The Hang Seng Index rebounded 7.6% in the third quarter, ranking among the top in major Asia-Pacific stock markets. During this period, pharmaceutical stocks surged across the board, becoming a key pillar supporting the market, with accelerated sector rotation and innovative drugs attracting substantial capital inflows. Since July, I have written multiple articles discussing the new investment logic in the pharmaceutical sector. Among the top ten gainers in the third quarter, half were pharmaceutical stocks. WuXi Biologics (02269) rose 62% for the quarter, making it the best-performing blue-chip stock. Peers such as CSPC Pharmaceutical Group (01093), WuXi AppTec (02359), BeiGene (06160), Sino Biopharmaceutical (01177), and Innovent Biologics (01801) all posted double-digit gains, outperforming the broader market. This reflects capital shifting toward stocks with tangible industrial catalysts. While artificial intelligence (AI) can accelerate drug screening, this round of revaluation is not driven by speculative concepts, but rather by the increasing global recognition of the value of Chinese R&D assets.
The latest example is Hengrui Medicine (01276) licensing the rights outside Greater China for HRS-1596, a once-weekly oral GLP-1/GIP dual agonist, to Novo Nordisk (US.NVO), receiving an upfront payment of USD 300 million and potential milestones of up to USD 2.3 billion, plus sales royalties; however, the transaction is still subject to antitrust approval, and the USD 2.6 billion is not yet recognized revenue. Merck (US.MRK) paid USD 400 million upfront to acquire global rights to SciBrunch's preclinical KRAS G12D drug SPR2015, with a total potential value including milestones of USD 2.13 billion; Eli Lilly (US.LLY) partnered with InnoCare Pharma (09969) on up to five targets, with initial and short-term payments of up to USD 100 million and potential milestones of approximately USD 3.25 billion.
This is not merely a random 'bargain hunting' trend. With blockbuster drugs like Keytruda facing patent cliffs, multinational pharmaceutical companies urgently need to replenish their pipelines. Acquiring Chinese assets that have already undergone partial early-stage R&D saves time, but clinical, regulatory, and commercialization risks remain, and milestones may not necessarily be achieved. The market has thus shifted from solely focusing on reimbursement pricing and domestic sales to evaluating upfront payments, royalties, and global sales rights.
Cancer vaccines offer another valuation reference. Moderna's (US.MRNA) personalized mRNA therapy, Intismeran Autogene (V940/mRNA-4157), co-developed with Merck, achieved the endpoints of recurrence-free survival and distant metastasis-free survival in a Phase III melanoma study, driving Moderna's shares to surge 177% on August 19; however, only top-line results have been released so far, with full data, overall survival, and regulatory approval still pending confirmation.
On individual stocks, core holdings could include Hansoh Pharmaceutical (03692), Innovent Biologics, and BeiGene: Hansoh reported 11.7% revenue growth in the first half, with innovative drugs accounting for 85.4%, though its oncology business remains relatively concentrated; Innovent reported 44.8% revenue growth, 56.7% product revenue growth, and a 50.2% increase in net profit to RMB 1.253 billion, driven mainly by product volume expansion, though risks include surging R&D investment and new drug sales falling short of expectations; BeiGene reported 32.3% revenue growth and recorded USD 464 million in net profit, a year-on-year surge of 385.8%, with a more mature global footprint but still heavily reliant on Brukinsa.
For catalyst-driven positions, consider CSPC Pharmaceutical Group and Sino Biopharmaceutical: CSPC reported 40.1% revenue growth in the first half, though a significant portion came from licensing fees; Sino Biopharmaceutical reported 10.6% revenue growth, with innovative drugs and licensing income up 44.3%, though risks include milestones and new product volume falling short of expectations.
WuXi Biologics and WuXi AppTec should be placed under high-volatility watch: the former reported 18.4% revenue growth in the first half, with total outstanding orders reaching USD 25.1 billion; the latter reported 38.9% revenue growth, with a 25.2% increase in orders for continuing operations, showing strong fundamentals, but exposed to geopolitical risks, client production delays, and valuation corrections.
Strategically, it is advisable to accumulate on pullbacks in stages, avoid chasing on news days, and control exposure to individual stocks. By Maggie Mak, Head of Research Department, Grand Capital Securities (Asia)
*The author is a licensed person under the SFC and does not hold any of the aforementioned stocks.
*Articles published in Economic Information Daily, whether signed or unsigned, represent the authors' personal opinions and do not reflect the position of Economic Information Daily. Economic Information Daily serves as a platform providing free speech.
The latest example is Hengrui Medicine (01276) licensing the rights outside Greater China for HRS-1596, a once-weekly oral GLP-1/GIP dual agonist, to Novo Nordisk (US.NVO), receiving an upfront payment of USD 300 million and potential milestones of up to USD 2.3 billion, plus sales royalties; however, the transaction is still subject to antitrust approval, and the USD 2.6 billion is not yet recognized revenue. Merck (US.MRK) paid USD 400 million upfront to acquire global rights to SciBrunch's preclinical KRAS G12D drug SPR2015, with a total potential value including milestones of USD 2.13 billion; Eli Lilly (US.LLY) partnered with InnoCare Pharma (09969) on up to five targets, with initial and short-term payments of up to USD 100 million and potential milestones of approximately USD 3.25 billion.
This is not merely a random 'bargain hunting' trend. With blockbuster drugs like Keytruda facing patent cliffs, multinational pharmaceutical companies urgently need to replenish their pipelines. Acquiring Chinese assets that have already undergone partial early-stage R&D saves time, but clinical, regulatory, and commercialization risks remain, and milestones may not necessarily be achieved. The market has thus shifted from solely focusing on reimbursement pricing and domestic sales to evaluating upfront payments, royalties, and global sales rights.
Cancer vaccines offer another valuation reference. Moderna's (US.MRNA) personalized mRNA therapy, Intismeran Autogene (V940/mRNA-4157), co-developed with Merck, achieved the endpoints of recurrence-free survival and distant metastasis-free survival in a Phase III melanoma study, driving Moderna's shares to surge 177% on August 19; however, only top-line results have been released so far, with full data, overall survival, and regulatory approval still pending confirmation.
On individual stocks, core holdings could include Hansoh Pharmaceutical (03692), Innovent Biologics, and BeiGene: Hansoh reported 11.7% revenue growth in the first half, with innovative drugs accounting for 85.4%, though its oncology business remains relatively concentrated; Innovent reported 44.8% revenue growth, 56.7% product revenue growth, and a 50.2% increase in net profit to RMB 1.253 billion, driven mainly by product volume expansion, though risks include surging R&D investment and new drug sales falling short of expectations; BeiGene reported 32.3% revenue growth and recorded USD 464 million in net profit, a year-on-year surge of 385.8%, with a more mature global footprint but still heavily reliant on Brukinsa.
For catalyst-driven positions, consider CSPC Pharmaceutical Group and Sino Biopharmaceutical: CSPC reported 40.1% revenue growth in the first half, though a significant portion came from licensing fees; Sino Biopharmaceutical reported 10.6% revenue growth, with innovative drugs and licensing income up 44.3%, though risks include milestones and new product volume falling short of expectations.
WuXi Biologics and WuXi AppTec should be placed under high-volatility watch: the former reported 18.4% revenue growth in the first half, with total outstanding orders reaching USD 25.1 billion; the latter reported 38.9% revenue growth, with a 25.2% increase in orders for continuing operations, showing strong fundamentals, but exposed to geopolitical risks, client production delays, and valuation corrections.
Strategically, it is advisable to accumulate on pullbacks in stages, avoid chasing on news days, and control exposure to individual stocks. By Maggie Mak, Head of Research Department, Grand Capital Securities (Asia)
*The author is a licensed person under the SFC and does not hold any of the aforementioned stocks.
*Articles published in Economic Information Daily, whether signed or unsigned, represent the authors' personal opinions and do not reflect the position of Economic Information Daily. Economic Information Daily serves as a platform providing free speech.
