Influenced by multiple factors such as the start of the Fed interest rate cut cycle, frequent positive policy news, and good semi-annual performance reports, the Hong Kong stock pharmaceutical sector has recently experienced a strong rebound in the market.

In Q3 2024, the Hong Kong Stock Connect Innovative Drug Index (987018) rose by 21.75%. Some views believe that Hong Kong's innovative drugs have entered a technical bull market. As of September 26, the latest size of the Hong Kong Stock Connect Innovative Drugs ETF reached 0.292 billion yuan, hitting a new high since its establishment; the Hong Kong Stock Connect Innovative Drugs ETF increased by 10 million shares in the past week, achieving significant growth; within the past 5 trading days, the Hong Kong Stock Connect Innovative Drugs ETF had a net inflow of funds on 4 days, totaling an "absorption" of 10.8084 million yuan.

On September 27, the central bank announced a 0.5 percentage point reduction in the reserve requirement ratio for financial institutions, a series of policy combinations and positive news once again driving the entire Hong Kong stock pharmaceutical sector higher.

In terms of hot stocks entering the technical bull market rebound, Amvac Pharmaceutical (06660) surged more than 40% at one point during intraday trading, closing with an over 28% increase; Wuxi Apptec closed with an increase of over 23%; Genscript Bio surged over 14%; Beigene, Innovent Bio, Sino Biopharm, Akeso, and other innovative drug stocks also followed the upward trend.

Based on historical data, since 2021, the pharmaceutical index has entered a deep adjustment period. The magnitude and duration of this adjustment are rare, being considered as the 'longest investment difficult period in the history of the pharmaceutical sector.' Standing at the present point in time, reevaluating the Hong Kong stock pharmaceutical sector, high-quality growth stocks that were severely undervalued by the market in the previous period are expected to experience a value rebound with the help of favorable factors. Such as holding heavyweight tumor new drug Yivuseli by Akeso, Beigene with the first billion-dollar domestic innovative drug, and vaccine leader Amvac Pharmaceutical with multiple heavyweight products accelerating their market launch.

In the current environment still facing many uncertainties, those with more certainty are the preferred investment targets. In a recent rebound of Hong Kong stock innovative drugs, companies with strong innovation capabilities and abundant product reserves undoubtedly have stronger risk resistance capabilities, and significant volume increases will only appear during the overall rebound. From this perspective, Amvac Pharmaceutical's stock price soared by over 40% in a single trading day, showing inevitability and reasonableness.

As of the latest closing date (September 27), the market cap of Emergent BioSolutions in Hong Kong is nearly 7 billion Hong Kong dollars. Although there has been a rebound compared to the previous low point, a careful analysis reveals that the market valuation still significantly deviates from its true value, and the stock price does not reflect the company's true strength.

Emergent fully owns four licensed vaccine production companies, three vaccine research institutes, and four R&D centers. Calculated just based on the scarcity of its vaccine production licenses, the total value of the four licensed vaccine production companies alone exceeds one hundred billion.

In the vaccine sector least affected by medical insurance policies, with an annual revenue of nearly 1.2 billion, Emergent BioSolutions is a high-yield, low-risk, stable investment target.

Most importantly, after intense R&D investments, the company is set to declare the listing of three blockbuster vaccine products this year, meaning the company is about to enter a period of reaping rewards, with a very clear inflection point in performance. Some analysts believe that with the launch of the three new products, Emergent's sales revenue is expected to reach around 5 billion yuan, which is relatively achievable. Calculated at the industry net profit margin of 26%, Emergent's net income can reach approximately 1.3 billion yuan. Using the industry average P/E ratio of 23, Emergent's valuation could reach nearly 30 billion yuan.

Emergent BioSolutions has competitive advantages in pipeline, R&D, production, and sales across four dimensions, and now has a broad product pipeline including 8 commercialized vaccines and 21 vaccines under development, covering the top ten vaccine types globally.

By the end of the first half of 2024, the company's three blockbuster products - a 13-valent pneumococcal conjugate vaccine, serum-free iterative rabies vaccine, and a 23-valent pneumococcal polysaccharide vaccine - are entering the listing sprint phase. Currently, the 13-valent pneumococcal conjugate vaccine has completed pre-application for listing, the serum-free iterative rabies vaccine drug registration pre-test is completed, and the 23-valent pneumococcal polysaccharide vaccine is about to undergo unblinding statistics. The industrialization preparation for the three vaccines has also been completed, and the subsequent commercialization process is expected to be fast.

In addition, the company's two blockbuster products, mRNA RSV (respiratory syncytial virus) vaccine and mRNA herpes zoster vaccine, have been submitted for clinical trial applications in both China and the United States. Once approved, not only will the safety and effectiveness be verified by international authoritative institutions, but the globalization process will also be further accelerated.

According to the company's semi-annual report, Emergent BioSolutions is a vaccine company that was one of the earliest to establish an mRNA technology platform domestically. With the global mRNA vaccine still in a period where there are few products on the market, this makes Emergent's two new products highly scarce. Data indicates that the market size of mRNA vaccines and therapies is projected to grow rapidly at a compound annual growth rate of 16.8% from 2023 to 2028, reaching an estimated 101.8 billion dollars by 2028.

Of particular note, this year's Amei vaccine has entered a busy year of intensive application, with 20-valent pneumococcal conjugate vaccines in iterations, the iterative highly effective new process human diploid rabies vaccine, and 7 other products completing clinical pre-applications.

Furthermore, according to this year's semi-annual report, Amei vaccine has already started the registration of marketed products in multiple overseas markets such as Southeast Asia, Africa, South America, and the Middle East, consolidating its global competitiveness. With the pharmaceutical sector rapidly heating up, the imminent launch of several blockbuster products is expected to bring a series of bullish catalysts to Amei vaccine's stock price, accelerating the realization of the company's growth expectations.