The “sky-high monkey” returns to CRO, and the 20cm big red pillar sounded the horn of Zhaoyan New Pharmaceutical (06127) stock price counterattack?

In December 12, the Hong Kong stock price of Zhaoyan Pharmaceutical opened high. The biggest intraday increase reached 21.22%. The highest intraday price reached HK$21.54, causing the stock price of Zhaoyan New Pharmaceutical to return to the HK$20 mark after a month.

After more than 4 months of falling stock prices, Zhaoyan Pharmaceutical (06127) relied on a “20cm big red pillar” to refocus the market's attention on this leading security assessment company and the “monkey price” that has recently skyrocketed again.

Has Hong Kong Stock Connect capital become the “big winner” of this rise?

In July of this year, thanks to a wave of surging prices for innovative drugs in Hong Kong stocks, Zhaoyan Pharmaceutical's stock price hit HK$28.70. This stock price hit a new high since March 2023.

However, in reality, Zhaoyan Pharmaceutical's path to a new high stock price this time has not been easy. After rushing out of a sharp upward trajectory on June 17, Zhaoyan Pharmaceutical's stock price broke out of the “guillotine” market of three consecutive declines, and hit an intraday low of HK$13.89 on June 20, down 28.73% from the high point on the 17th. However, on June 23, Zhaoyan Pharmaceutical quickly stopped falling, and the stock price turned upward, recovering a large amount of “lost ground” within 7 trading days.

Meanwhile, the Hang Seng Healthcare Index also stopped falling and rebounding after “five consecutive losses”. Since June 20, the index's biggest rebound has reached 9.45%, and the Hong Kong stock pharmaceutical sector has shown a continued upward trend. In this context, Zhaoyan New Pharmaceutical launched an onslaught in July and eventually reached a high of HK$28.70.

Subsequently, the index continued to slowly rise until early September, while Zhaoyan New Pharmaceutical began to fluctuate and fall after hitting a high on July 29.

From a technical perspective, after the stock price of Zhaoyan Pharmaceutical reached a high level, the stock price quickly returned to the BOLL middle track, and fluctuated around the middle track for a month. It was not until August 28 that it first hit the lower BOLL line. From an EMA perspective, this is the first time since June this year that Zhaoyan Pharmaceutical's stock price has returned to the 60-day EMA. Since then, until October 3, the company's stock price has basically fluctuated along the 60-day EMA.

However, after the closing price fell below the 60-day line on October 4, the stock price of Zhaoyan Pharmaceutical did not return to the 60-day line again, but instead entered a new round of fluctuating downward channel. On the technical side, it officially entered the pattern of moving average bonding downward. All moving averages diverged downward, and overall fluctuated downward below the 30-day EMA. Generally speaking, this technical pattern means a fundamental reversal in the previous technical trend of individual stocks. As the cost of holding short, medium, and long-term positions in the market gradually declined, the downward trend began to be established step by step.

This round of decline in Zhaoyan Pharmaceutical's market did not show signs of stopping until December 5, when it came out of “Little Sanyang” continuously, and during this period, Hong Kong Stock Connect capital once again became the main force in the market to take up chips.

The Zhitong Finance App observed that in the past 60 days, the top five sellers of Zhaoyan New Drug were Hong Kong and Shanghai HSBC, Merrill Lynch, Citibank, Morgan Stanley, and CICC. Among them, Hong Kong and Shanghai HSBC was the largest seller, with a cumulative net sale of 12.2852 million shares; from the buyer's perspective, China Investment (Shanghai-Hong Kong Stock Connect) was the largest buyer, buying 6.885,600 shares. It can be seen that most of the foreign currency holders came from Hong Kong Stock Connect Mainland retail investors. Based on the shareholding ratio, China Investment (Shanghai-Hong Kong Stock Connect) and China Chuangying (Shenzhen-Hong Kong Stock Connect) currently hold 34.15% and 22.86% of Zhaoyan Pharmaceutical's shares, respectively.

Looking at the chip distribution chart, Hong Kong Stock Connect continues to receive OTC funds, causing the average cost of chips in Zhaoyan New Pharmacy to continue to decline, from HK$23.30 at the beginning of October to HK$19.44 on December 11. At this time, the chip peak was concentrated around HK$17.63, which is significantly lower than the average chip cost. On December 12, a “20cm red pillar” raised the closing price of Zhaoyan's new drug to HK$21.25, and also caused the chip profit ratio to rise sharply from 32.02% on December 11 to 78.84% on December 12. For Hong Kong Stock Connect funds, the four-month implementation of the “buy more you fall” strategy has finally paid off.

The basic trend is already showing, but the market still needs to start the monkey cycle

After experiencing adjustments in the global biomedical investment and financing market from 2022 to 2023, the CRO industry showed steady resilience as early as 2024.

Judging from external factors, on the one hand, many multinational MNCs showed rigid growth in R&D budgets, spurred by the “patent cliff” problem. As early as 2023, they led the total investment in global pharmaceutical research and development to reach 26.5 billion US dollars, forming a “ballast stone” for the needs of the global CRO industry;

On the other hand, domestic policies are shifting from “encouraging innovation” to “encouraging true innovation”, which emphasizes clinical value. At the same time, drug review and approval are being accelerated and quality is being improved, and regulatory standards are in line with the international community, which also favors leading CROs with high technical standards and excellent execution capabilities. Data shows that in the Q1 quarter of this year, the average time of the IND task for new domestic drugs (from entering the new report task queue to leaving the queue) was 71 days, with a maximum of 91 days. In the future, if the clinical review cycle for new drugs that meet the requirements can be shortened to 30 working days, it will greatly stimulate the research and development of key innovative drugs in China, and will also bring more demand in the safety evaluation market for Zhaoyan New Drugs.

Back to Zhaoyan Pharmaceutical, according to this year's three-quarter report, Zhaoyan New Pharmaceutical achieved revenue of 985 million yuan in the first three quarters, a sharp drop of 26.23% over the previous year; of these, the third quarter's single-quarter revenue was 316 million yuan, a year-on-year decrease of 34.87%.

In fact, Zhaoyan Pharmaceutical's declining revenue trend this year began in 2023. Looking at the vertical comparison, the company's revenue and profit declined sharply after reaching a historical peak in 2022. In particular, in 2023, due to the “impact of monkey prices,” the company calculated a net loss of up to 267 million yuan from changes in the fair value of biological assets, which directly led to the company's “revenue increase without profit increase” in the current period. Meanwhile, in 2024, the cold winter of industry investment and financing also caused the company's on-hand orders to shrink and spread to the revenue side, causing a double decline in revenue and profit. Looking at it now, its 2025 performance is only a continuation of its previous performance.

It is also easy to see from the history of revenue changes mentioned above. For Zhaoyan New Pharmaceutical, which specializes in CRO, changes in the size of on-hand orders are an effective leading indicator for predicting its short-term annual revenue trend for 1-2 years. For example, the order volume of Zhaoyan New Drug contracted from a phased peak of 4.5 billion yuan in 2022 to 2.2 billion yuan in 2024, revealing its subsequent negative revenue growth in the past year. Judging from this rule, a steady recovery in order volume may be an important sign to determine whether its performance has bottomed out and rebounded.

Judging from the latest Q3 financial report, in the first three quarters of 2025, the amount of new orders signed by Zhaoyan Pharmaceutical reached 1.64 billion yuan, an increase of 17.1% over the previous year. Among them, the growth rate in the third quarter reached 24%, showing signs of recovery. Since it is a leading indicator and does not have a direct impact on its short-term performance, this benefit is not directly reflected in the company's stock price after the financial report.

In contrast, an upward monkey cycle can directly affect the performance of Zhaoyan New Pharmaceutical. This is because the experimental monkey biological asset measurement method in Zhaoyan Pharmaceutical's 2020 annual report was changed from the previous “cost method measurement” to “fair value method measurement”. As a result of this change in accounting policy, when biological assets continue to rise in price, their price surpluses are released in current statements. In other words, the beginning and end of the monkey price boom cycle will have a direct impact on the company's net profit.

Judging from the news, according to the Zhitong Finance App, I learned from the relevant breeding manufacturer on December 9 that currently the price of crab-eating monkeys around the age of 3-5 has risen to 140,000 yuan, and supply is already in short supply during the year. However, this market price has increased by more than 50% compared to the 90,000 yuan/crab-eating monkey cost obtained by the company's merger and acquisition in 2022.

In addition, according to Fangzheng Securities estimates, the supply of experimental monkeys is estimated to be about 48,000 to 52,400 monkeys per year in 25-27, and the demand for experimental monkeys is about 513-62,600 monkeys per year. The bank believes that in the short term, due to the recovery in new drug research and development, the supply side will be more difficult to improve in the short term, and the gap between supply and demand may continue to expand.

In other words, the supply and demand gap for experimental monkeys, which continues to expand in the short term, may drive the price of monkeys to continue to rise, and this is expected to be the direct engine driving the performance growth of Zhaoyan New Pharmaceutical in the second half of 2025 and 2026.