of positions held by Kangfang Biotech in the portfolio is likely to be more obvious. For example, funds such as Hongde Medical Innovation, Dongwu Double Triangle, Dongwu Medical Services, and Xinyuan Health Industry. Kang Fang Biotech is the most heavily held stock.

Looking at the total holdings of fund companies, fund companies such as Harvest, Central Europe, E-Fangda, Bank of China, and Guangfa hold a large number of total holdings. Judging from the market value at the end of the first quarter, the total market value of the company's products held more than 100 million yuan.

On the heavy position reduction list, funds such as Dongfanghong Qixing's three-year holdings, Zhejiang Shang Smart Choice Pioneer's one-year holding, regular biweekly redemptions with the BOSHI Healthy Growth theme, Bank of China Core Selection, and GF Consumption Upgrade reduced their positions in the first quarter, which may be able to escape the impact of this sharp drop on the net value of the fund.

edit/new