The net loss expanded by 372% year-on-year, combined with changes in inventory. After a significant drop in the stock price of MICOT PHARMA-B (02335), is it worth investing?

On August 24, MICOT PHARMA-B (02335) announced that, according to the quarterly review results of the Hang Seng Index series released by Hang Seng Indexes Company Limited on August 21, 2026, covering the period ending June 30, 2026, the company has been selected and will be included as a constituent stock of the Hang Seng Composite Index (HSCI), effective September 7 of this year. This also means that MICOT Pharma's H shares have met the qualifications to be included in the Stock Connect program. On August 28, MICOT Pharma disclosed its H1 2026 financial report. During the reporting period, the company achieved other income of RMB 1.335 million, an increase of 9.25% year-on-year; however, the net loss for the period reached RMB 231 million, an increase of 372.08% year-on-year. The day after the financial report was released, MICOT Pharmas stock price fell by 1.04%, with an intraday price touching HKD 26.80, a new low since its listing. Over the course of 8 trading days, the stock price dropped by more than 30%. On June 24, MICOT Pharma listed and rose by 102.75%, with its stock price settling at HKD 36.90 on the first day. Within five trading days from its listing, MICOT Pharma experienced three days of gains and two days of declines. The final data shows that as of June 30 of this year, the average market capitalization of MICOT Pharma during the review period was HKD 10.251 billion, exceeding the current market capitalization threshold of HKD 9.395 billion. This is also why MICOT Pharma was able to gain qualification for the Stock Connect in this round. In fact, MICOT Pharma's strategy is focused on being included in the Stock Connect right after its listing. According to the official review rules of the Hang Seng Index, the quarterly review for small and medium-sized companies only considers trading data from the listing date to June 30 of the same year, with no retrospective calculations after the window closes. For MICOT Pharma, listed on June 24, this round of assessments only spanned five trading days, thereby naturally mitigating the disadvantages of significant volatility and unstable trading typically associated with newly listed stocks. With the dual boost of initial market sentiment and the incentive of inclusion in the Stock Connect, MICOT Pharma's secondary market saw an acceleration phase of the main uptrend driven by institutional buying, which continued until mid-July. During this period, MICOT Pharma's stock price accumulated a rise of 20.38% based on the closing price, with an average daily trading volume of HKD 51.96 million, corresponding to a net OBV trading volume of 4.92 million shares, reflecting a healthy upward trend in both volume and price. However, after July 16, the company's stock price performance took a 180-degree turn. From the RSI indicator, on July 16, when the company's stock price peaked, the RSI also reached 72.87, while the J value in the KDJ indicator hit 87.89, indicating a clear overbought signal. On that day, the stock price closed at HKD 44.42, just 1.4% below the intraday high of HKD 45.04, showing a strong short squeeze at the end stage, to some extent indicating that the stock price had entered an accelerated final phase, with significantly increased risks of chasing high prices, leading to a shift in sentiment from consensus among holders to divergence. Amid increasing divergence in the market, MICOT Pharmas stock price experienced a sharp drop of 36.65% during eight trading days from July 17 to July 28, characterized by a high position clearance-style sell-off. From a volume perspective, during this drop, MICOT Pharma showed significant increases in trading volume. On July 20, its trading volume reached HKD 32.577 million, which "halved" to HKD 12.7288 million by July 28, displaying a bear market volume and price structure. Meanwhile, the OBV fell from 4.557 million shares to 2.215 million shares, indicating continued outflow of supporting funds. This round of sharp decline for MICOT Pharma was indeed traceable. From the news front, this period coincided precisely with the information vacuum prior to the disclosure of MICOT Pharma's interim performance report. Between July 17 and July 28, the company did not release any significant positive announcements. Key developments related to its core pipeline, such as the completion of the primary endpoint in the Phase II clinical trial of the new drug MT200605 for stroke (announced on August 3), and the completion of the first enrollment in the Phase II clinical trial for MT1002 (disclosed on July 17), were all released either right around or after this time frame. Therefore, during the information vacuum, MICOT Pharma, as a newly listed stock that had previously seen excessive gains but lacked new catalysts, often faced pressure for phase adjustments. Moreover, given that its inclusion in the Stock Connect was already a certainty, earlier investors with supporting funds might have chosen to cash out on market highs. After the warehouse variation, when will the stock price rebound? It was observed that on the same day MICOT Pharma released the above announcement, there was a warehouse variation: on August 24, MICOT Pharma experienced a change in positions, with a total warehouse value of HKD 521 million, accounting for 6.33%. The company's shareholder deposited 17.7341 million shares into Merrill Lynch Far East. Unlike the paperless issuance process of A-share listed companies, Hong Kong still retains the option of holding physical stocks. Given that stocks can only be traded once transferred to CCASS, a warehouse change does not necessarily mean that shareholders are selling, but it can be interpreted as shareholders preparing for sales. In the trading data from brokers over the past five days, it is also clear that Merrill Lynch was the largest net-selling broker during this period, with cumulative net sales of 17.7489 million shares. Timing-wise, this warehouse variation occurred just before the company disclosed its H1 2026 financial report. Although the profit situation showed that MICOT Pharma's net loss drastically widened by 372.08% year-on-year, this was mainly due to the company's R&D expenses of approximately RMB 128 million during the reporting period, a year-on-year increase of about 216%. In addition, the company had two key financial changes: operating cash flow turned positive for the first time, and the balance sheet underwent structural improvements. The former was thanks to an exclusive commercialization collaboration with a client for MT1013, where a upfront payment of HKD 20 million had already been received. According to the agreement, MICOT is also entitled to receive milestone payments of up to HKD 1.04 billion, as well as royalty distributions based on net sales of the product; the latter is related to the conversion of preferred stock redemption liabilities to equity, combined with the net proceeds from the IPO, leading to a complete shift from negative to positive assets. Although the market performance showed that the financial report disclosed by MICOT Pharma did not trigger strong bullish sentiment, from the trend perspective, the market has begun forming a weak recovery shape with decreasing volume. It was observed that from July 29 to August 18, MICOT Pharma's stock price experienced a rebound from a significant drop, but after reaching a rebound peak with increased volume on August 18, the funds did not continue to flow in, resulting in a divergence-style decline where rebound funds were primarily focused on short-term speculation. Additionally, since late August of this year, MICOT Pharma's intraday trading volume has continued to shrink. From August 25 to August 31, its daily average trading volume remained below HKD 9 million, with corresponding turnover rates below 0.12%. Meanwhile, the Bollinger Bands (BOLL) width of MICOT Pharma's stock price shrank sharply from 0.526 on July 29 to 0.129 on August 31, indicating a significant convergence in market volatility, with the market entering a low-volatility bottoming phase. From the perspective of stock price catalysts, as a profitless company listed in 2018, MICOT Pharma's key stock price catalysts without a doubt revolve around the clinical data disclosure of its core varieties and subsequent progress in business development (BD) collaborations. From recent news, it has been reported that the key Phase III study for the core product MT1013 has successfully enrolled 424 patients, while another core product, MT200605, has reached the primary endpoint in its Phase II study for treating acute ischemic stroke, which is expected to open up further growth opportunities; on the other hand, if the company receives more license out/milestone payments in the second half of this year, this could further alleviate the company's cash pressure and become an important driving force for its stock price rebound.