Since 2026, the global innovative pharmaceutical industry has shown a structural recovery.

In the first quarter, the overall S&P 500 healthcare index fell by about 5%, but the sub sectors showed differentiation. The biotechnology and pharmaceutical sub sectors rose by about 2% against the trend, and multinational pharmaceutical companies were active in mergers and acquisitions.

The international role of China's innovative drugs continues to rise: ADC, dual antibody and other fields have attracted global attention, and multiple heavyweight BD transactions with down payments exceeding 100 million US dollars have been intensively implemented in the first half of the year. However, during the same period of rapid progress in the industry, the innovative drug sector in Hong Kong stocks continued to decline.

The Hang Seng Biotechnology Index has been continuously declining since September 2025, with a deepening correction in the second quarter of 2026 and an accelerated decline in June. The Hang Seng Index has performed relatively steadily during the same period, and the explanatory power of systemic risks is clearly insufficient.

What's wrong with innovative drugs in the Hong Kong stock market?

01、Elephant's Dilemma

In this round of adjustment, the transformation of the growth engine of traditional top pharmaceutical companies has become the core proposition. The market's evaluation focus on them has shifted from revenue scale to transformation efficiency and the pace of realizing innovative achievements.

Chinese biopharmaceuticals are a typical example of this process.

As a leading enterprise in the era of generic drugs, Chinese biopharmaceuticals have accumulated a nationwide sales network and a revenue base of billions. With the basic clearance of the impact of centralized procurement on the generic drug sector, its innovation transformation has entered a substantive stage: subsidiaries such as Zhengda Tianqing continue to promote innovative drug layout, and varieties such as anlotinib have made stable contributions.

The 2025 financial report shows that the proportion of innovative drug revenue in China's biopharmaceutical industry has risen to 48%. However, since the beginning of 2026, its stock price has fallen by about 30%, reflecting that the market is still observing whether the sales system can complete the ability transfer from scale coverage to academic promotion.

Hansen Pharmaceuticals, which has experienced a decline comparable to that of Chinese biopharmaceuticals, is deeply tied to the lifecycle of its core products.

Amitinib, as a representative of domestically produced third-generation EGFR-TKI, has supported the valuation logic of Hansen Pharmaceuticals' transformation from generic drugs to innovative drugs. However, the sustained strength of Axitinib and the entry of competitors such as Fumetinib have led to a situation where multiple products compete on the same stage in this track. Although Hansen Pharmaceuticals has laid out hepatitis B, metabolism and other fields, it is still in the promotion stage, and it still needs time to commercialize.
Shiyao Group is in a transitional period of switching between major products.

As a landmark product in the nervous system sector of Shiyao Group, Enbipol has long held an important share of drug revenue, with annual sales approaching billions of yuan. Although this variety has not yet been successfully marketed as a generic drug due to the barriers built by subsequent patents, its sales growth rate has slowed down in recent years.

At present, Shiyao Group has made layout in new platforms such as mRNA vaccines and ADCs, and has also launched BD cooperation with multiple multinational pharmaceutical companies. Its stock price has relatively stable fluctuations, with a decline of about 5% since the beginning of the year.

Overall, these top pharmaceutical companies that started with generic drugs or traditional large varieties are undergoing a shift in the market evaluation coordinate system. The revenue volume and cash reserves are still the chassis advantages, but investors' attention has shifted more towards the clinical advancement speed of innovative pipelines, commercial realization ability, and profit quality in the normalized environment of medical insurance negotiations and centralized procurement.

02、Biotech's Speed of Life and Death

If the troubles of big pharmaceutical companies are the old and new rupture of growth narratives, Biotech is facing a more brutal proposition: even if it has made achievements in innovative drugs, the market is re pricing with far more stringent standards than in the past. The hierarchical differentiation within this group is far more worthy of examination than the single dimension of 'how much it has fallen'.

Kangfang Biotechnology is the most impactful case in this round of adjustment.

As a leader in the commercialization progress of biotechnology, Kangfang Biotechnology's Ivoxidan antibody and Cardonimumab have been approved and included in medical insurance, and the company's revenue volume ranks among the top in the "18A" sector. But after the release of ASCO data at the end of May, the stock price opened high and fell low, and the market value evaporated by over 10 billion yuan within a few days.

Market discussions have focused on several dimensions: the actual impact of medical insurance negotiations on core product pricing and profit margins, progress in clinical data for subsequent indications expansion, and the overall competition in the PD-1/dual antibody track squeezing long-term growth space.

The testing standards faced by Kangfang Biotechnology are shifting from "whether there are products on the market" to "whether the products can continue to contribute to high-quality growth", and profitability and pipeline thickness have become more concerned indicators.

The fluctuation of Cornerstone Pharmaceutical highlights the high sensitivity brought by pipeline concentration.

The PD-1/VEGF/CTLA-4 tertiary antibody CS2009, due to positive early clinical data, once pushed the stock price of Cornerstone Pharmaceutical up. After some indicators changed in the subsequent updated data, the company's stock price immediately adjusted significantly, falling by about 23% within six months.

It is not difficult to see that the market has given higher price elasticity to clinical data fluctuations in biotech, which is highly dependent on a single or few pipelines. The fluctuation of data in early research and development was normal, but in the current environment, the market's tolerance for such uncertainty has significantly decreased.

The predicament of Yiteng Jiahe (formerly Jiahe Biotechnology) points to the overall decline of the biosimilar drug market, with its stock price nearly halving within six months.

The core product of the company, Yingfuli Xidan Kang, was approved for listing in 2022 and later entered centralized procurement, with actual returns far below expectations. With the inclusion of Bevacizumab, Rituximab and other varieties in the national biopharmaceutical alliance procurement, the profit margin of this track has further narrowed.

Industry analysis suggests that biosimilars are transitioning from high margin varieties to low profit varieties, and the commercial returns of related companies are facing reassessment. Companies such as Fosun Pharma are also under similar pressure, with their stock prices continuing to decline since 2026 and their market value significantly shrinking from its peak. By the end of 2025, Jiahe Biotechnology and Yiteng Pharmaceutical will complete a reverse merger and rename themselves as "Yiteng Jiahe", becoming the first case of a reverse merger of an 18A unprofitable biotechnology company in the Hong Kong stock market.

The trajectory of Geli Pharmaceutical provides another observation. This enterprise, which used to be characterized by introduction and rapid promotion, has significantly reduced the market space of its core products in the hepatitis C field due to the increase in cure rates and the influx of competitors, with a decline of about 30% in six months.

The Fast follow model itself has been re priced by the market - CDE's review threshold for me too drugs continues to increase, and it is difficult to obtain approval based solely on "not the worst" clinical data. Companies that rely on this path are facing fundamental challenges in their research and development. Geli is currently shifting its focus to the field of weight loss drugs and laying out GLP-1 related areas, but the clinical validation and commercialization prospects of the new pipeline still need time to gradually become clear.

Under the dual pressure of medical insurance cost control and stock competition, the value ceiling of the me too pipeline has been clearly foreseen, and the market valuation of such assets is infinitely approaching zero.

03、survival ability discount

Extending the timeline further, from 2024 to the first half of 2026, every round of fluctuations in the innovative pharmaceutical sector of the Hong Kong stock market has left its mark on this transformation. The downturn in 2024 was closely linked to the Federal Reserve's interest rate hike cycle, but by 2026, simply using the US China interest rate differential to explain the volatility of biotech has become largely ineffective.

No one asks' when will the macro be loose? 'The real focus of the market is on the same thing. If this company does not have capital market support and relies solely on sales or business development, how long can it survive?

Looking back at the bull market cycle from 2020 to 2021, investors were eager to ask whether the target was new enough and whether the team background was glamorous. Loose liquidity made forward thinking pricing dominant. Nowadays, the market is shifting from the "imagination premium" to the "survival ability discount".

Cash reserves have replaced target novelty. According to calculations, assuming the financing window is closed, only about 40% of the 18A companies can sustain themselves with existing cash for more than two years, and more than half of the companies may face a survival crisis in the short term. The cases of accelerated sharp decline due to cash flow shortages since the beginning of this year have repeatedly confirmed this judgment.

The weight of commercialization capability increases equally. After the normalization of centralized procurement and medical insurance negotiations, going public is no longer equivalent to success. Whether the product can generate stable revenue in a real payment environment has become the core variable determining valuation. Regardless of the chosen path, verifiable sales data must be submitted in a real medical insurance payment environment.

Endorsement by multinational pharmaceutical companies remains the most direct certification in the era of globalization. According to the statistics of the Medical Magic Cube, the total amount of BD transactions for innovative drugs in China will once again exceed 50 billion US dollars in 2025, but the top 10 transactions account for over 70% of the market share, with a concentration rate reaching a historical high. A BD transaction with a high down payment is the most hardcore pricing anchor for the global competitiveness of pipelines, and without such endorsement, the valuation of pipelines will face continued uncertainty and discount. This trend is still strengthening in the distribution of BD transactions in the first half of 2026.

The divergence between long and short positions is particularly intense as a result. The bears are closely monitoring internal competition, geopolitical risks, and payment ceilings, while the bulls see a different picture. Industry insiders have pointed out that the market value of some biotech companies has fallen below their cash on paper, indicating a value gap from the perspective of asset reset.

The pace of industrial innovation has not stopped, and the tension between valuation lows and innovation highs has become the root of divergence. And the divergence itself is a signal of the true operation of the market's survival of the fittest mechanism. After the collapse of the US biotechnology foam in the 1990s, a generation of giants such as Amgen and Gilead were born. Similar screening mechanisms are being implemented in the Chinese market.

Reference article:
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