As August draws to a close, the release of mid-year reports from innovative drug companies is accelerating, drawing heightened attention to the sector. How did domestic innovative drug developers actually perform in the first half of the year? A look at the constituent stocks of the Hong Kong Stock Connect Innovative Drug ETF Huabao (520880) provides valuable insight, as its underlying index—the Hang Seng HK Stock Connect Innovative Drug Select Index—comprises 48 leading innovative drug R&D companies and offers solid industry representation.

Overall Picture: Value Delivery Underway?

According to public filings from listed companies, as of the close on August 28, 40 of the 48 constituent stocks covered by the Hong Kong Stock Connect Innovative Drug ETF Huabao (520880) had released their 2026 interim results. Broadly speaking, the majority have crossed the breakeven threshold, with core leaders accelerating profit release. In terms of revenue, six innovative drug companies recorded total revenue exceeding RMB 10 billion, with China Resources Pharmaceutical leading by a wide margin at RMB 134.457 billion. Both BeiGene and Fosun Pharma surpassed RMB 20 billion in revenue, while Sino Biopharmaceutical, CSPC Pharmaceutical, and Hengrui Pharmaceutical all landed in the RMB 15-20 billion range. On the year-over-year revenue growth front, 31 companies posted positive growth, with five exceeding 100%, including RemeGen (435.74%), Insilico Medicine (287.17%), and Everest Medicines (157.29%).

Looking at profitability, 27 innovative drug companies reported net profits, with 12 exceeding RMB 1 billion. CSPC Pharmaceutical led with net profit of RMB 6.094 billion, while RemeGen, Hengrui Pharmaceutical, and Hansoh Pharmaceutical each posted net profits attributable to shareholders exceeding RMB 4 billion. Sino Biopharmaceutical and BeiGene both surpassed RMB 3 billion. In terms of year-over-year growth in net profit attributable to shareholders, 30 companies recorded positive growth—representing 75% of the total—with 11 exceeding 100%. KeyMed Bio and RemeGen saw net profit surges of more than 16-fold and 11-fold, respectively, with InnoCare Pharma (918.7%), Fudan-Zhangjiang (545.56%), and Biocytogen (402.29%) also ranking near the top.

Looking at the Leaders: Strong Growth in Both Revenue and Profit

Let's turn to the three heavyweight constituents of the Hong Kong Stock Connect Innovative Drug ETF Huabao (520880). Innovent Biologics (weighting: 11.84%) delivered results that beat expectations, with both revenue and net profit growing year over year. Product revenue reached RMB 8.202 billion (up 56.7% year over year), driving Non-IFRS net profit to RMB 1.704 billion (up 40.5% year over year). Management also unveiled, for the first time, a 2030 total revenue target of RMB 35-40 billion. CSPC Pharmaceutical (weighting: 10.40%) met expectations, reporting net profit attributable to shareholders of RMB 6.094 billion, up 139.2% year over year, with adjusted net profit of RMB 6.164 billion, up 165.8%. The strong earnings growth was primarily driven by licensing fee income of RMB 5.895 billion (up 448.5% year over year). BeiGene (weighting: 11.62%) also beat expectations, posting net profit attributable to shareholders of RMB 3.271 billion, a staggering 386% jump year over year—already well exceeding its full-year 2025 figure of RMB 1.416 billion—demonstrating clear operating leverage. Second-quarter product revenue alone reached USD 1.68 billion, up 29% year over year.

Examining the earnings drivers, Innovent Biologics relies on a dual engine of product volume growth and business development deals, reflecting high earnings quality. CSPC Pharmaceutical, by contrast, is primarily boosted by the AstraZeneca BD licensing fee, with its core pharmaceutical business remaining steady but sustainability of profitability warranting close monitoring. BeiGene continues to benefit from global commercialization, delivering sustained profitability backed by a deep pipeline.

What Lies Ahead: Improving Fundamentals and a Dense Catalyst Calendar

Overall, the interim results validate that innovative drugs are transitioning from the "narrative phase" to the "delivery phase," with the industry's valuation logic shifting from "burning cash for R&D" toward a focus on commercialization and profitability. On investment strategy, CICC notes that Hong Kong-listed innovative drug stocks currently offer favorable odds and win rates. Genuine fundamental improvements are expected to boost win rates and realize the odds, potentially opening the door to sustained upside. On market momentum, Feng Chencheng, fund manager of the Hong Kong Stock Connect Innovative Drug ETF Huabao (520880), believes that in the short term, the sector may see "two steps back, three steps forward," but on the whole, the Hong Kong Stock Connect innovative drug segment remains on an upward trajectory.

It's worth noting that with the mid-year reporting season drawing to a close, innovative drug companies are entering a period of intensive clinical data releases, with WCLC (World Conference on Lung Cancer, opening September 12) and ESMO (European Society for Medical Oncology Congress, opening October 23) serving as key windows. Feng cautioned that as clinical results from Chinese companies' leading bispecific antibody and ADC pipeline candidates are validated, this could provide support for the resilience of innovative drug sector valuations. For full-chain exposure to innovative drugs, two T+0 trading instruments are worth watching: the Hong Kong Stock Connect Innovative Drug ETF Huabao (520880), which passively tracks the Hang Seng HK Stock Connect Innovative Drug Select Index with 100% allocation to innovative drug R&D companies and 70% of positions in R&D leaders; and the off-market feeder fund (025221). Additionally, the Hong Kong Stock Connect Healthcare ETF Huabao (159137) passively tracks the HK Stock Connect Healthcare Thematic Index with heavy exposure to the innovative drug supply chain, allocating 50% to CXO and 20% to innovative drugs, with WuXi-related companies accounting for over 38%. The off-market feeder fund is (026922).

Data is sourced from public information from the Shanghai, Shenzhen, and Hong Kong stock exchanges, as well as the CSI and Hang Seng Index companies. Weighting data is as of July 31, 2026. Regarding fund fees: ETF funds do not charge sales service fees. When investors subscribe to or redeem fund shares, the authorized broker may charge a commission of up to 0.5%, which includes fees levied by the stock exchanges and registration institutions. Please refer to each fund's legal documents for detailed fee information. Special note: The fund manager has assessed the risk rating of the Hong Kong Stock Connect Healthcare ETF Huabao, the Hong Kong Stock Connect Innovative Drug ETF Huabao, and their feeder funds as R4 - medium-to-high risk, suitable for aggressive (C4) and above investors. Risk disclosure: The index constituent stocks mentioned in this article are for illustration purposes only. Descriptions of individual stocks do not constitute investment advice of any form and do not represent the holdings or trading activities of any fund under the fund manager. The weightings of the Hang Seng HK Stock Connect Innovative Drug Select Index constituents are as follows: Innovent Biologics 11.84%, BeiGene 11.62%, CSPC Pharmaceutical 10.40%, Akeso 8.25%, Sino Biopharmaceutical 7.75%, Hansoh Pharmaceutical 7.43%, 3SBio 4.64%, Kelun-Biotech 4.55%, Zai Lab 3.19%, InnoCare Pharma 2.36%, KeyMed Bio 2.35%, China Medical System 2.06%, RemeGen 2.06%, DualityBio 1.88%, Hutchmed 1.50%, Ascentage Pharma 1.47%, Everest Medicines 1.39%, Simeere Pharmaceutical 1.39%, United Laboratories 1.37%, Hengrui Pharmaceutical 1.34%, China Resources Pharmaceutical 1.16%, Grand Pharma 1.12%, Fosun Pharma 1.07%, Conba Pharmaceutical 0.93%, Luye Pharma 0.80%, Carsgen Therapeutics 0.68%, Lepu Biopharma 0.59%, Junshi Biosciences 0.57%, Insilico Medicine 0.54%, Genevant Sciences 0.51%, CanSino Biologics 0.47%, SPH 0.45%, Livzon Pharmaceutical 0.40%, Vazyme Bio 0.38%, Biocytogen 0.31%, Homology Medicines 0.22%, Shijiazhuang No.4 Pharmaceutical 0.18%, Haixi Pharmaceutical 0.16%, PegBio 0.12%, Xuanzhu Biopharmaceutical 0.11%, Boan Biotech 0.08%, Shandong Xinhua Pharmaceutical 0.07%, Baoji Pharmaceutical 0.07%, Hepalink 0.06%, Changfeng Pharma 0.05%, Fudan-Zhangjiang 0.04%, Yaojie Kang'an 0.03%, and YinNuo Biopharmaceutical 0.01%. Any information appearing in this article (including but not limited to stocks, comments, forecasts, charts, indicators, theories, or any form of statement) is for reference only. Investors are solely responsible for their own investment decisions. Furthermore, any views, analyses, or forecasts in this article do not constitute investment advice of any form 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 a fund does not represent future performance. Fund investing involves risk. MACD golden cross signals have formed, and these stocks are showing upward momentum!