The reevaluation of innovative drug stocks is happening right now—did you get in on this wave?

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Market Forecaster Weekly Call | Opportunities in Innovative Drugs Amid the Divergence of Multinational Pharmaceutical Companies and Uncovering Gems in HK and US Biotech Sectors

Futu Securities Weekly Market Insights: US-Iran Tensions Dominate Risk Pricing, Hong Kong Stocks Await Recovery Window

In this week's strategy sharing, Futu Securities analyst Joe Yu conducted a systematic review and outlook on global macro trends, as well as the movements of US and Hong Kong stocks.

Macroeconomic Situation

Following the US-Israeli attack on Iranian industrial facilities on March 27, Brent crude oil surged to around $110, deepening stagflation expectations. The US 10-year Treasury yield briefly touched 4.48%, while the dollar index broke through 100, both exerting downward pressure on US stocks. Expectations for Fed rate cuts this year have narrowed to just one instance; should negotiations collapse and conflict escalate, prospects for rate cuts will become even slimmer. However, the team judges that the overall trend still leans towards negotiations, with easing signals potentially emerging around May.

On the China front, profits of large-scale industrial enterprises grew by 15.2% year-on-year for January-February, demonstrating economic resilience, though the impact of high oil prices on cost pressures needs ongoing attention.

Regarding US stocks

Last week, the S&P 500 and Nasdaq fell by 2.2% and 3.23% respectively, with funds clearly shifting to defensive plays. The semiconductor sector saw a single-day drop of nearly 4.8%. Several foreign sell-side firms have lowered their year-end S&P 500 target to near 7000 points, but earnings from technology and industrial stocks remain solid, with AI demand continuing to support the TMT sector.

On the individual stock front, focus on small-cap CRM software companiesBRAZE, which is capturing market share from Salesforce and Adobe, with a 35% year-on-year increase in large customers, and has announced a $100 million share repurchase plan, offering high short-term upside potential.

Regarding Hong Kong stocks

Hong Kong stocks fell only 1.29% for the week, showing much stronger resilience compared to US stocks. The average daily turnover was approximately HKD 309.6 billion, with southbound funds accumulating net inflows of over RMB 25 billion. The current Hang Seng Index price-to-earnings ratio is about 11 times. In the short term, there is pressure from annual report disclosures and recent IPO lock-up expirations, but mainland capital inflows remain strong.The team believes that once tensions between the US and Iran ease, oil prices fall, and lock-up pressures clear, Hong Kong stocks are likely to rebound ahead of US stocks.

In terms of individual stocks, focus on newly listed companiesXun Ce (3317.HK), specializing in data infrastructure and AI Agent platforms. Strategic investors include Tencent and Alibaba Cloud Feng. Since its listing, the stock price has doubled. Going forward, monitor customer expansion and gross margin recovery.

Focus next week

March 31: China's official PMI data

April 3rd: US March non-farm payroll report (expected to add 48,000 jobs, unemployment rate at 4.58%)

2026 Global Biopharmaceutical Investment Outlook: Patent cliffs reshape competitive landscape, data reveals major year catalysts driving sector divergence

[Futu Securities Hong Kong and US Stock Pharmaceutical Industry Strategy Sharing Summary]

Since the beginning of 2026, global capital markets have continued to fluctuate amid macro uncertainties, while the biopharmaceutical sector is carving out a structural trend independent of tech stocks amidst this turbulence. Futu Securities analyst Freya Sun noted in a recent sharing session on Hong Kong and US pharmaceutical strategies that:The wave of mergers and acquisitions driven by the pressure of the patent cliff, the concentrated readouts of clinical data for innovative drugs, and the performance realization of Chinese companies' business development overseas are shaping up as the three core themes for biopharmaceutical investment in 2026.

I. US Pharmaceutical Sector: Balancing Between Safe Haven and Offense

The overall valuation of the US medical sector is currently significantly discounted compared to the S&P 500. However, unlike the sharp volatility seen in tech stocks, the S&P Select Healthcare Index (XLV), which consists primarily of large pharmaceutical firms and medical device companies, remains regarded as a natural defensive asset due to its robust cash flow. Freya Sun pointed out that during the process of deleveraging, selling pressure is expected to concentrate more on the technology sector, with the relative resilience of the pharmaceutical sector likely to persist.

However, within this defense lies an offensive opportunity.Current investment themes revolve around two paths: First, under the pressure of the patent cliff, targeting multinational pharmaceutical companies with strong acquisition intentions, having identified pipeline replacement solutions, and possessing commercialization capabilities; second, focusing on growth-oriented companies with rich pipelines, significant revenue growth potential, and key clinical data readouts scheduled for 2026.

Following these two paths, multinational pharmaceutical enterprises present four distinctly different scenarios—

Eli Lilly and Co$Eli Lilly and Co (LLY.US)$is a typical representative of high growth and high valuation.Sales of GLP-1 injectable tirzepatide continue to grow strongly, and oral GLP-1 is expected to receive approval for market launch in April 2026, becoming the company's second growth curve. With pipeline reserves in Alzheimer’s disease and immunology, Eli Lilly and Co’s forward P/E ratio is approximately 27 times, ranking at the top among major pharmaceutical companies. However, high valuation is a double-edged sword—when market sentiment is fragile, the magnitude of pullbacks tends to be larger. Additionally, the potential impact of tensions in the Strait of Hormuz on specialty plastic packaging materials and cold chain logistics, along with ongoing pricing pressures from drug policies in both China and the US, constitute short-term disruptive factors.Freya Sun believes that although short-term fluctuations are inevitable, Eli Lilly and Co remains the preferred target among major pharmaceutical enterprises in the long term.

AbbVie$AbbVie (ABBV.US)$has charted a textbook-style patent cliff recovery curve.Its core product, Skyrizi, has captured a 60% market share among patients with ulcerative colitis, while its share of new first-line patients is as high as 75%, essentially completing the handover from its predecessor, Humira. More noteworthy is the growth potential: Skyrizi's penetration in Crohn’s disease remains extremely low, and Upadacitinib has head-to-head defeated standard therapies across multiple indications such as rheumatoid arthritis and atopic dermatitis, demonstrating superior safety and efficacy.The simultaneous recovery in fundamentals and valuation has made AbbVie the standout performer among companies 'emerging from the patent cliff.'

Johnson & Johnson$Johnson & Johnson (JNJ.US)$and Roche$ROCHE HOLDING AG (RHHBY.US)$represent another type of opportunity—companies that have not yet produced blockbuster products but possess ample M&A resources and strong safety cushions as reserve players.Johnson & Johnson boasts dual pharmaceutical and medical device matrices, with approximately $200 billion in cash and equivalents on its balance sheet, and an AAA credit rating. Whether through debt financing or direct cash deployment, its acquisition capabilities are unquestionable. Roche, driven by a dual engine of innovative drugs and diagnostic testing, maintains a credit rating above A-grade. For these companies, future stock price catalysts lie in whether they can find new pipelines via acquisitions to replace products affected by the patent cliff and achieve commercialization in the short term.

As for the fourth category of pharmaceutical companies whose fundamentals remain under pressure and who are struggling in the short term, Sun Bihan cautioned about the risk of value traps.

II. US Biotech: Easing rate cut expectations, but M&A logic persists.

If the investment thesis for large pharmaceutical companies revolves around 'who can withstand the patent cliff,' then the beta opportunities in the biotech sector are primarily driven by both the rate-cut cycle and pharmaceutical M&A demand.

Recently, market expectations that the Fed may cut rates only once this year, or even raise rates in a stagflation scenario, have put noticeable pressure on the biotech sector.However, Sun Bihan emphasized an undeniable structural fact: the patent cliff is an unavoidable issue for multinational pharmaceutical companies, meaning the willingness to engage in M&A will persist.Against this backdrop, biotech companies occupying popular targets and possessing high scarcity still have the potential to deliver excess returns.

2026 is also expected to be a major year for clinical data readouts in the small nucleic acid and oncology ADC fields, with dense catalysts for the sector. Sun Bihan has identified the most noteworthy directions across four dimensions: KRAS-targeted drugs, MASH (metabolic dysfunction-associated steatohepatitis), small nucleic acid drugs, and rare diseases.

The recent focus in the KRAS-targeted drug sector is Revolution Medicines$Revolution Medicines (RVMD.US)$。KRAS gene mutations occur in over 90% of pancreatic cancers, approximately 40%-50% of colorectal cancers, and about 30%-36% of non-small cell lung cancers, covering the three most prevalent solid tumors. Revolution's core product has 'best-in-class' potential, having received FDA Breakthrough Therapy designation and Priority Review vouchers. There were previous reports that Merck & Co had expressed interest in acquiring the company for $28 billion to $32 billion (although no deal was reached), corresponding to a price-to-sales ratio of over 3x, placing its valuation in a reasonable range. Institutional forecasts predict peak sales of $7.5 billion to $9 billion for its use in pancreatic cancer and non-small cell lung cancer.The likelihood of an acquisition remains relatively high.

Madrigal Pharmaceuticals in the MASH field$Madrigal Pharmaceuticals (MDGL.US)$enjoys an absolute first-mover advantage.Its core product is currently the world’s only approved MASH-targeted drug, with patent protection lasting nearly 20 years. Analysts predict peak sales of approximately $5.7 billion just within the F2-F3 patient population. The company is actively advancing its Phase F4 clinical trials — if positive data emerges by 2027, market opportunities could potentially double.

The small nucleic acid drug sector is undergoing a historic transition from rare diseases to chronic conditions.Benefiting from recent breakthroughs in delivery technology, small nucleic acid drugs are highly anticipated in the market due to their advantages such as high safety, low dosing frequency, and relatively easier development. Among the two mainstream technological approaches currently, siRNA (represented by Alnylam)$Alnylam Pharmaceuticals (ALNY.US)$) has broader long-term prospects, but the ASO route (represented by Ionis) offers stronger short-term certainty—its Apo-C3 targeted small nucleic acid drug has been approved for specific hypertriglyceridemia, and in February 2025, it was also accepted for severe hypertriglyceridemia indications.The key differentiating advantage lies in this: no other drugs in the same field can overcome the risk of acute pancreatitis, whereas Ionis’s product can reduce the risk of acute pancreatitis episodes by 85%, making it almost unique in the current competitive landscape.

Scholar Rock in the rare disease field$Scholar Rock (SRRK.US)$is a classic story of turning around from a difficult situation.The company's core pipeline is a selective myostatin inhibitor for the treatment of spinal muscular atrophy (SMA), with clinical data already released showing positive results. Previously, due to non-compliance of production facilities, the FDA approval process was temporarily suspended. However, the turning point has arrived – by the end of February 2026, the plant had fully resumed normal operations, and an FDA re-inspection is expected shortly. Once passed, the company can resubmit its BLA within days. European approval is projected to land around mid-2026.Sun Bihan believes that this stock has already significantly reduced risk and is now at the tipping point of a turnaround, with a high probability of approval.

Third, Hong Kong-listed innovative drug companies: The year of BD realization has arrived, with dual catalysts driving sector revaluation.

Unlike the defensive logic seen in US stocks, Hong Kong-listed innovative drug companies have recently experienced a significant rebound. This momentum stems from three converging drivers:First,Compared to the technology sector, innovative drug companies exhibit more reasonable capital expenditures and a clear trend of profit recovery. Many firms, after experiencing a trough in profits, are seeing substantial earnings growth in 2025, along with increased attention to shareholder dividend returns.Secondly,With the upcoming AACR conference, several companies are anticipated to release major clinical data, creating expectations for positive outcomes.Thirdly,And most crucially –2026 will become the inaugural year for China’s innovative drug industry to realize BD performance.

Innovative drug companies that signed BD agreements last year will see concentrated payments from upfront fees and milestone nodes this year, substantially boosting revenue and cash flow. This transition from 'expectation' to 'realization' forms the strongest basis for revaluation in Hong Kong-listed innovative drug stocks.

Sun Bihan systematically categorized the innovative drug targets in Hong Kong stocks into three major types——

Clinical data-driven type

Akeso$AKESO (09926.HK)$is the top recommended target in this category.The core product, Ivonescimab (AK112), is a PD-1/VEGF bispecific antibody that previously outperformed the global "blockbuster" Keytruda (K药) in head-to-head clinical trials, drawing significant market attention. By 2026, its global clinical data is expected to see major progress — the readout of overall survival and progression-free survival data will directly determine the product’s global market expansion pace. Meanwhile, Akeso's self-developed ADC pipeline and combination therapy with bispecific antibodies will also be fully rolled out this year,The combination strategy of IO 2.0 and ADC 2.0 is being viewed optimistically by the market. If the data is positive, it will further expand the company’s valuation ceiling in the field of cancer treatment.

Kelong Botai$SKB BIO (06990.HK)$Following closely behind.The BLA for its core product SKB264 combined with Keytruda for non-small cell lung cancer is about to be submitted, and the Phase III clinical trial results in China will be announced at the 2026 ASCO conference. Despite revenue falling short of expectations in 2025 due to inventory adjustments under new National Reimbursement Drug List pricing (with annual sales of RMB 542 million), management provided clear guidance that product sales would at least double year-over-year in 2026. In the breast cancer field, first-line triple-negative breast cancer overall survival data is expected to be released in 2027.As a product showing excellent head-to-head performance on the PD-L1 target for non-small cell lung cancer, the market is likely to assign it a higher valuation.

BD partnership value realization type

Innovent Bio$INNOVENT BIO (01801.HK)$is one of the most notable targets for outbound licensing deals.In early 2026, Innovent Bio reached a strategic collaboration with Eli Lilly and Co totaling up to USD 8.85 billion, including an upfront payment of USD 350 million and potential milestone payments reaching up to USD 8.5 billion. The collaboration focuses on the autoimmune field, with Innovent leading Proof-of-Concept (POC) validation and the domestic market, while Eli Lilly handles global commercialization – this collaboration's benefits have already partially reflected in the stock price, but Sun Bihan believes the greater potential lies in the product pipeline.

Innovent's PD-L1/IL-2α bispecific antibody is expected to deliver head-to-head registration data for first-line treatment of non-small cell lung cancer and colorectal cancer by 2026; its CLDN-targeted ADC has entered global Phase III clinical trials, with a potential market size exceeding USD 8 billion. Clinical data will further solidify the company’s competitiveness in the ADC space. In the metabolic field, although its peptide product faces fierce competition, the long-term trend of the GLP-1 market transitioning from pharmaceuticals to the broader health sector over the next decade still provides room for growth.

From a valuation perspective:The domestic commercial portion, valued at 2.5 times price-to-sales ratio with revenue guidance of CNY 20 billion by 2027, implies a baseline valuation of approximately HKD 55 billion; overseas business development (BD) royalties are separately valued at around USD 10 billion. Even after applying a discount for potential commercialization risks, Innovent's potential value remains at the CNY 100 billion level.The current share price still has over 15% upside potential.

Sino Biopharm$3SBIO (01530.HK)$The investment logic is equally clear.Its core product, 707 (PD-1/VEGF bispecific antibody), competes with Akeso Biopharma and Summit Therapeutics, with peak global sales potentially reaching USD 6 billion to USD 10 billion. More importantly, Pfizer has paid up to USD 4.8 billion in milestone payments and agreed to double-digit royalty sharing – overseas earnings from just this one product could reach CNY 60 billion to CNY 90 billion. New data expected to be released at the 2026 ASCO and AACR conferences supports high expectations.The stock also has more than 15% upside potential.In the PD-1/VEGF bispecific antibody race, 3SBio's progress is already at the forefront of the industry.

CDMO platform-oriented

Wuxi XDC$WUXI XDC (02268.HK)$As the absolute leader in the ADC outsourcing field, it is accelerating the expansion of production capacity.The company's capital expenditure guidance for 2026 is RMB 3.1 billion, a significant increase from RMB 1.2 billion in 2025, primarily allocated to the Suzhou Bio-Xlink project (the integration project following the acquisition of Dongyao Pharma). Capacity is expected to double by 2029, with the Singapore site becoming a key hub.

The strategic significance of this acquisition lies in the fact that Wuxi XDC’s previous business focus was on the pre-IND stage. However, once pipelines cross the IND milestone and enter clinical trials, the contract value of process validation and commercial production will increase exponentially. The acquisition of Dongyao Pharma enables the company to cover the entire chain of services before and after IND, effectively expanding order volume, increasing profit margins, and securing higher service premiums.Against the dual backdrop of a major year for ADCs in 2026 and the acceleration of innovative drug exports, Wuxi XDC’s order growth expectations warrant an optimistic outlook.

Fourth, near-term catalyst: AACR conference to become a sector bellwether

The AACR conference, scheduled to take place in California, USA, from April 17 to 22, represents the most important catalyst window for the biopharmaceutical sector in the near term. Sun Bihan suggests focusing on three key areas:First, the latest clinical progress in the PD-1/VEGF bispecific antibody track; second, whether there are any breakthrough data reads in the KRAS-targeted drug space; third, clinical data on ADC and bispecific ADC combination therapies.Several leading Chinese ADC companies, including Innovent Bio, will disclose significant clinical results at the conference. Any data surpassing expectations could directly catalyze sector performance.

Summary

The global biopharmaceutical investment landscape for 2026 has become clear:Large US-listed pharmaceutical companies are focusing on pipeline acquisitions through mergers and acquisitions as their core strategy, while the biotech sector is using the scarcity of popular targets as a screening criterion. Meanwhile, innovative drugs listed in Hong Kong are entering a dual-catalyst cycle driven by BD performance realization and global Phase III clinical data reads. The intersection of these three trends presents the most certain investment opportunities for the year.

Investors are advised to focus on three types of targets:Companies with definitive data insights, companies with clear BD revenue realization timelines, and companies with global commercialization capabilities and prospects.Against the backdrop of increasing sector divergence, the importance of in-depth research and precise stock selection will far outweigh simple sector beta plays.

Equal-weight strategy enters a golden window: E Fund International elaborates on the logic behind the global biopharmaceutical index layout

[Futu Securities Hong Kong and US Stock Pharmaceutical Industry Strategy Sharing Summary - Index Investment Section]

When it is difficult to grasp individual stock movements and industry volatility becomes daunting, can index investing provide a more stable participation path for the highly elastic biopharmaceutical track? At a recent Futu Securities pharmaceutical strategy sharing session focused on Hong Kong and US stocks, Feng Di, an index researcher from E Fund International, provided a clear assessment:The first half of 2026, particularly before the May ASCO annual meeting, represents a golden window for positioning an equal-weight biopharmaceutical index strategy.

Feng Di discussed the biopharmaceutical index jointly developed by E Fund and Solactive$EFund Biophar ETF (03186.HK)$It provides a systematic elaboration from three dimensions: global industry trends, index compilation advantages, and investment timing.

I. Four major industry trends anchor long-term certainty

Population aging represents the most fundamental rigid demand.Feng Di first extended the perspective to a 50-year time scale—from 1974 to 2024, the proportion of the global population aged 65 and above surged from 5.2% to over 10%, nearly doubling. Data from Japan's Ministry of Health, Labour and Welfare further corroborates this trend: the growth rate of medical expenses for people aged 65 and above significantly outpaced that of the working-age group between 15 and 64. Population aging is not a short-term theme but a long-cycle certainty driving the growth of the global biopharmaceutical sector.

Technological accumulation is on the verge of a leapfrog breakthrough.Antibody-drug conjugates (ADCs) are seen as the core focus for Hong Kong-listed biopharma in 2026, with the potential to systematically improve both the survival duration and quality of life for cancer patients. Meanwhile, in the US stock market, cutting-edge technologies such as gene editing, RNA therapies, and cell therapies form another major innovation driver. Feng Di pointed out that this is not a short-lived trend but a systematic leap following a decade of technological buildup.

Artificial intelligence is profoundly reshaping the efficiency boundaries of drug discovery.Take Insilico Medicine, which listed on the Hong Kong Stock Exchange in 2024, as an example. AI empowerment is primarily reflected in two key stages: First, in the target discovery phase, where traditional laboratory screening could take years, AI can compress the cycle to weeks by analyzing millions of patents, clinical data, and research papers around the clock. In Insilico Medicine’s idiopathic pulmonary fibrosis project published in Nature, the target discovery time was shortened from four to five years using traditional methods to just 18 months. Second, during the molecular design and optimization phase, where conventional methods require synthesizing thousands of molecules over two to three years, AI optimization may reduce this to synthesizing only dozens or one to two hundred molecules to lock in the target compound.The time required for drug discovery and preclinical research can be reduced by 70% to 90% overall.

The US and China markets have formed a highly synergistic division of labor ecosystem.US-listed large pharmaceutical companies leverage their robust commercial channels and financial strength, offering diverse pipelines and strong risk resistance. Meanwhile, Chinese and Hong Kong-listed biopharma enterprises hold significant advantages in specific cutting-edge targets such as ADCs. From a global perspective, listed companies from both countries excel in different areas, presenting a highly complementary pattern in the industry chain division of labor.

Additionally, Feng Di specifically noted that although the global medical insurance payment system faces systemic spending pressures, high-value innovative drugs that can significantly improve patient survival durations and reduce complications are still supported by payers willing to invest in innovation. For instance, in China, innovative drugs included in national medical insurance negotiations from 2017 to 2019 saw significant year-on-year increases in overall sales after inclusion through a "volume-for-price" strategy.

Second, Index Compilation: Why is the equal-weighting strategy more suitable for biopharma?

Above the industrial trend, Feng Di provided a detailed breakdown of the Solactive Biomedical Index's compilation logic – this is currently one of the rare biomedical indexes in the market that covers both the Hong Kong and US core pharmaceutical markets.

In terms of stock selection rules,The index requires that the average daily trading volume of constituents over the past six months should not be less than 3 million USD, and the industry classification must fall under the RBICS biopharmaceutical sector. A maximum of 30 stocks from Hong Kong shares can be included, while at least 70 stocks from US shares will be incorporated, totaling approximately 100 constituents, which ensures a relatively sufficient number of components.

The most core design feature is equal weighting.Feng Di divided the compilation methodology of the biomedical index into two major schools: market-cap weighting and equal weighting. The former’s rationale is to bet on industry leaders, believing that the strong remain strong – leading companies have more stable cash flows, richer pipelines, and stronger resistance to single R&D setbacks or interest rate cycles. The Nasdaq Biotechnology Index (NBI) is a typical representative.

However, the biomedical industry has a distinct characteristic that sets it apart from other industries: explosive growth often comes from small and medium-sized companies.The conclusion of a BD transaction or a breakthrough in Phase III clinical data could potentially lead to a significant valuation leap for a small or medium-sized Biotech company in a short period. If investors wish to benefit from such innovative breakthroughs through high elasticity, an equal-weighting strategy grants small-cap stocks the same weight and contribution to index elasticity as large-cap stocks, making it a more ideal investment tool.

Historical backtest data shows that this design has indeed delivered significant outperformance.Since its base date, the annualized return of the Solactive Biomedical Index has been approximately 14%, significantly outperforming the S&P Biotech Select Index at 8.8% and the Hang Seng Biotech Index at about 1%, while overall volatility has been relatively more controllable.High elasticity is precisely the most distinctive feature that the equal-weighting strategy imparts to this index.

Third, investment timing: the period before May is the golden window for deploying an equal-weight strategy

After clarifying the advantages of the index's construction, Feng Di focused on the most practical aspect: determining the investment timing.

The industry’s prosperity has entered a clear upward recovery cycle.Whether looking at the recovery in biopharmaceutical financing data in recent years or the dual validation from both primary and secondary market performances, the market is in an obvious upswing. Last week, the innovative drug sector in Hong Kong stocks was ignited due to earnings reports from companies like Innovent Bio, serving as a vivid reflection of this trend.

The火爆 state of the BD market provides more robust data support.According to data from the National Medical Products Administration, in just the first three months of 2026, the total value of China's innovative drug BD transactions has approached $60 billion, surpassing 40% of the total for all of 2025 and nearly reaching the level of the first half of last year. The dual validation of BD data and clinical data together points to a 'flourishing' sector dynamic—This is precisely the market characteristic where the equal-weight strategy shows its greatest advantage.

The external liquidity environment also provides support.Feng Di frankly admitted that there is some concern in the market about the Federal Reserve raising interest rates, but his core judgment is this: while the pace of rate cuts may slow down, the overall easing cycle will not reverse. Based on historical backtesting, examining five easing cycles—in 1995, 1998, 2001, 2007, and 2019—from the first rate cut to the first rate hike, the biomedical indices of US stocks, Hong Kong stocks, and A-shares performed excellently in terms of success rate and gains.The combination of falling interest rates, ample liquidity, and favorable forward-looking data creates a triple resonance that forms the core logic for deploying an equal-weight strategy at this moment.

Feng Di particularly emphasized the upcoming catalyst window—The AACR conference in April and the ASCO annual meeting at the end of May are periods of concentrated disclosure for clinical data on innovative drugs, especially for innovative drug data listed in Hong Kong.Multiple companies, including Kelun Biotech, will present Phase III clinical data at ASCO. The market generally expects positive data performance. At this moment, with the data yet to be released and the market pricing in expectations, it is the optimal time for positioning.

Of course, Feng Di also provided investors with a hint for strategy switching:If the market eventually enters a tightening cycle with no rate cuts or even rate hikes, investors should shift to a market-cap-weighted biopharmaceutical index strategy to benefit from the stronger defensive protection of leading enterprises. However, for now—with policy impacts from procurement and industry anti-corruption already past, innovative drugs going global entering an explosive cycle, and data-driven catalysts imminent—an equal-weight strategy is the better choice.

IV. Q&A Highlights: Liquidity Assurance, AI Drug Development Inclusion, and Strategy Flexibility

During the subsequent Q&A session, Futu Securities analyst Sun Bihan followed up on three core issues of concern to investors.

Regarding the weight allocation between Hong Kong and US stocks and liquidity risk:The index rule sets a maximum of 30 Hong Kong-listed stocks and a minimum of 70 US-listed stocks, meaning that if there are insufficient Hong Kong-listed stocks meeting liquidity thresholds, they will automatically be supplemented by US-listed stocks. Feng Di revealed that the core consideration behind setting the weighting structure at approximately 65% for Hong Kong stocks and 35% for US stocks is that the index plans to go through the Stock Connect mechanism in the future, enabling mainland Chinese investors to participate. The Stock Connect rules require that Hong Kong stocks account for no less than 65% of the total.

On the inclusion timing for AI drug development targets:Due to the index's six-month liquidity review period requirement for constituent stocks, AI pharmaceutical companies like Insilico Medicine that were listed on the Hong Kong stock exchange later have not yet been included. However, Feng Di predicts that based on current trading activity and market enthusiasm, Insilico Medicine is highly likely to be added to the index during the regular rebalancing on the third Friday of September.

Regarding strategy adjustments in a rate hike scenario:As a passive index product, its compilation methodology cannot flexibly switch to market-capitalization weighting. Feng Di frankly stated that an index is essentially a tool—when investors believe the larger interest rate cut cycle is still ongoing and favor high growth potential, they choose the equal-weight strategy; if it is clearly determined that the market will enter a rate hike cycle, one should shift to market-capitalization weighted biopharmaceutical index products for risk protection.

In summary,The core message conveyed by Feng Di on behalf of E Fund International was clear and straightforward: global biopharmaceuticals are at the intersection of three major forces—long-term demand driven by aging populations, efficiency revolutions empowered by technological leaps and AI, and a highly collaborative industrial division between China and the US. In the biopharmaceutical track, where individual stock selection is extremely challenging, index investing offers a more disciplined participation path. And during the current window of rising industry momentum, booming BD transactions, and upcoming dense clinical data reads,the equal-weight strategy, with its ample exposure to small and medium-sized innovative companies and higher elasticity, is facing its most favorable deployment timing.

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