On September 19, GENFLEET-B (02595) made its debut on the Hong Kong Stock Exchange, with its share price reaching an intraday high of HK$50.20, representing a 146.20% increase from the issue price, and ultimately closing up 106.47% with a market capitalization approaching HK$15 billion. GENFLEET-B's first-day performance actually represents another concrete manifestation of the current Hong Kong innovative drug bull market.

Taking the Hong Kong Stock Connect Innovative Drug Index (931250) as an example, after confirming a double bottom pattern at the historical low of 460.24 points in April last year, the index has broken through the annual moving average this year, with year-to-date gains exceeding 110%. Trading volume for the corresponding sector continues to expand, with average daily turnover increasing by 300% year-over-year since the second quarter, reflecting market enthusiasm.

However, over the past three weeks, both the Hong Kong Stock Connect Innovative Drug Index and the Hang Seng Healthcare Index have experienced high-level stagnation. The Hang Seng Healthcare Index even posted consecutive weekly declines in the second and third weeks of September, marking the first such occurrence this year. With continued hot IPO activity on one side and sector stagnation on the other, market concerns and "profit-taking" voices have inevitably emerged. Therefore, at this critical juncture, assessing the future direction of the innovative drug sector is of great significance to investors.

**Fed Rate Cuts Bring New Opportunities?**

On Wednesday, September 17 (US Eastern Time), the Federal Reserve announced a 25 basis point rate cut after the Federal Open Market Committee (FOMC) meeting, lowering the federal funds rate target range from 4.25%-4.5% to 4.00%-4.25%. This marks the Fed's first rate cut this year. Against the backdrop of slowing US employment growth, slightly rising unemployment rates, and increasing downside employment risks, the market expects two more rate cuts of similar magnitude within the year.

Historical data shows that Fed rate cuts reduce the cost of USD borrowing and diminish the dollar's attractiveness, often driving global capital flows toward emerging markets. In the short term, the Fed's rate-cutting cycle brings liquidity easing, which is expected to provide more significant marginal support to Hong Kong markets currently in multi-sector growth cycles. The pharmaceutical sector, particularly innovative drugs, is clearly one of the important alternative options for capital, becoming a key direction for foreign investment allocation in China's scarce assets.

However, as mentioned earlier, Hong Kong's innovative drug sector has already doubled year-to-date, making subsequent valuation growth potential a direct factor in attracting short-term capital to Hong Kong innovative drugs. Analysis shows that the current price-to-earnings ratios (PE-TTM) of the aforementioned Hong Kong Stock Connect Innovative Drug Index and Hang Seng Healthcare Index are 36.19x and 35.96x respectively, positioned at the 24.64% and 26.15% percentiles of the past five years, significantly lower than the corresponding valuation levels of over 50x for A-share and US biotech indices, demonstrating clear advantages.

From a long-term perspective, unlike the previous innovative drug bull market from 2015-2021 driven by policy (drug review acceleration + Hong Kong Stock Exchange Chapter 18A), this round of Hong Kong innovative drug market activity not only has policy support but places greater emphasis on the enterprises themselves as core driving factors. "Hardcore innovation - global monetization - performance validation" has become the key logic for assessing the "investment certainty" of innovative drug companies.

From a policy perspective, the State Council executive meeting reviewed and approved the "Implementation Plan for Full-Chain Support of Innovative Drug Development," providing systematic guidance for innovative drug R&D, approval, pricing, and payment processes. This year's Government Work Report explicitly proposed for the first time to "improve drug price formation mechanisms, formulate innovative drug catalogs, and support the development of innovative drugs and medical devices."

This year, taking the recently launched 11th batch of National Volume-Based Procurement (VBP) as an example, it incorporated "anti-involution" as a core principle for the first time, emphasizing adherence to principles of "stabilizing clinical practice, ensuring quality, preventing bid rigging, and countering involution." The most prominent change in the new rules is the optimization of price difference control "anchor point" selection. When the "lowest price" is below "50% of the average winning price," the anchor point for price difference control will be set at "50% of the average winning price" rather than simply using the lowest bid, aligning with the current domestic innovative drug industry's transition from quantity-based to quality-based development logic.

Alongside policy support, benefiting from the synergistic effects of product commercialization, cost control, and global expansion, domestic innovative drug companies are collectively transitioning toward scaled profitability. According to statistics, in the first half of 2025, 149 Hong Kong-listed pharmaceutical companies achieved total current revenue of RMB896.12 billion (+1%) and net profit attributable to shareholders of RMB61.99 billion (+29.7%). Among these, 36 innovative drug companies realized revenue of RMB28.5 billion, up 15.8% year-over-year, significantly outperforming the overall industry. The sector's net profit attributable to shareholders jumped from losses in 2024 to RMB1.8 billion, marking a clear fundamental improvement inflection point.

**Market Investment Logic from Capital Flow Perspective**

Returning to GENFLEET-B, the company set multiple Hong Kong Chapter 18A records during its IPO process, with its fundraising history and IPO data reflecting the red-hot innovative drug market. This may position it as a key catalyst for the next phase of Hong Kong's innovative drug bull market.

Data shows that since its establishment, GENFLEET-B has completed seven rounds of private financing totaling RMB1.421 billion, with a post-money valuation of RMB3.124 billion in the C+ round before the IPO. The IPO raised USD233 million before over-allotment option exercise, potentially reaching USD268 million after exercise, setting a record for Hong Kong Chapter 18A companies since 2022.

GENFLEET-B attracted a stellar cornerstone investor lineup including RTW Investments, TruMed, OrbiMed, UBS Asset Management, Vivo Capital, E Fund Management, Fuguo Fund Management, Tibet Sourced Lesheng (through TRS), and Tsing Capital, with total subscription amounts of approximately USD100 million, representing about 49.27% of offered shares (before greenshoe), also marking the highest cornerstone subscription amount for Hong Kong biotech companies since 2022.

This means market sentiment had already peaked before GENFLEET-B's listing. The subsequent grey market trading and first-day performance were merely continuations of elevated market sentiment.

On September 18, GENFLEET-B opened at HK$40.00 in Phillip Securities' grey market, quickly rising to a high of HK$45.58 after brief volatility, maintaining mid-to-high level fluctuations before closing at HK$41.22, up 102.16% with total turnover reaching HK$213 million.

On its official listing day, GENFLEET-B opened with a gap-up directly at the opening price, with shares immediately rising to HK$44, surging 115.79% from the issue price, quickly touching an intraday high of HK$50.20, and ultimately closing at HK$42.10, up 106.47%, with turnover reaching HK$1.553 billion and turnover rate of 11.15%, performing even better than the previous day's grey market trading.

However, the doubling gains from the issue price combined with the day's high-low volatility also created significant on-market divergence for GENFLEET-B on its listing debut, with many investors choosing to "lock in profits."

But on September 22, despite GENFLEET-B closing down 6.13%, clear "reluctant selling" emerged on-market, with daily trading volume plummeting from 34.9135 million shares on the listing day to 4.7366 million shares. From the chip distribution perspective, 93.42% of chips were concentrated in the HK$40.50-47.60 range, with profitable bottom-fishing chips representing only 0.85%, significantly down from the 20.10% profitable ratio on the listing day. This indicates that the vast majority of investors chose to continue holding, with "reluctant selling" sentiment prevailing.

The reason investors favor GENFLEET-B lies in its fundamental performance hitting multiple key points of this Hong Kong innovative drug bull market: possessing innovative and differentiated proprietary pipelines, products that have gained commercial validation and BD transaction verification, with revenue showing growth trends in recent years. Simply put, the scarcity of GENFLEET-B's core products and rich R&D pipeline provide long-term value anchoring.

Therefore, against the backdrop of Hong Kong's innovative drug bull market expected to continue, a target with relatively solid fundamentals that aligns with innovative drug growth logic clearly offers higher risk-reward ratios.