The Hang Seng Healthcare Index has been in a downtrend for nearly 40 trading sessions since April 17, with a cumulative decline of approximately 25% as of June 8. The recent string of negative sessions has also impacted newly listed innovative drug companies to varying degrees.

Take LONGBIO-B (01779), which debuted on June 5, as an example. During its IPO subscription phase, its Hong Kong public offering was oversubscribed by 4,762.58 times, and its grey market price closed 57% higher. Given such market fervor and grey market performance, it seemed LONGBIO-B only needed to sustain a gain of over 50% on its first trading day to meet the threshold for Stock Connect inclusion.

However, after opening on June 5, its share price quickly surged to a high of HK$158 before plummeting, then continued to fluctuate and decline. Despite a late rebound, it closed up only 37.21%. The following day, its performance was relatively weak, with the share price trading below its opening level throughout the day and closing down 6.83%. This performance has pushed its share price further away from the target of HK$144 needed for inclusion.

The Race Against Time for Inclusion

The company's IPO utilized a Type B structure. According to the issuance plan, it offered 14.1932 million shares globally, with 1.4194 million (about 10%) for the Hong Kong public offering and 12.7738 million (about 90%) for the international offering, plus a 15% over-allotment option.

The offer price was set at HK$96.06, raising a total of approximately HK$1.363 billion. The post-offering free float is about HK$682 million. The high entry cost for retail investors, with a board lot fee reaching HK$4,851.44, meant investors often needed to use margin financing to improve their chances of allocation, leading to over HK$400 billion in margin financing during the subscription period.

Behind this high leverage and market heat were 10 cornerstone investors for the IPO, including OrbiMed Funds, TruMed, GAOYI Capital, RuiJun Asset Management, RuiYuan Fund, Fullgoal Fund, Value Partners, GBAHIL, FR M, and Yuanfeng Vision Growth Fund, who collectively subscribed to US$87 million (approx. HK$681 million) worth of shares.

Furthermore, LONGBIO-B has solid fundamentals. As a clinical-stage leader in China's allergic disease field, its core product LP-003 directly targets the blockbuster drug omalizumab, with head-to-head data showing superiority. It is also the only domestic product in its class to have entered Phase III trials. Its best-in-class potential and imminent commercialization enhance its medium-to-long-term investment appeal.

With these fundamentals, cornerstone investor backing, and an initial market cap around HK$7 billion, the company's intent to qualify for Stock Connect is clear. The inclusion threshold for small-cap stocks under the Hong Kong Stock Connect has been rising, surpassing HK$10 billion this year from under HK$10 billion last year. As of June 8, the threshold stood at HK$10.238 billion.

The next regular review for the Hang Seng Indexes and Stock Connect is in June, with results announced on August 25, covering the review period from July 1, 2025, to June 30, 2026. Currently, LONGBIO-B's average daily market cap during the review period is HK$9.077 billion, achieving 94.61% coverage of the threshold. With its closing price at HK$124 on June 8, there are less than 30 days remaining in the current review period. To achieve last-minute inclusion, the company needs its share price to average around HK$144.48 for the remaining days of the review period.

The Challenge of Sustaining a High Valuation

If LONGBIO-B aims for inclusion in the upcoming review, its primary challenge is stabilizing its share price above the target level. This presents some resistance for a company already trading at a high valuation.

The company's clinical-stage core products are the anti-IgE antibody LP-003 and the dual-function complement inhibitor LP-005. LP-003 is nearing commercialization and has garnered global attention as a next-generation anti-IgE antibody. Head-to-head clinical data indicates its binding affinity, efficacy, safety, and dosing convenience are significantly superior to the marketed omalizumab, positioning it as a globally competitive, next-generation allergy treatment with leading global progress.

Prospectus data shows the drug's binding affinity to IgE is 2.08 pM, 860 times stronger than omalizumab's (~1790 pM), implying more efficient free IgE capture. Its Fc fragment, modified with YTE mutations, reportedly extends its half-life by about twofold, allowing dosing every 8 to 12 weeks compared to omalizumab's every 2 to 4 weeks, which improves adherence for chronic patients.

In terms of development, patient enrollment for the Phase III trial of LP-003 for seasonal allergic rhinitis is complete, with a Biologics License Application (BLA) submission in China expected by Q3 this year at the latest. If successfully launched, it would be the first new-generation anti-IgE antibody to reach the market in over 20 years since omalizumab.

Regarding market potential, the global market for allergic disease drugs grew from US$42.8 billion in 2018 to US$68.8 billion in 2024, and is projected to reach US$111.4 billion by 2030. The Chinese market grew from US$3.8 billion to US$8.1 billion over the same period and is expected to reach US$22.9 billion by 2030, outpacing global growth. The reference product, omalizumab, achieved global sales exceeding US$4.3 billion in 2024. Owning a potential "blockbuster molecule" in a vast market is likely a key driver behind LONGBIO-B's rapid valuation increase.

The company has secured successive funding rounds in recent years. It completed a B1 round raising RMB112 million in December 2023 at a valuation of RMB1.312 billion, a B2 round raising RMB60 million in December 2024 at a post-money valuation of RMB1.56 billion, a B3 round raising RMB16 million in March 2025 at a post-money valuation of RMB1.716 billion, and raised RMB208 million in May 2025 at a post-money valuation of RMB2 billion.

However, investors must also note that LONGBIO-B is a pre-revenue, loss-making Chapter 18A company. Its cash flow is sufficient to support only 1-2 years of R&D, and profitability is unlikely before 2027. In other words, while its pipeline is high-quality, its fundamentals lack commercial realization, which may hinder broad investor appeal in a Hong Kong healthcare sector currently favoring proven innovation.

Despite this, its IPO market cap reached HK$7.127 billion, a 226.57% surge from its Series C valuation, potentially透支 short-term valuation growth expectations. Nonetheless, based on its price action on June 9, where the share price rose to HK$146.30 in early trading, briefly surpassing the inclusion threshold, it indicates that on-market capital still harbors strong intent to push for inclusion.