① What bullish factors should be noted for the rise of the Innovative Drugs Sector in the Hong Kong stock market? ② The annual reports show that many pharmaceutical companies are entering a profit harvest period, does this indicate that a profit turning point is approaching?
Today, Hong Kong pharmaceutical stocks strengthened again, with several individual stocks rising by more than double digits, showing strong momentum compared to the short-term continuous pullback in the Large Cap market.
As of the time of writing,$INNOVENT BIO (01801.HK)$A rise of nearly 17%.$3SBIO (01530.HK)$、$SKB BIO-B (06990.HK)$Both have increased by about 11%, achieving a year-to-date doubling trend.
In addition,$WUXI BIO (02269.HK)$、$BEIGENE (06160.HK)$Leading stocks in the Industry have also surged, with more than ten companies in the entire Sector rising by over 5%.
On the news front, several Hong Kong Innovative Drug companies released Earnings Reports this week, and their collective performance explosion has become another new catalyst driving the sector's market.
On March 26, INNOVENT BIO (01801.HK) announced its 2024 performance, with total revenue of approximately 9.422 billion yuan, a year-on-year increase of 51.8%; a loss of 94.631 million yuan, significantly narrowing by 90.8% year-on-year. More importantly for the market, under the Non-IFRS, INNOVENT BIO achieved its first profit, turning from a loss to a net income of nearly 0.332 billion yuan year-on-year.
In addition, another Innovative Drug company that surged in the short term, 3SBIO (01530.HK), also experienced bullish catalysts from its performance.
On March 25, 3SBIO released its 2024 performance, achieving revenue of 9.108 billion yuan, an increase of 16.5% year-on-year; net income of 2.09 billion yuan, an increase of 34.9% year-on-year.
3SBIO also revealed that the company is actively preparing for market entry of self-developed or collaborative Innovative Drugs by 2025. With the progress of clinical research and filing processes, the company expects that starting in 2025, the group will have key new drugs entering the commercialization stage each year.
As for the performance announced last week, $SINO BIOPHARM (01177.HK)$the net income for 2024 is expected to grow by 33.5% year-on-year to 3.46 billion yuan, mainly due to the acceleration of Innovative Drugs sales, with revenue from each segment growing by 21.9% year-on-year. The company also expects to achieve 5 BD (business development collaborations) by 2025, and the existing R&D pipeline will see multiple data readouts.
In a report released on March 24, Zhongyou Securities stated that after analyzing the 2024 performance of companies in the Innovative Drugs Sector, the overall performance of the Sector shows a high growth trend, with many companies achieving profitability. Driven by policies, technology, and aging demographics, Innovative Drug companies are entering a concentrated harvest period for commercialization.
On the other hand, aside from the performance turning point, many Hong Kong Innovative Drug companies are also expected to announce the latest clinical data for multiple product pipelines at the 2025 American Association for Cancer Research (AACR) annual meeting, which is also a short-term logic for market interest in pharmaceutical stocks.
The AACR annual meeting will be held in Chicago, USA from April 25 to 30, 2025, and it may further boost the enthusiasm for pharmaceutical stocks.
Sinolink recently released a Research Report stating that the current "valuation expansion elasticity and space" for Hong Kong Innovative Drugs may be stronger than that of A-shares. Data shows that Hong Kong Innovative Drugs have consistently been lower than A-shares, and after recent corrections, the latest valuation is about 80% of that of A-shares.
Sinolink also pointed out that a higher "R&D expense ratio" and "overseas revenue proportion" indicate that the actual "newness" of the Hong Kong Innovative Drug industry is higher, while the overall Net income growth rate of the Sector has continued to lead A-shares since H1 2023. Considering the profit outlook, this comparative advantage is expected to persist.
Looking ahead, the National Medical Insurance Administration plans to launch the first version of the Class B drug catalog within the year, providing a supplemental payment path for high-value Innovative Drugs through a "basic medical insurance + commercial insurance" collaboration model, which is also one of the potential highlights for pharmaceutical stocks in the medium to long term.
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