H shares fully circulation, early shareholders' lock-up expiration, and unusual movements in warehouse storage, is the post-cut LEADS BIOLABS-B (09887) worth betting on?

Since September last year, the Hong Kong stock market's innovative pharmaceutical sector has changed from a bull market to a downward trend, especially after mid-April this year, it has been continuously falling. This directly led to the Hang Seng Healthcare Index falling all the way down after mid-April this year. From April 16th to the present, the index has fallen by more than 25%. Also on April 16th, LEADS BIOLABS-B (09887) reached a new high of 97.50 Hong Kong dollars per share, after which the company's stock price fell along with the pharmaceutical sector. On June 25th, the company's stock price had dropped to 47.62 Hong Kong dollars, a decrease of over 50% from its previous high, nearing a new low for the year. This decline in stock price also means that LEADS BIOLABS has given back all the gains it made since the start of the uptrend. But it seems that the company's stock price has not yet stabilized. With the completion of the H-share full circulation and the early shareholder lock-up period approaching, whether LEADS BIOLABS can withstand the selling pressure in the market has become the focus of investors' attention. H-share full circulation, early shareholder lock-up, and changes in warehouse holdings Looking at a longer timeline, LEADS BIOLABS' stock price saw an increase of 87.71% in March-April this year, driven by breakthroughs in its product pipeline and improvements in market liquidity. Firstly, the clinical progress of the core product LBL-024 is the most critical driver. The company announced that its Phase II study of PD-L1/4-1BB dual therapy for cholangiocarcinoma has successfully entered the expansion phase (safety induction period for 20 patients evaluated well), and the Phase II study for esophageal squamous cell carcinoma has completed the first case enrollment. These developments strengthen the expectation that the medication will be the first globally approved targeted 4-1BB therapy, particularly with plans to submit a BLA for extrapulmonary neuroendocrine carcinoma in Q3 2026. China Post Securities raised its rating to "buy" based on this, reflecting a reassessment of the pipeline value by the market. Secondly, the inclusion of Hong Kong stock connect triggered a change in the financial situation. After the company was officially included in the Hong Kong stock connect on March 9th, Southbound funds continued to flow in, pushing the average daily trading volume from 20 million Hong Kong dollars to over 100 million Hong Kong dollars, significantly optimizing the shareholder structure. Furthermore, industry factors to a certain extent became a driving force for LEADS BIOLABS' stock price increase: the two ADC preclinical studies (LBL-054/LBL-061) disclosed by the company before the AACR annual meeting attracted industry and market attention to its innovative technology platform. At the same time, the Hong Kong stock innovative drug ETF rose by 7.19% during the same period, indicating a clear warming trend in the Hong Kong stock innovative pharmaceutical sector. However, after April 16, the Hong Kong pharmaceutical sector entered a correction cycle, and market sentiment towards high-risk assets grew cautious. Looking at the market, the downturn period from April 16 to May 8 was divided into two stages. The first stage is from April 16 to May 8, during which the company's stock price fluctuated due to the sector's correction and the impact of a key data vacuum; the second stage is from May 11 to present, where the approval of the H-share full circulation plan led to a sharp drop in the stock price. After the market closed on May 8, LEADS BIOLABS announced the implementation of the H-share full circulation plan, and on May 14, the announcement of the approval of the full circulation of H shares by the Stock Exchange was released. It is understood that the H-share full circulation of LEADS BIOLABS involved the conversion of 443,900 shares of unlisted stock. According to the announcement, after the conversion, the circulating shares in the secondary market would increase by 28.9%. With the early shareholders' lock-up period approaching on July 25 this year, the unlocking involves 42 early shareholders with 104 million shares, accounting for 52.22% of the total share capital of the company, with an unlocked market value of 5.271 billion Hong Kong dollars. It is worth mentioning that data shows that on June 4 and June 23 this year, LEADS BIOLABS experienced two warehouse holding changes. On June 4, there was a change in warehouse holding with a total market value of 1.486 billion Hong Kong dollars, accounting for 16.86%, where shareholders of the company deposited 25.8462 million shares into CSD, reducing their shareholdings by 59.44%; on June 23, there was a warehouse holding change with a market value of 369 million Hong Kong dollars, accounting for 3.55%, where shareholders of the company deposited 6.9641 million shares of stock in Citibank. Unlike A-share listed companies' paperless issuances, Hong Kong still retains the holding of physical shares. Since shares can only be traded after being transferred to CCASS, a warehouse holding change does not necessarily mean that shareholders are selling, but it can be seen as shareholders preparing for sale. On May 18th, LEADS BIOLABS announced that its core product - the globally first-line dual therapy LBL-024 developed independently had received Phase III clinical approval in China. This is undoubtedly a development milestone for LEADS BIOLABS, marking a shift from second-line single-agent treatment to first-line combination therapy for EP-NEC. However, this milestone event did not stop the company's stock price from falling further in the secondary market, indicating the bearish sentiment among market holders awaiting the upcoming lock-up period. In the midst of the decline, looking for certainty in the aftermath For LEADS BIOLABS, whether the current stock price decline is due to "following the trend" or "selling off due to lock-up," it is actually an action taken by investors in the innovative pharmaceutical sector based on existing market logic. Currently, market logic has transitioned from event-driven to a phase of detailed pricing based on fundamentals. As an 18A company that has not yet commercialized its products or achieved profitability, LEADS BIOLABS is almost inevitably facing a valuation discount in the current market logic. But since the innovative pharmaceutical sector as a whole faces the issue of precise pricing based on opportunities and fundamentals, the best card an 18A company can play during the pre-commercialization phase is its research products and cash flow. LEADS BIOLABS' most valuable asset currently is the commercialization expectation of its core product, LBL-024. As reported, Velesin (LBL-024) is a PD-L1/4-1BB bispecific antibody independently developed by LEADS BIOLABS. Although the first indication approved for this drug is for EP-NEC in the second-line, LBL-024 is not limited to a single small cancer type but is positioned as a pan-tumor IO 2.0 cornerstone therapy with potential survival benefits. Velesin is able to conditionally activate 4-1BB, enhancing T cell activation regulated by 4-1BB while releasing PD-1/PD-L1 immune suppression, synergistically eliminating tumors. It offers safety comparable to PD-1/PD-L1 inhibitors with a stronger potential for broad-spectrum cancer therapy, showing potential in various indications including NSCLC, SCLC, EP-NEC, and BTC. For example, previous clinical study results have shown that Velesin achieved an ORR of 75% in second-line immunotherapy for non-squamous cell carcinoma, and an ORR of 66.7% in first-line treatment for non-squamous cell carcinoma. The drug combined with chemotherapy achieved an ORR of 88.1% in first-line treatment for SCLC, far exceeding the standard treatment's approximately 60%. As the first targeted co-stimulatory receptor 4-1BB in a single-arm pivotal clinical stage globally, Velesin has conducted clinical studies for 13 solid tumor indications in China, including one pivotal registration study and eight proof-of-concept studies, covering areas with high unmet clinical needs such as EP-NEC, NSCLC, SCLC, and BTC. In terms of commercialization progress, the key registration clinical study for Velesin targeting 3L+ EP-NEC completed all enrollments in August last year. The company's plan is to submit a pre-BLA application in Q2 of this year and a BLA application in Q3, opening up the possibility of conditional approval for marketing the drug in Q2-Q3 of 2027. Regarding the cash reserves that are highly valued by 18A companies, as of the end of 2025, LEADS BIOLABS had cash and cash equivalents of 1.548 billion Hong Kong dollars, enough to support the company's commercialization launch, as well as its future 3-4 years of research and development expenditure, making its overall financial cushion relatively ample. In this context, if the short-term "following the trend" and "lock-up sales" of LEADS BIOLABS cannot be completely avoided, based on its stable fundamentals, investors may consider gambling on a valuation rebound after the stock price stabilizes, making it a viable strategy.