After being removed from the Hong Kong Stock Connect list in March this year, CUTIA-B (02487) experienced a rollercoaster ride in its stock price. Although it plunged to a year-low of HK$3.64 within a month of its removal, the company quickly stabilized its decline following the release of its annual report on April 22, thanks to its solid fundamentals. Bolstered by market undervaluation and a bullish trend in Hong Kong's biotech sector, CUTIA-B's stock surged 2.5-fold over the next two months.

A comparison with the Hang Seng Healthcare Index reveals that from April 9 to June 16, CUTIA-B's stock outperformed the index in terms of growth momentum. However, while the index continued climbing until early September before gradually adjusting, CUTIA-B's rally peaked on June 16. Although the stock exhibited some correlation with the index's fluctuations post-April, its volatility was significantly more pronounced, with liquidity concerns from its Stock Connect exit exacerbating the swings.

The rebound accelerated the sell-off by Stock Connect investors. On April 9, CUTIA-B hit a record low of HK$3.64 but staged a sustained recovery over the next six weeks. By May 20, its intraday price had surged 20% to HK$7.62, surpassing its pre-exit high. This rebound, driven by a recovery in Hong Kong's healthcare sector and strong annual report figures, fully erased the post-exit losses.

CUTIA-B's 2024 annual report, released on April 22, showed a 103% YoY increase in total revenue and a 102% rise in gross profit, while net losses narrowed by 77.91%. The revenue growth was attributed to higher sales of hair disease and skincare products, while improved brand-line margins reflected operational maturity. Cost-cutting measures further contributed to the reduced losses. Coupled with optimistic sales forecasts for three prescription drugs, the report fueled market optimism, propelling the stock's two-month rally.

For Stock Connect investors, the removal meant they could only sell, not buy. As CUTIA-B's stock rose, these investors accelerated their exits. Data shows that on the day after its Stock Connect removal, these investors held 10.09% of CUTIA-B's shares (32.32 million shares worth HK$195 million). By June 16, their stake had dwindled to 4.10%. From June 17 to September 17, outflows slowed, with holdings stabilizing at 2.87%.

While the sell-off eased selling pressure, liquidity dried up. Since September, only three trading days saw volumes exceed 1 million shares, with the lowest daily volume at just 48,000 shares—a stark contrast to earlier activity.

**When Will Sector and Fundamental Catalysts Align?** After failing to break previous highs on August 29 despite a 20% intraday surge, CUTIA-B entered another downtrend, plunging 51.08% from HK$12 to HK$5.87 over two months. Although a technical rebound began on November 7 after hitting a low, the stock's recovery stalled as the Hang Seng Healthcare Index fell for two consecutive days on November 17–18, dampening sentiment.

Technically, the 5-day moving average crossed above the 10-day line on November 14, signaling a rebound. However, weak sector sentiment and thin liquidity weakened the upward momentum by November 18. With the stock deeply oversold and only 3.41% of positions in profit, a prolonged consolidation phase seems likely unless sector and fundamental catalysts reignite bullish momentum.

Hong Kong's biotech sector correction stems from profit-taking, short-term sentiment shifts, and external uncertainties. After a sharp rally, valuations normalized, triggering a pullback. The absence of major licensing deals and U.S. policy risks added to volatility. However, China's biotech sector continues its transition from "following" to "leading" global innovation, as evidenced by strong Q3 earnings from CXO firms.

For CUTIA-B, fundamental recovery remains key. Its H1 2025 report, released on August 28, showed a 30.6% YoY revenue decline to RMB66.3 million and a 19.1% wider net loss of RMB239 million. The drop stemmed from terminating a distribution deal with U.S. skincare brand OMA and redirecting resources toward commercializing CU-40102 (topical finasteride spray) and CU-10201 (topical 4% minocycline foam), both approved by regulators.

To fund these efforts, CUTIA-B announced a placement of 28.9 million shares at HK$8.40 apiece (a 12.04% discount), raising HK$240 million, with 45% allocated to marketing and branding for the two new products. Market estimates project CU-40102's first-year revenue at over RMB100 million, with peak sales potential of RMB1–2 billion, while CU-10201 is expected to generate RMB50 million initially, peaking at RMB500 million–1 billion. CU-40102, as the only topical finasteride globally, holds strong commercial potential. However, early-stage commercialization risks remain, requiring further validation through performance metrics.