Recently, a Hong Kong-listed 18A innovative drug company experienced drastic fluctuations in its stock price during the large-scale unlocking window period. Just a year ago, when this company went public, it was in the limelight, even setting a subscription record of thousands of times.

From being sought after by capital to facing pressure due to the lifting of restrictions, the market attitude has undergone a drastic change in just one year.

This is not an isolated case. Since the Hong Kong Stock Exchange introduced Chapter 18A in 2018, allowing the listing of unprofitable biotech companies, the delisting date is becoming the "judgment day" for more and more 18A companies.

Some enterprises have undergone significant adjustments after the lifting of restrictions, while others have gained market recognition again through commercialization, R&D breakthroughs, and BD cooperation.

Lifting restrictions is like a mirror, reflecting not only short-term capital speculation but also the true quality of a company's long-term value.

Since the beginning of 2025, the IPO market in Hong Kong stocks has remained vibrant, with numerous listed companies gradually entering their first round of unlocking period. For innovative pharmaceutical companies, how will this wave of unlocking affect the performance of the capital market? And how will it change investment institutions' judgments on the value of Biotech?

Focusing on issues such as the capital logic behind the lifting of restrictions on 18A enterprises, value revaluation, and how innovative pharmaceutical companies navigate through cycles, senior investor Lin Wei (pseudonym) shared her observations and thoughts on industry changes with Xie Yijun from the dual perspectives of primary and secondary market investors.
 

01. After the lifting of restrictions, who is swimming naked?

"For innovative drug companies in the 18A category, the lifting of restrictions is an inevitable test for shareholders, and it is also an important time node for the transition from primary market valuation to secondary market valuation."

From the perspective of market mechanism, the lifting of the ban means that shares that were previously locked up enter the market, leading to an increase in market supply in the short term.

For some 18A enterprises, the proportion of publicly traded shares at the IPO stage is relatively low. As cornerstone investors, Pre-IPO investors, and early-stage funds gradually enter the market with their holdings, significant pressure on shareholding may emerge in a short period of time.

"Many innovative pharmaceutical companies are still in the research and development stage when they go public, and the public shareholding ratio is often compressed to the minimum. When the lock-up period ends and a large number of low-cost shares enter the market, if the company's fundamentals cannot provide sufficient attractiveness, it is prone to supply and demand imbalance."

Lin Wei pointed out that the lifting pressure on Hong Kong Stock Exchange 18A enterprises has certain particularities.

On the one hand, the initial tradable share volume of an IPO is relatively small, making the change in the size of tradable shares after the lock-up period more pronounced. On the other hand, the exit pace of cornerstone investors, Pre-IPO investors, and early-stage financial investors also affects market expectations.

Typically, cornerstone investors have a lock-up period of 6 months, while Pre-IPO investors often have a lock-up period of 6 to 12 months. When multiple investor groups enter the tradable state simultaneously, the market may face phased pressure from market absorption.

In addition, the proportion of long-term funds in the investor structure of the Hong Kong stock market is relatively low, making short-term trading factors prone to amplifying fluctuations. Once the market forms an expectation of unlocking, some investors may adjust their positions in advance, further exacerbating the pressure on stock prices.
Besides the share structure, the shareholder structure is also an important factor that the market pays attention to. Early-stage financing for innovative pharmaceutical companies mainly relies on institutional investors such as venture capital (VC) and private equity (PE). These funds have a clear duration of existence and need to exit upon maturity, so the unlocking of restricted shares often becomes their most important exit window.

"Fund exits cannot be simply equated with company fundamentals," said Lin Wei. "Some shareholder exits are passive behaviors due to the expiration of the fund's duration, unrelated to the company's quality; some are active choices made when the target valuation has fully reflected expectations and the upside potential is limited; and some indeed reflect investors' prudent judgments on the company's fundamentals."

The lifting of restrictions is not the fundamental reason for stock price fluctuations. More importantly, it often serves as an important window for the market to re-examine the value of enterprises.

In the primary market stage, investment institutions focus on the future growth potential of enterprises, including technological platforms, innovation pipelines, and potential commercial value; whereas after entering the secondary market, investors need to see a more certain path for value realization.

In other words, primary market investment focuses on the future possibilities of enterprises, while the secondary market needs to verify whether these possibilities are gradually being realized.

Over the past few years, the 18A sector of Hong Kong stocks has undergone significant cyclical changes.

Lin Wei pointed out that the period from 2018 to 2021 was the stage where the dividends of the 18A system were released. At that time, the investment enthusiasm for innovative drugs was high, and the capital market gave Biotech a relatively high valuation expectation. Many companies obtained capital support in the early stages of research and development.

However, from 2022 to 2024, as global liquidity tightened, the innovative drug industry entered a period of adjustment. The market began to re-examine the supporting factors behind the previously high valuations. Issues such as pressure on medical insurance payments, homogenization competition in target areas, and insufficient commercialization capabilities gradually emerged, leading to a valuation regression for some innovative drug companies after they went public.

Since the beginning of 2025, although the overall trend has shown signs of recovery, the market evaluation system has undergone further iteration. Capital is shifting from focusing on "whether there is an innovative story" to "whether there is the ability to deliver value".

In terms of industry performance, a clear differentiation has emerged among Hong Kong stocks listed in 2018A. Some companies have garnered long-term market support through advancements in core products, breakthroughs in commercialization, and significant BD collaborations. Conversely, others are gradually facing valuation pressures due to a narrow product pipeline, increased cash pressure, and insufficient commercialization capabilities. Essentially, this differentiation reflects the capital market's shift from thematic investment to value investment.

02. Capital no longer solely pays for "innovation stories"

If lifting the ban is a liquidity test that 18A enterprises must face, then the deeper question lies in: after experiencing the repricing of the capital market, what exactly does a Biotech company rely on to gain long-term recognition?

In the primary market environment, the valuation of innovative pharmaceutical companies is largely based on future expectations. An innovative technology, a potential pipeline, or a vast market space can all serve as reasons for capital to place bets.

Lin Wei believes that the lifting of trading restrictions is essentially a process of value revaluation. What truly determines the performance of stock prices is whether the company has strong enough fundamentals to attract new investors to take on its shares. Ultimately, what the market ultimately focuses on is the company's ability to create value.

This value judgment is shifting from a single indicator to a more comprehensive evaluation of abilities.

Firstly, the market focuses on the certainty of a company's core assets, such as pipeline quality and iteration capability.

Over the past few years, the innovative drug industry has undergone a transformation from being driven by a single star product to competing on platform capabilities.

For biotech companies, while a core pipeline that has advanced to the late clinical stage is indeed crucial, the market is increasingly focusing on whether the company possesses the ability to continuously generate innovative assets. On the one hand, the clinical data, differentiated advantages, and future market potential of core products determine the current value of the company; on the other hand, the R&D platform and subsequent pipeline reserves determine the upper limit of the company's future growth.
Especially in the increasingly competitive field of innovative drugs, enterprises with a single product pipeline face greater uncertainty. Once clinical results fall short of expectations or the competitive landscape changes, enterprise valuation may quickly come under pressure. In contrast, enterprises with platform-based R&D capabilities and the ability to continuously advance product iteration are more likely to gain long-term capital recognition.

However, R&D capability is only one part of a company's value.

As the industry enters a more mature stage, the capital market has also begun to pay attention to whether enterprises possess the operational capabilities to navigate through cycles.

Lin Wei believes that judging whether a biotech company possesses long-term growth potential depends not only on its technological prowess but also on its underlying capital structure. The presence of strategic investors such as industrial capital and long-term funds among shareholders often indicates a more stable development outlook for the company.

Meanwhile, cash management capabilities are becoming increasingly important. In the past, the capital market was willing to pay for future potential; but now, investors are paying closer attention to whether companies can utilize their limited funds to complete key research and development milestones and support commercialization. Cash reserves, R&D investment efficiency, and capital usage planning are becoming important indicators for judging the long-term value of enterprises.

As more and more innovative pharmaceutical products enter the commercialization stage, the market is beginning to pay more attention to commercialization and BD delivery capabilities.

"The fact that BD has been able to secure quality down payments and milestones through authorization proves that the assets have gained global industry recognition. The commercialization capability has improved rapidly after the product launch, rather than solely relying on CSO cooperation," Lin Wei pointed out.

In 2025, the total annual transaction amount for China's innovative drug BD outbound licensing reached $135.655 billion, with an initial payment of $7 billion. As we entered 2026, the momentum continued unabated and even increased. In the first half of the year alone, the total amount of China's innovative drug outbound licensing transactions was approximately $110 billion, equivalent to 80% of the total for the entire year of 2025.

Although single-asset transactions still account for more than half, portfolio transactions with options have significantly increased, and platform cooperation and product portfolio are becoming standard practices.

Therefore, under the new valuation system, what the capital market is seeking is no longer simply enterprises with innovative concepts, but innovative pharmaceutical companies that truly possess capabilities in research and development, technology platforms, commercialization, and globalization.

03. IPO is not the end, the real test has just begun

For Biotech, which has just entered the capital market, listing is not an end, but a new beginning.

"Many biotech companies view IPO as 'financing completion' and 'successful listing', but for 18A enterprises, going public is just obtaining a ticket to the public market, and the real test has just begun," said Lin Wei.

In her view, the so-called "new starting point" encompasses transformations on four levels.

Firstly, the valuation logic has changed. The primary market focuses on growth potential, while the secondary market looks at pricing power. If the fundamentals cannot support high valuation, the risk of valuation inversion between the primary and secondary markets will be greatly magnified;

The financing logic has also shifted from the narrative logic of the primary market to the value verification logic of the secondary market. After listing, news such as clinical progress of core pipelines, data readouts, performance announcements, unlocking windows, and changes in key personnel can affect the company's pricing at every node. Furthermore, subsequent refinancing capabilities such as private placement and strategic allocation are highly dependent on the company's value verification.

The governance logic and business logic are also changing. At the governance level, after going public, the company shifts from being led by the founding team to compliant governance as a public company. Information disclosure, investor communication, shareholder interest balancing, and equity incentives all need to be examined openly under a magnifying glass. At the business level, the company needs to shift from being R&D-driven to being market-driven. The management team needs to simultaneously consider comprehensive capabilities such as cash flow management, commercialization, and channel building, and quickly address the team's shortcomings.

In the first half of 2026, 87 new stocks were listed on the Hong Kong Stock Exchange, but there are still hundreds of companies waiting in the queue. Faced with a crowded IPO pipeline and a more rational investment environment, companies have more and more issues to address before listing. Lin Wei suggested that Biotech should do their homework thoroughly before listing, "it's not just a decision to launch at the moment of listing".

She emphasized that any luck-based mentality of "getting on the train first and paying the fare later" may lead to substantial obstacles in the current penetrating regulatory environment - whether the listing path is compatible, whether the pipeline commercialization logic can be closed-loop, whether the ownership of intellectual property rights is clear, whether the compliance foundation is solid, whether the cash flow can support the next milestone, whether the fundraising purpose is clear, and whether the capital narrative is self-consistent. Any ambiguity in any of these links may hinder the listing process or even lead to an issuance failure.

04. Conclusion

In the future, China's innovative pharmaceutical industry will still have vast opportunities.

On the one hand, the global market is re-evaluating China's innovative drug R&D capabilities, and BD going global will continue to be an important growth direction; on the other hand, policy support, improved review efficiency, and the perfection of the industrial ecosystem will also provide long-term support for the industry's development.

However, at the same time, industry differentiation will intensify further. Capital will no longer foot the bill for all innovation stories, but will instead favor enterprises that can continuously create value.

For innovative pharmaceutical companies that have just entered the capital market, what truly matters is not short-term changes in market capitalization, but whether they can build the ability to navigate through cycles.

As Lin Wei said, "Tell fewer stories and deliver more results."

Ultimately, what determines the height of a company is not the attention it receives upon listing, but its ability to continuously create value in the public market.