Source: Brokerage China
Author: Wu Qi
The Hong Kong stock market's Innovative Drugs Sector is experiencing a high-level adjustment.
Today, the Hong Kong stock market's Innovative Drugs Sector experienced a significant pullback, among which$AKESO (09926.HK)$at one point it fell more than 19%, closing with a decrease narrowed to 11.83%.$3SBIO (01530.HK)$、$EVEREST MED-B (01952.HK)$、$ASCENTAGE-B (06855.HK)$、$ZAI LAB (09688.HK)$、$JOINN (06127.HK)$The decline has exceeded 3%.
It is worth noting that the innovative drugs sector in Hong Kong is one of the best performing sectors in the capital markets this year. Analysts generally believe that a large number of innovative drug companies are expected to break even between 2025 and 2027, gradually releasing operational flexibility.
The reason for the sharp decline in the innovative drugs sector was a disappointing piece of news. Recently, AKESO disclosed the global first dual-specific antibody new drug, IVOX, in a head-to-head trial.$Merck & Co (MRK.US)$The latest clinical research results of Pembrolizumab (K drug) triggered severe stock price drops among companies listed on the US stock market.$Summit Therapeutics (SMMT.US)$The stock price plummeted by 36%.
Many investors are bullish on the significant investment opportunities brought by the fundamental reversal of Hong Kong's innovative drugs this year. Since the beginning of the year, related ETFs tracking this index have consistently attracted inflows, and their size has reached new highs. Numerous fund managers increased their holdings in Hong Kong's innovative drug companies in the first quarter; however, a small number of fund managers believe that the growth of Hong Kong's innovative drugs has been substantial and chose to cash out.
The innovative drugs sector in Hong Kong is currently affected.
Today, the Hong Kong stock company AKESO opened significantly lower, with intraday losses exceeding 19%, and its year-to-date increase narrowed to 43.66%.
Among the innovative drugs in the Hong Kong stock market, 3SBIO, EVEREST MED, ASCENTAGE-B, ZAI LAB, and Joinn Laboratories all experienced declines of over 3%.
However, innovative drugs in the Hong Kong stock market remain one of the best-performing industry themes this year. Among the constituent stocks, $REMEGEN (09995.HK)$the year-to-date increase is nearly 2 times, with 3SBIO's year-to-date increase approaching doubling, and Lepu Biopharma, $INNOCARE (09969.HK)$、$INNOVENT BIO (01801.HK)$The increase for the year has exceeded 45%.
The public fund product, Huitianfu Hong Kong Advantage Select, which heavily invests in Hong Kong stocks of Innovative Drugs, has achieved a net value increase of 64.44% this year, surpassing the humanoid robot thematic fund, currently ranking at the top of the fund performance increase list for the year. Other pharmaceutical thematic funds that are also among the top performers this year include Great Wall Medical Industry Select, Yongying Medical Innovation Smart Selection, Nuode Selected Value, and Ping An Core Advantage, all with a net value increase exceeding 40%.
In terms of passive funds, the Hong Kong stocks Innovative Drugs ETF under Yinhua Fund, Huitianfu Fund, and GF Fund has all increased over 27% this year, ranking among the top three in ETF annual increase.
The pharmaceutical thematic ETF has continuously received net inflow of funds since the beginning of the year, such as Huitianfu Guozheng Hong Kong Stock Connect Innovative Drugs ETF which has received a net inflow of over 2 billion yuan this year, and Yinhua Zhongzheng Innovative Drugs Industry ETF and ICBC Guozheng Hong Kong Stock Connect Innovative Drugs ETF both have received a net inflow of over 1 billion yuan this year.
According to data from Tianfeng, as of the end of the first quarter of 2025, the scale of passive pharmaceutical funds reached 140.4 billion yuan, hitting a historical high; in terms of shares, the shares of passive pharmaceutical funds amounted to 266.2 billion yuan, a month-on-month increase of 41.2 billion shares, also reaching a historical high. In terms of the holding ratio of pharmaceutical funds, by the end of the first quarter of 2025, the top three industries for actively managed pharmaceutical thematic funds were Innovative Drugs (34%), Traditional Pharmaceuticals (26%), and CDMO (17%). Among the Innovative Drug companies,$BeiGene (ONC.US)$(A+H), Zexing Pharmaceutical, INNOVENT BIO, AKESO, and Kelun Botai Biomedical,$Sichuan Biokin Pharmaceutical (688506.SH)$、$CSPC Innovation Pharmaceutical (300765.SZ)$The active equity fund holdings have significantly increased.
The high-performing stock SMMT dropped 36%.
Last Friday, the US-listed company $Summit Therapeutics (SMMT.US)$ closed down 36%, and was suspended at one point during trading.
SMMT has been a high-performing stock in the pharmaceutical and biotechnology Sector in recent years, achieving a growth rate of 583.72% in 2024, with its growth rate doubling this year before the recent drop. The main reason for the increase in stock price is that SMMT previously reached a deal valued at up to 5 billion dollars with AKESO, acquiring the rights to Ivoxi in the USA, Europe, Canada, and Japan markets. Ivoxi can be used for first-line treatment of PD-L1 positive non-small cell lung cancer (NSCLC).
Market analysts interpret that REMEGEN's latest disclosure regarding Ivosidenib's data did not meet previous positive expectations. SMMT's investors had previously assigned a high valuation premium to the company due to their high expectations for Ivosidenib's data, hence the stock price experienced a significant decline.
According to specific news, the National Medical Products Administration's official website shows that REMEGEN's globally innovative bispecific antibody new drug Ivosidenib has been approved for marketing for a new indication as a single agent for the first-line treatment of PD-L1 positive locally advanced or metastatic non-small cell lung cancer (NSCLC).
The Hong Kong-listed company REMEGEN made a voluntary disclosure stating that the approval for the first-line treatment of PD-L1 positive NSCLC new indication is based on significant positive results obtained from the randomized, double-blind, controlled phase III clinical trial HARMONi-2, comparing Ivosidenib head-to-head with Merck's Pembrolizumab (K drug), including the interim analysis data for median progression-free survival (PFS) and overall survival (OS).
Industry insiders say that despite the impressive PFS data, the OS data did not meet expectations, which may be a crucial reason for the sharp fluctuations in the Capital Markets.
Other investors believe that a new cancer drug developed in China has beaten global pharmaceutical giants in data comparisons for the first time, although the initial market expectation was for a significant lead. Preliminary data showed no significant difference, and the gap in expectations led to fluctuations in the Capital Markets.
CSC believes that attention can continue to be paid to REMEGEN and SMMT, which will release data from the first global phase III HARMONi study (second-line EGFR mNSCLC) in mid-2025; data from the phase III HARMONi6 study (first-line squamous NSCLC) is expected to be published in 2025; multiple data reads for AK104 and AK112 will be available from ASCO and ESMO.
Fund managers currently have differing opinions.
Against the backdrop of fluctuating overall market performance, the stock prices of Innovative Drugs in the secondary market achieved good results. According to the fund's Q1 report, fund managers have differing views on the future trends of Innovative Drugs. Some fund managers chose to reduce their holdings in Innovative Drugs and take profits, while others remain bullish on the future performance of Innovative Drugs.
The Fortune SG Healthcare Growth 30, the Wanjia Global Growth One-Year Hold, and the Huaxia Innovative Pharmaceutical Leaders Fund have all clearly increased their holdings in Hong Kong-listed innovative pharmaceutical companies in their quarterly reports.
The fund manager of Fortune SG Healthcare Growth 30, Sun Xiaoyue, indicated that the reasons for reallocating to Hong Kong-listed innovative drugs are that first, the valuations of Hong Kong stocks have been undervalued due to liquidity issues for years; and second, a significant number of Hong Kong innovative pharmaceutical companies are performing well fundamentally, especially as the progress of many companies' R&D pipelines continues to exceed market expectations. It is determined that domestic innovative pharmaceutical enterprises will begin to experience a leap from quantitative changes to qualitative changes in the second half of 2024, followed by a possible sustained high prosperity for 3 to 5 years.
Xu Yanpeng, the fund manager of Anxin Pharmaceutical Innovation Fund, stated that the domestic innovative pharmaceutical industry is entering a period of accelerated growth. Since last year, policies encouraging the development of innovative drugs have been introduced and implemented one after another, and the competitiveness of domestic innovative pharmaceutical companies has been continuously demonstrated, with a number of biotech companies experiencing rapid revenue growth and starting to turn a profit. At the same time, Chinese innovative drugs are accelerating their entry into international markets, relying on excellent product strength to continuously participate in global innovative drug market competition, becoming a strong dark horse in recent years.
A small number of funds such as Hongta Hongtu Pharmaceutical Select and Donghai Securities Hairui Jianxing have reduced their holdings in innovative pharmaceutical companies in the first quarter due to valuation and cost-effectiveness reasons.
The fund manager of Hongta Hongtu Pharmaceutical Select stated in the quarterly report that during a time when innovative drugs are hitting new highs, some reduction in holdings of innovative drugs was made considering cost-effectiveness to avoid potential risks of drawdown. However, in the long term, it is believed that the trend of innovative drugs going overseas will continue, and many innovative pharmaceutical companies will see explosive revenue growth, eventually leading to positive net income.
Is investing always stepping on a landmine?Futubull AI is now online!Providing precise answers, comprehensive insights, and grasping key opportunities!
Editor/Jeffy
