Source: Securities Times
Author: Lin Qiao
Recently, the market for innovative drugs has been ignited by various Bullish news.
This year, the "pharmaceutical" market has made a long-awaited comeback, but unlike the previous pharmaceutical bull market, the stocks with impressive gains this time are focused on the innovative drug Sector, and the Hong Kong stock market performs especially well. This has led QDII funds heavily invested in Hong Kong's pharmaceutical Sector to achieve remarkable performance, while mainland pharmaceutical theme Funds have also managed to stand out largely due to their heavy investment in Hong Kong stocks.
Several fund managers expect that starting from this year’s semi-annual reports, the market will see a collective improvement in income for innovative drug companies, which will attract broader financial attention; moreover, compared to A-shares, the Hong Kong innovative drug industry has a more cost-effective advantage in terms of valuation. Combined with relatively better fundamental advantages, this also suggests a potential for greater valuation elasticity.
Hong Kong innovative drugs dominate the QDII gain leaderboard.
According to Wind data statistics, as of June 2, among the 310 QDII Funds in the All Market, 256 products have seen net value growth this year, accounting for 82.6%. Among them, 37 products have a net value growth rate exceeding 30%, and 42 Funds have yields exceeding 20%.
Historically, the performance ranking of QDII Funds is highly correlated with investment themes, especially in recent years, the leading products have mainly been U.S. technology Funds, Gold theme, and Crude Oil Product and other Commodity theme Funds. However, fortunes change, and this year, Crude Oil Product, Natural Gas, S&P Biotech, and Nasdaq theme Funds have mostly underperformed.
On the contrary, since the beginning of this year, driven by the influx of southern funds boosting valuations, QDII products allocated to Hong Kong stocks have performed exceptionally well, especially the health care theme Funds, which have outperformed all, with almost all of the top 30 performing QDII heavily invested in the Hong Kong innovative drug Sector.
Taking the top performer, Huatai PineBridge Hong Kong Advantage Select, as an example, the fund has achieved about 71% return this year. From the style of its heavy holdings, Huatai PineBridge Hong Kong Advantage Select has become a bona fide Hong Kong innovative drug theme fund in the past three years. After a long period of bottoming out, the fund has finally begun to see significant gains this year, including$REMEGEN (09995.HK)$、 $SKB BIO-B (06990.HK)$ And $INNOVENT BIO (01801.HK)$a collective surge in heavyweight stocks, leading to a huge performance advantage for the fund.
In terms of ETFs, the Hang Seng Innovative Drug Theme Fund dominates the rankings, with the Huatai-PineBridge Hang Seng Innovative Drug ETF, Yinhua CSI Innovative Drugs Industry ETF, and Wanjiabo Zhongzheng Hang Seng Innovative Drug ETF all seeing increases of over 40%, also experiencing a respective growth in share of 1.978 billion, 0.837 billion, 0.243 billion, and 109 million units this year.
Research Reports indicate that from the market position, the A-share pharmaceutical sector and the Hong Kong innovative drug sector are both at a bottom level within the last five years. In terms of Institutions' Hold Positions, the fourth quarter of 2024 marks the lowest point for public Funds' heavy positions in the pharmaceutical Industry since the second quarter of 2020, while the first quarter of 2025 shows a rebound from the bottom.
The innovative drug market may be halfway through.
Recently, the innovative drug market has been ignited by various Bullish news. On one hand, this is due to the accelerated commercialization of domestic innovative drugs, with several products being approved for listing in May, along with significant external licensing transactions.$3SBIO (01530.HK)$with$Pfizer (PFE.US)$An authorization agreement was reached for the PD-1/VEGF dual antibody, involving an investment of 6.05 billion dollars.
Dan Lin, the fund manager of Yongying Fund, believes that the recent explosion of innovative drugs is not a coincidence, but a necessary development of the domestic pharmaceutical industry and is in line with the historical规律of the innovative drug industry.
"The characteristics of innovative drug R&D are long cycles and high investments. In the past 5 to 10 years, numerous projects have contributed to the sustained high growth of CXO companies and have spurred the bull market of the CXO sector from 2018 to 2021. Now, the accumulated strength of innovative drugs over the past 5 to 10 years is blossoming. As more and more innovative drugs are launched, included in medical insurance, and gain traction, and even high-quality innovative drugs achieve overseas penetration, more companies will transition from having no revenue and no profits to demonstrating non-linear growth on the financial reports. The innovative drug sector will truly step into a phase of continuous prosperity not only driven by clinical catalysts but also supported by high growth in financial results," Dan Lin stated.
Liu Jie, the fund manager of GF Fund, stated that the recent strong performance of the innovative drug sector in Hong Kong stocks is mainly driven by three factors: recent partnerships between leading pharmaceutical companies and multinational pharmaceutical companies, which confirm the competitiveness of China’s innovative drug sector globally; with the liquidity of the Hong Kong stock market improving, the willingness of foreign institutions to allocate funds has increased; and the time window for several important industry conferences is approaching, which will lead domestic innovative pharmaceutical companies to release clinical data, often beneficial for the phased performance of innovative drug companies in the Hong Kong stock market.
Zhou Sicong, the fund manager of Ping An Fund, stated that in recent years, innovative drugs have been competing for market funds with AI, robots, and other sectors, but by 2025, the market's chip structure may change, with funds and long-term capital expected to enter the market. It is expected that from this year's semi-annual reports, the market will see a collective improvement in the revenue of innovative drug companies, which will attract broader capital attention, and the volatility of the innovative drug market will significantly decrease.
Zhou Sicong determines that from a mid-term perspective, the years 2025 to 2028 will be a critical period for Chinese innovative drug companies to collectively enter a profit phase. Unlike previous years where individual companies achieved profitability sporadically, it is expected that from 2025 to 2028, Chinese innovative drug companies will enter the profit cycle in batches, with 2025 being a key year for the industry to collectively achieve profitability. Based on the history of A-shares, when an entire industry begins to enter a profit phase, it often also marks the start of a strong performance for the entire sector.
Hong Kong stocks may perform better.
Within the year, among the innovative drug constituent stocks in Hong Kong, two stocks have doubled. $REMEGEN (09995.HK)$ In addition, there is also$GRAND PHARMA (00512.HK)$、$INNOCARE (09969.HK)$Of the two stocks that rose more than 80%, only 4 out of 36 stocks in the Sector have recorded a decline this year. Additionally, from the performance this year, the Hong Kong stock market has undoubtedly outperformed the A-share market.
In addition to the aforementioned QDII Funds that focus on Hong Kong stocks, many domestic medicines theme funds that performed well also distinguished themselves by holding significant positions in Hong Kong stocks. As of the end of the first quarter, among the top ten holdings of Great Wall Pharmaceutical Industry Select Fund, five Hong Kong stocks are included. $INNOVENT BIO (01801.HK)$ 、$AKESO (09926.HK)$It includes five Hong Kong stocks such as AKESO, SKB BIO-B, INNOVENT BIO. $ZAI LAB (09688.HK)$ , and 3SBIO also claimed five positions among Yongying Pharmaceutical's innovative selected holdings.
国金证券策略首席分析师张弛则强调了港股市场的高弹性：港股创新药的估值扩张弹性、空间或强于A股。首先，更高的研发费用率和海外收入占比表明，港股创新药行业的“含新量”更高，同时板块整体净利润增速自2023年上半年以来持续领先于A股，结合盈利前景预测来看，这一比较优势将有望延续。其次，港股创新药行业对美债利率更加敏感，更受益于海外流动性宽松后对估值层面的提振。最后，港股创新药行业在估值层面也更具性价比优势，结合更好的基本面相对优势，也意味着潜在的估值弹性或更大。
长城基金基金经理梁福睿分析称，对比A股和港股市场，由于港股市场与宏观经济关联度更高，有着比较灵活的做空机制，其创新药企业估值的泡沫明显更少，且可供选择的优质资产更多，整体板块BETA（相对于整体市场的波动性）更强；而A股市场有很多由仿制药转型到创新药的企业，后续估值上升空间或更大。
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