Research report on Hong Kong stocks in the pharmaceutical, biotech, and medical device sectors

1. Industry Overview

Sector Structure:

Chemical Pharmaceuticals & Generics (e.g., $CSPC PHARMA(01093.HK), $SINO BIOPHARM(01177.HK))
Traditional Chinese Medicine ($BAIYUNSHAN PH(00874.HK), $TRAD CHI MED(00570.HK), $TONG REN TANG(01666.HK))
Biotech (Chapter 18A Companies) ($INNOVENT BIO(01801.HK), $CANSINOBIO(06185.HK), $HBM HOLDINGS-B(02142.HK), $JUNSHI BIO(01877.HK), $AKESO(09926.HK))
Medical Devices & High-Value Consumables ($MICROPORT(00853.HK), $WEIGAO GROUP(01066.HK), $CHUNLI MEDICAL(01858.HK))

Key Trends:

Biotech IPOs (especially HKEX Chapter 18A firms) saw inflated valuations during 2018-2021;
Subsequent global liquidity tightening and centralized procurement policies triggered 70-90% corrections from peaks;
Current valuations are relatively low, with weak risk appetite. Pipeline differentiation and commercialization capabilities are now critical investment metrics.

2. SWOT Analysis

1. Strengths

Strong Market Demand

Aging populations, rising chronic diseases, and health awareness drive long-term demand.
Innovative drugs (e.g., immuno-oncology, gene/cell therapy) and high-end devices thrive amid healthcare upgrades.

Policy-Driven Innovation

HKEX Chapter 18A enables pre-revenue biotech listings, funding R&D;
Regulatory reforms accelerate approvals for "hardcore" innovations.

Localization & Supply Chain Edge (Devices)

Domestic consumables/imaging equipment outperform multinationals in cost and service;
Volume-based procurement (VBP) forces hospitals to adopt local brands.

Talent Influx & Platform Breakthroughs

Returnee scientists and ex-MNC teams advance bispecific antibodies, T-cell engagers, mRNA platforms.

2. Weaknesses

Core Tech Dependencies

Reliance on imported components (e.g., imaging probes) and upstream IP.

Commercialization Gaps

Weak sales networks and overseas compliance experience vs. global peers.

Pipeline Homogeneity

Overcrowded targets (PD-1, CAR-T) trigger price wars;
Low-margin device makers struggle under VBP.

Financial Fragility

Pre-profit 18A firms rely on volatile equity financing.

3. Opportunities

Import Substitution & VBP Expansion

Cardiac stents, orthopedic joints already under VBP; more device categories may follow.

Differentiated Pipelines

First-in-class/best-in-class candidates (e.g., bispecifics) attract premium valuations.

Global Partnerships

Rising cross-border licensing deals (e.g., Harbour BioMed's $320M T-cell engager pact).

AI & Digital Health

Surgical robots, AI drug discovery open new revenue streams.

4. Threats

VBP & Price Controls

Steep price cuts compress margins; innovative drugs may face stricter negotiations.

Geopolitical Risks

Trade tensions and supply chain disruptions raise costs.

Clinical/Regulatory Setbacks

Failed trials or stricter FDA/NMPA reviews trigger volatility.

Industry Shakeout

Cash-strapped "pseudo-innovators" face consolidation.

3. Four Key Dimensions

1. Fundamentals

Financials:

Traditional pharma leaders (CSPC, Sino Biopharm) balance generics with novel drugs.
Device giants (MicroPort, Weigao) dominate niches like cardiovascular and orthopedics.
Biotech bifurcation: near-commercialization vs. cash-burning R&D.

Pipeline Quality:

Multimodal platforms (bispecifics, ADCs) outshine me-too PD-1s.

2. Policy

VBP rounds 10-11 expand to high-value consumables;
NRDL inclusion accelerates sales but requires steep discounts;
18A funding tightens amid muted secondary markets.

3. Catalysts

Clinical Milestones

$AKESO(09926.HK)'s PD-1/VEGF bispecific ivonescimab beat Merck's Keytruda in PFS—a first for Chinese PD-1s.

Deals

$HBM HOLDINGS-B(02142.HK)'s $320M T-cell engager deal with Candid.

4. Technicals

Sector remains range-bound; selective rebounds on positive data.
Institutions favor firms with cash buffers and validated pipelines.

4. Pipeline Spotlights

1.$HBM HOLDINGS-B(02142.HK)

Highlights: T-cell engager deal validates platform.
Risks: Pre-revenue status demands careful cash monitoring.

2. $AKESO(09926.HK)

Highlights: PD-1/VEGF bispecific's superiority over Keytruda.
Risks: Commercial execution and global expansion hurdles.

3. $MICROPORT(00853.HK)

Edge: Diversified device portfolio offsets VBP pressures.

4. $INNOVENT BIO(01801.HK)

Catalysts: PD-1/LAG-3 bispecific and overseas partnerships.

5. Investment Strategy

Focus on Differentiated Pipelines

Avoid homogeneous PD-1/device players;
Prioritize platforms with global potential (bispecifics, ADCs).

Balance Import Substitution & Policy Risks

Scale and tech upgrades key to surviving VBP.

Monitor Funding & Clinical Risks

Track 18A firms' cash runways and trial readouts.

Event-Driven Opportunities

Data releases, licensing deals may spark rallies.

6. Bottom Line

Long-Term Drivers Intact: Aging demographics, innovation policies, localization.

Selectivity Crucial: Post-correction, winners will separate via science and execution.

Global Ambitions: Breakthroughs like Akeso's bispecific prove China's biotech rise.

Disclosure: This is research, not investment advice.