Following recent market adjustments, the share prices of many Hong Kong-listed companies with solid fundamentals and stable profitability have been unduly punished, with their price-to-earnings and price-to-book ratios now at historically low levels.

Since June, numerous companies have chosen to use their own funds for share buybacks, signaling to the market with real money that they believe their value is underestimated.

For instance, on June 10th alone, 75 Hong Kong-listed companies implemented share repurchases, including leaders from various sectors.

In reality, this round of market correction in Hong Kong has not only impacted the stock prices of leading companies in popular sectors but has also been unfavorable for many targets in niche segments.

Taking Zhaoke Ophthalmology-B (06622) as an example, the company has announced share buybacks on four separate occasions this month, starting from June 11th.

Data shows that Zhaoke Ophthalmology conducted share repurchases on June 11th, 15th, 16th, and 22nd, accumulating a total buyback of 1.164 million shares.

The total amount involved was HK$3.1795 million, representing approximately 0.21% of the company's total issued share capital.

This marks the first round of execution following its announced buyback intention on June 8th.

According to the company's buyback intention announcement, it is authorized to repurchase up to 10% of the total issued shares on the date the relevant resolution was passed, equating to roughly 54.8949 million shares.

Can share buybacks bolster short-term market confidence?

Last year, riding the wave of a bull market for Hong Kong-listed innovative drug stocks, the share price of Zhaoke Ophthalmology-B surged from a low of HK$1.2 to a high of HK$4.6, representing a maximum intra-period gain of 283.33%.

However, compared to the Hang Seng Healthcare Index, which peaked and began correcting in October last year, Zhaoke Ophthalmology's stock price started its volatile decline earlier, on August 18th.

Subsequently, the company's share price continued a downward trend with fluctuations.

From a chart perspective, after nearly a full month of price ascent in July last year, divergence among holders of Zhaoke Ophthalmology shares began to widen significantly.

During the three consecutive positive trading days from August 4th to 6th, trading volume exceeded 7 million shares on the first two days and remained at 6.8 million shares on the third, showing a noticeable increase in volume compared to earlier periods.

This led to a significant price correction on August 14th, accompanied by selling pressure that pushed the day's trading volume even higher to 8.9932 million shares.

Afterwards, the intraday price movements of Zhaoke Ophthalmology largely followed the broader Hong Kong healthcare sector.

Amidst the sector's fluctuations, the price action, characterized by rallies followed by pullbacks, seemed to shake out less committed retail investors.

Consequently, while the overall chart was dominated by small positive and negative candlesticks, the appearance of larger positive or negative candles was often accompanied by a significant increase in trading volume.

In a sustained downtrend, this pattern often indicates that holders are leaning towards short-term trading strategies rather than long-term holding, reflecting underlying weak market confidence.

This may be related to the liquidity issues that have plagued the Hong Kong healthcare sector this year.

Since last September, the innovative drug sector in Hong Kong has shifted from its previous bull market state into a volatile downtrend, experiencing a persistent decline especially after mid-April this year.

This directly caused the Hang Seng Healthcare Index to fall steadily after mid-April.

From April 16th this year to the present, the index has declined by over 25%.

This outcome stems from the combined effect of multiple factors including capital flows, market sentiment, and geopolitical tensions.

Regarding capital flows, in the first half of this year, strong performance in Hong Kong's tech sectors like AI computing power and semiconductors attracted a large amount of active market capital.

In contrast, innovative drugs, being a long-cycle sector with infrequent catalysts, faced significant liquidity diversion due to the siphon effect towards tech stocks in a market environment dominated by存量资金博弈.

Secondly, the increasingly tense global geopolitical landscape has heightened uncertainty around the US Federal Reserve's monetary policy.

Market expectations this year for delayed interest rate cuts or even potential hikes from the Fed have directly contributed to a tightening of global liquidity.

For interest-rate-sensitive assets like innovative drug stocks, this has undoubtedly put downward pressure on their valuations.

As a small-cap stock, Zhaoke Ophthalmology has felt this pressure acutely.

Data shows that in the first three quarters of last year, Zhaoke Ophthalmology's trading volumes were 151 million shares, 179 million shares, and 179 million shares respectively, totaling 509 million shares.

In contrast, over the three quarters from Q4 last year to the present, the company's quarterly trading volumes were 61.6393 million shares, 45.0486 million shares, and 32.1169 million shares respectively, totaling 139 million shares.

Furthermore, during the prolonged price adjustment, the distribution of Zhaoke Ophthalmology's shareholdings has become extremely fragmented.

The concentration ratios for 70% and 90% of the筹码 are 35.27% and 48.91% respectively.

On one hand, the weak control by major funds within Zhaoke Ophthalmology, combined with liquidity issues, makes it difficult to form stable, concerted buying pressure in the market.

On the other hand, a large number of shares are套牢 above the cost level of HK$3.08, creating significant resistance to any upward price movement.

Under these circumstances, any short-term rally could potentially open a window for these trapped shares to be sold.

Therefore, although Zhaoke Ophthalmology's stock price recorded four consecutive positive days from June 9th to 12th following the buyback announcement, it was immediately followed by four consecutive days of decline from June 15th to 22nd.

Awaiting a Rebound in the Hong Kong Innovative Drug Sector

In reality, Zhaoke Ophthalmology currently does not lack the fundamental or valuation conditions necessary for a share price rebound.

According to the company's 2025 annual report, its three core assets have all entered the regulatory review stage.

Among them, the 0.01% and 0.02% concentration formulations of Atropine Sulfate Ophthalmic Solution (NVK002) are currently undergoing product上市审评 by Chinese regulatory authorities.

The resubmission of a New Drug Application for another innovative drug, Cyclosporine Ophthalmic Gel, was accepted by the National Medical Products Administration in May last year.

In June of the same year, the Cyclosporine Ophthalmic Gel received IND approval from the US FDA, allowing it to initiate Phase III clinical trials in the United States.

Furthermore, the Biologics License Application for Zhaoke Ophthalmology's Bevacizumab Intravitreal Injection (TAB014) was accepted by the NMPA in June last year.

This marks China's first submitted BLA for a bevacizumab product targeting wet age-related macular degeneration.

All three of these core assets belong to major product categories.

Taking Atropine Sulfate Ophthalmic Solution (NVK002) for myopia control as an example, this patented formulation successfully addresses the instability issues of low-concentration atropine, a technology protected by intellectual property rights globally.

NVK002 is preservative-free and has an expected shelf life of over 24 months.

It is reported that NVK002 is currently one of the most advanced atropine candidates globally for treating myopia progression, targeting the broadest patient group covering children and adolescents aged 3 to 17.

From a market perspective, according to the World Health Organization and CIC data, China currently has approximately 700 million myopia patients, of which 163 million are children and adolescents who could potentially benefit from NVK002.

Estimates suggest the myopia prevention and control market in China could reach RMB 210 billion by 2030, with a ten-year compound annual growth rate of about 13.7%.

Regarding domestic competition, the low-concentration atropine ophthalmic solution market currently has only one competing product.

Given the current commercialization progress, Zhaoke Ophthalmology's NVK002 is expected to become the second low-concentration atropine drug domestically.

Therefore, even with competing products, analysis predicts that Zhaoke Ophthalmology's NVK002 could capture a peak market share of 22% in China.

From a financial standpoint, Zhaoke Ophthalmology's debt-to-asset ratio for 2025 was 18.57%, with current and quick ratios of 4.18 and 4.14 respectively, indicating a healthy overall debt situation and good short-term solvency.

Additionally, the company holds cash of RMB 1.3 billion, and its current net asset value per share of HK$3.25 is significantly higher than its current market price, placing it in a state of trading below book value.

If the Hong Kong innovative drug sector is gradually moving away from purely event-driven行情 and entering a stage of精细定价 based on fundamentals, then Zhaoke Ophthalmology, currently at a valuation bottom, may only be waiting for a sector-wide rebound as the catalyst for its share price to take off.