Zai Lab Ltd (09688) surged over 15% in early Hong Kong trading on August 7, leading a broad rally in the innovative drug sector. The entire innovative drug supply chain saw strong gains, with 百奥赛图-B rising over 5% and 百济神州 climbing more than 3%. The Huabao Hong Kong Stock Connect Innovative Drug ETF (520880), which is 100% focused on innovative drug research and development targets, jumped over 2% during the session with real-time trading volume exceeding 3 billion yuan.
On the corporate news front, Zai Lab Ltd released its 2026 interim report, revealing second-quarter net product revenue of $105.8 million, an 11% increase quarter-over-quarter. Sales of its drug efgartigimod surged 36% sequentially to $23.9 million. After excluding a $5.9 million inventory impairment, the gross margin remained stable at approximately 60%, achieving commercial profitability. Meanwhile, 百济神州 announced on the evening of August 5 that its net profit attributable to parent company shareholders for the first half of 2026 reached 3.271 billion yuan, a staggering 627.1% year-over-year increase. The company has also raised its full-year 2026 revenue forecast to between 44.9 billion and 46.2 billion yuan, signaling a transition from a high-speed investment phase to one of commercial realization.
The broader Hong Kong Stock Connect medical sector also strengthened, with the CXO (Contract Research Organization and Contract Development and Manufacturing Organization) segment launching a new offensive. 康龙化成 advanced over 8%, while the WuXi series of companies showed strong momentum. 药明合联, 药明康德, and 药明生物 all gained more than 5%. The Huabao Hong Kong Stock Connect Medical ETF (159137), which has a CXO weighting of over 48%, surged as much as 3% in early trading. This rally was supported by news that 药明生物 has reached an agreement with 创胜医药 to acquire the CDMO (Contract Development and Manufacturing Organization) assets of its wholly-owned subsidiary, 杭州奕安济世, for approximately 190 million yuan. The assets include a process development and manufacturing base in Hangzhou, covering over 10,000 square meters with development and production capabilities for both drug substance and drug product.
Earlier, on August 3, 药明康德 released its interim report, which significantly exceeded market expectations. The company's semi-annual net profit attributable to parent company shareholders surpassed the 10 billion yuan mark for the first time, reaching 11.08 billion yuan, a 29.43% year-over-year increase. 药明康德 has also increased its full-year 2026 performance guidance, raising its overall revenue forecast from 51.3-53 billion yuan to 58.5-60.5 billion yuan.
In its latest industry weekly report, China Merchants Securities expressed a continued bullish outlook on the innovative drug sector. The broker noted that the sector has transitioned from a rebound driven by oversold conditions to a rally propelled by fundamentals and industry trends, with the impact of market style and capital rotation gradually weakening. With the arrival of the interim reporting season and expectations for innovative drug pipeline catalysts, the firm maintains a positive view on the healthcare sector's future performance. It recommends focusing on overseas-facing assets, R&D-stage assets, and undervalued stocks with improving fundamentals, specifically highlighting innovative drugs and CXO.
For investors looking to position in the innovative drug supply chain, two key T+0 trading instruments are available. For a pure play on innovative drugs, the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) offers 100% exposure to innovative drug R&D companies, with over 70% of its position allocated to industry leaders. To capture both innovative drugs and CXO, the Huabao Hong Kong Stock Connect Medical ETF (159137) provides a balanced approach with 48% CXO and 20% innovative drugs, while the remaining 30% is allocated to medical device and AI healthcare leaders. Data is sourced from the Shanghai, Shenzhen, and Hong Kong stock exchanges, as well as the China Securities Index and Hang Seng Index companies. The institutional view is from China Merchants Securities' August 2, 2026, weekly report on the biomedical industry. Please note that ETF funds do not charge sales service fees. When investors subscribe for or redeem fund shares, the subscription and redemption agent may charge a commission of up to 0.5%, which includes fees charged by the stock exchange and clearing house. For fund fee rates, please refer to the legal documents of each fund. Risk Warning: The constituent stocks mentioned in this article are for display purposes only. Descriptions of individual stocks do not constitute investment advice of any kind and do not represent the holdings or trading activities of any fund managed by the fund manager. The fund manager assesses the risk level of the Huabao Hong Kong Stock Connect Medical ETF (159137) and its feeder funds, as well as the Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) and its feeder funds, 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 solely responsible for their own investment decisions. Furthermore, any views, analyses, or forecasts in this article do not constitute investment advice to readers and do not bear any responsibility for 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 the fund. Past performance of a fund does not represent its future performance. Fund investment carries risks.