Summary of Key Points
From mid-2024 to mid-2026, the biotechnology sector in the Hong Kong stock market (especially unprofitable innovative companies that comply with the HKEX 18A rules) has experienced a structural recovery: The index has risen significantly (the Hang Seng Biotech Index has increased by over 64%), the pace of financing and listings has accelerated, and integration with the global industry chain has deepened. At the same time, biotech companies have shifted from focusing on conceptual hype to strengthening their internal capabilities, with valuation logic shifting towards a greater emphasis on actual clinical value and global competitiveness.
Detailed Analysis
1. Recovery in Financing and Listings
The ability of the Hong Kong biotechnology sector to attract investment has significantly improved over the past two years. In the first half of 2026, a total of 87 companies listed on the Hong Kong Stock Market raised over HK$210 billion through IPOs, including 11 unprofitable biotech firms that raised HK$12.9 billion—almost matching the HK$13.7 billion raised by 16 similar companies in the entire year of 2025.
In simple terms, while there was a lack of interest in investing in and listing unprofitable biotech companies before, now not only is there capital flowing into the sector, but the pace is also accelerating, indicating that market confidence has returned.
2. Rapid Index Growth and High Valuation Recovery
The Hang Seng Biotech Index increased by 71% from mid-2024 to July 2025 and soared by 82% for the entire year of 2025, with its market value returning to 50%-60% of its peak in 2021. This rapid growth is due to mainland investors (southbound funds) continuously buying Hong Kong biotech stocks, as well as increased cooperation with international companies through business development (BD) initiatives, which has created opportunities for profit-making.
However, this growth comes with volatility; while prices can rise quickly, the overall upward trend is clear.
3. Deepening International Cooperation
Chinese biotech companies are no longer merely licensing out their technology but are engaging in more advanced forms of collaboration with multinational pharmaceutical corporations (MNCs), such as joint development and joint ventures. For example, they may now invest alongside MNCs in global clinical trials and share sales profits. Oncology drugs remain the most common area of cooperation, but non-oncology fields like autoimmune diseases and metabolic disorders are also seeing progress.
This indicates that Chinese companies' technological capabilities are recognized internationally, allowing them to negotiate on an equal footing with leading global firms.
4. Enhanced R&D Efforts with AI
Biotech companies are becoming more efficient in their research and development efforts, leveraging AI to screen potential drug candidates, predict drug effects, and even generate new molecular structures. This not only saves time and costs but also helps build competitive technical advantages (such as data assets).
5. Changed Valuation Logic
Investors no longer rely solely on hot topics (like mRNA or ADC technologies) for high valuations; instead, they focus more on clinical value and global execution capabilities:
- Reliable clinical data is essential, including multi-center trials, clear efficacy endpoints, and complete compliance documentation.
- Technological differentiation is key: products must be either first-in-class or best-in-class, or possess unique delivery methods to deliver drugs more effectively to target areas.
- Global presence is important, including the ability to conduct clinical trials and sell products overseas, as well as having bargaining power in negotiations with MNCs. Companies with data from global trials can negotiate higher prices in these collaborations.
In One Sentence
The Hong Kong biotechnology sector has evolved from relying on speculative concepts to building sustainable growth through genuine technical strength and global competitiveness. Not only is there increased investment and market momentum, but companies are also making tangible improvements in their technology and global capabilities.