Another major business development deal in innovative drugs has been announced. Following its seventh collaboration with Eli Lilly, INNOVENT BIO announced its second significant partnership with a multinational corporation this year on May 29. The company has entered into a collaboration with Pfizer for oncology drugs, with a total transaction value of $10.5 billion.
According to the announcement, INNOVENT BIO and its subsidiaries have signed a global strategic licensing and collaboration agreement with Pfizer. The two parties will conduct in-depth cooperation on 12 early-stage and pioneering oncology research projects with breakthrough potential, covering multiple novel and differentiated antibody-drug conjugates and multi-specific antibodies.
Under the agreement, the upfront payment for this collaboration is $650 million, with milestone payments potentially reaching up to $9.85 billion, bringing the total transaction value to $10.5 billion. Additionally, some projects will involve double-digit sales royalties or profit-sharing arrangements.
The secondary market responded swiftly. In early trading on May 29, INNOVENT BIO's stock opened significantly higher, with gains approaching 10% at one point. As of the latest update, the stock was up 7%.
In terms of the sector, the Hong Kong Stock Connect Innovative Drug segment opened higher but fluctuated and retreated, dragged down by declines in stocks such as BeiGene, Hansoh Pharma, and RemeGen. The Huabao Hong Kong Stock Connect Innovative Drug ETF (520880), which focuses 100% on innovative drug R&D, rose over 1% initially but was consolidating below the waterline as of the latest update, with its on-market price continuing to explore new historical lows. Yesterday, the ETF experienced a significant decline of 3.45%.
Analysts note that rumors circulating yesterday regarding restrictions on the overseas licensing of China's core technology business development deals have been debunked today. In fact, multiple companies in the industry have indicated that pipeline authorizations for innovative drugs are unaffected. There are no fundamental negatives for innovative drugs, with policy support, low valuations, strong overseas momentum, and an inflection point in performance. Investors are advised not to fear the darkness before dawn and maintain a firm positive outlook.
It is worth noting that the Hong Kong Stock Connect Innovative Drug segment has been in a phase of adjustment since September last year, lasting over eight months. The benchmark index for the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) has declined by more than 33% during this period. The current position may be nearing the bottom of this adjustment cycle, highlighting the value of allocation.
Historical annual returns for the Hang Seng Hong Kong Stock Connect Innovative Drug Select Index from 2021 to 2025 were: -22.72%, -16.48%, -19.76%, -14.16%, and 66.32%. Past performance does not guarantee future results.
To invest in core innovative drug assets at low levels, consider these two key investment tools: For pure exposure to innovative drugs, the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) provides 100% allocation to innovative drug R&D companies, with its top ten holdings accounting for over 70% of the portfolio, highlighting its focus on industry leaders. Its underlying assets are Hong Kong-listed stocks, offering high volatility and T+0 trading. For investors seeking lower volatility, the Huabao Pharmaceutical ETF (562050) offers a unique allocation of "70% innovative drugs + 30% traditional Chinese medicine," combining the high growth potential of innovative drugs with the high dividend yields of traditional Chinese medicine. It is a rare offering in the market.
Note: ETF funds do not charge sales service fees. When subscribing for or redeeming fund units, subscription and redemption agents may charge a commission of up to 0.5%, which includes fees charged by stock exchanges and registration institutions. For detailed fund fee structures, please refer to the respective fund legal documents.
Risk Warning: The index constituents mentioned are for illustrative purposes only. Descriptions of individual stocks do not constitute any form of investment advice and do not represent the holdings or trading activities of any funds managed by the fund manager. The fund manager assesses the risk level of the Huabao Pharmaceutical ETF and its feeder funds as R3-medium risk, suitable for balanced (C3) and above investors. The risk level of the Huabao Hong Kong Stock Connect Innovative Drug ETF and its feeder funds is assessed as R4-medium to high risk, suitable for aggressive (C4) and above investors. Any information appearing in this article (including but not limited to stocks, comments, forecasts, charts, indicators, theories, and any form of expression) is for reference only. Investors are responsible for any independent investment decisions. Furthermore, any views, analysis, or forecasts in this article do not constitute investment advice of any kind to readers, and no liability is assumed for any direct or indirect losses arising from the use of this content. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Past performance of the fund does not indicate future results. Fund investments carry risks.
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