On the evening of September 16, Novo Nordisk and Anthropic announced a collaboration to use AI models for drug discovery. On the same day, GenScript also declared a partnership with Lilly's AI/machine learning drug discovery platform, Lilly TuneLab. These dense positive headlines triggered a collective surge across multiple Hong Kong-listed CRO/AI drug discovery stocks on September 17, directly boosting market risk appetite for VIVA BIOTECH's (01873) AI CRO platform and CDMO commercialization prospects.
Observations from the morning session on September 17 showed that VIVA BIOTECH's shares opened modestly higher by about 1.12% amid sector-wide sentiment, then rapidly climbed to an intraday high of HK$1.46 within 40 minutes, reaching a peak gain of 8.55%. However, despite the early surge driven by speculative capital, the stock quickly retreated upon touching the prior resistance level of HK$1.46, turning the day's rally into a stress test against overhead trapped positions. Nevertheless, this probe candlestick has drawn increased investor attention to whether a confirmed reversal and primary uptrend launch could follow.
A "Fairy Guide" Pattern or Just a Probe?
On August 26 after market close, VIVA BIOTECH released its 26H1 financial report, showing revenue of RMB 1.007 billion, up 20.99% year-on-year. However, net profit attributable to the company was RMB 101 million, a decrease of 32.1% year-on-year. Following the earnings release, China Merchants Securities maintained a "Strong Buy" rating in its updated research note, projecting 2026-2028 revenue of approximately RMB 2.02/2.49/3.27 billion, with adjusted P/E ratios of about 8.5/6.4/4.5 times. Yet, institutional expectations do not equate to realized performance.
The visible pattern of rising revenue without corresponding profit growth, alongside profit declines driven by lower investment income, unfavorable foreign exchange effects, and increased R&D expenses for new businesses, has shifted the secondary market's trading logic for VIVA BIOTECH from "expectation trading" back to "profit realization trading." This has transitioned the stock from its earlier "accelerated peak-climbing" phase into a "post-earnings pullback and repair" phase. On August 27, VIVA BIOTECH's shares fell sharply by 8.01% with expanded trading volume of HK$18.3 million, indicating that funds chose to cash out the earlier CDMO+AI expectations after results landed. Under this trading logic, the stock's maximum drawdown in the subsequent period reached 19.50%.
However, from a fundamental perspective of the interim report, VIVA BIOTECH exhibited a "strong revenue, weak profit" profile. The "four consecutive declines" from August 27 to September 1 essentially reflected the market first pricing down profit expectations while still recognizing the company's medium-to-long-term CDMO and AI direction. On September 11, VIVA BIOTECH's shares bottomed out, touching an intraday low of HK$1.28, signaling entry into oversold territory. Subsequently, the stock stabilized above the lower Bollinger Band, providing support for a potential oversold rebound.
On September 16, driven by bullish sentiment in A-share CXO concepts, the AH-listed innovative drug/CXO sector experienced a notable risk-appetite recovery. As a "small and exquisite" CDMO player with a market capitalization of approximately HK$3 billion, VIVA BIOTECH's logic of peptide commercialization, AI drug discovery, and CRO order improvements perfectly matched the day's market preference for high-elasticity recovery plays. Therefore, despite its valuation being suppressed by profit-side disturbances earlier, it still attracted excess capital allocation, with market trading logic shifting toward its medium-to-long-term revenue and order-side marginal improvements.
Against the backdrop of the previous day's volume-backed absorption, VIVA BIOTECH's long upper shadow candlestick on September 17, resembling a "Fairy Guide" pattern, drew more investor attention. However, even with the similar shape, what VIVA BIOTECH produced on September 17 was not actually a "Fairy Guide" formation. Typically, a standard Fairy Guide emphasizes "main force probing then covertly absorbing," requiring subsequent volume-backed breakthroughs above the upper shadow high. But from the candlestick position, after the volume-backed rebound on September 16, the stock rallied to HK$1.46 the next day, precisely hitting the prior trapped-pressure zone. This position is a rebound pressure test after a decline, not a typical low-level launch point, nor a mid-term continuation point in a smooth uptrend.
Additionally, from a volume perspective, following the volume expansion on September 16, VIVA BIOTECH's intraday turnover on September 17 dropped to the HK$5 million level. The morning rally to HK$1.46 did not see continued volume expansion, and the stock eventually closed at HK$1.39, indicating insufficient absorption by upward-moving capital. Therefore, compared to a "Fairy Guide" pattern, VIVA BIOTECH's performance on September 17 more closely resembled a probe rally within a repairing rebound. From a technical standpoint, only if the stock subsequently breaks out with volume and holds above the HK$1.46 resistance level can it signal potential upside; otherwise, this upper shadow may further confirm short-term pressure on VIVA BIOTECH's share price.
When Will Certainty-Driven Growth Pricing Arrive?
Currently, the entire CRO industry is seeing leading players emerge from the industry trough first, leveraging advantages in capital, technology, client resources, and global footprint to achieve performance recovery. In contrast, small and mid-sized CROs face multiple challenges including insufficient orders, tight capital chains, and talent attrition, with their survival space continuously compressed. How to cope with the industry's Matthew effect has become a key consideration for small and mid-sized CRO players like VIVA BIOTECH.
The 26H1 report showed that during the period, the company's revenue grew 20.99% year-on-year, but the "rising revenue without rising profit" issue was prominent. While overall net profit decreased 32.1% year-on-year, the company's adjusted non-IFRS net profit was RMB 128 million, down 30.08% year-on-year. Meanwhile, the gross margin for the period was 34.0%, further declining from 40.8% in the same period last year, primarily due to gross profit growth lagging revenue growth and declining margins in certain business segments. Amid the current volatile external environment, downstream clients, especially overseas ones, value service quality, efficiency, and capacity location stability, including quality control, compliance, process quality, delivery and supply reliability, more than price. Service providers with comprehensive arrangements and rich delivery experience in these areas can progressively build brand effects, fostering a long-term "strong get stronger" industry landscape.
Nevertheless, as a small to mid-sized CXO enterprise, its resilience against risks in a fluctuating external environment undoubtedly becomes a key factor affecting its stable profit growth. By business segment, during the reporting period, VIVA BIOTECH's CRO business generated revenue of RMB 405 million, down 4.2% year-on-year. However, the CDMO business carried by its subsidiary Langhua Pharmaceuticals showed impressive high-speed growth, with revenue of RMB 601 million, up 47% year-on-year, becoming the core engine of the company's revenue growth. VIVA BIOTECH explicitly stated in the report that this significant revenue growth was primarily driven by two CDMO commercialization projects: one peptide project has entered the commercial production stocking phase, rapidly ramping up revenue and contributing to growth; another small molecule project is in the PPQ production phase and is expected to achieve commercial launch in 2027. Together, these will lay a foundation for stable revenue growth at Langhua in the coming years.
Overall, the key takeaway from VIVA BIOTECH's interim report is that its core business fundamental base has not deteriorated. Its CRO business is upgrading from traditional structural biology services toward peptides, antibodies, XDC, PROTAC, molecular glues, and AI-driven projects. In terms of its AI CRO capabilities, VIVA BIOTECH has built a relatively comprehensive AI CRO platform covering new targets, new mechanisms, and new molecular formats, spanning the entire FIC drug discovery process. The report showed that CADD/AIDD has participated in 228 projects cumulatively with 92 clients, with AI-empowered projects contributing approximately 14.0% of CRO revenue, and the share of new molecular modalities rising to 17.7%. The company expects full-year CRO revenue growth to maintain or exceed current levels. Additionally, its MARS multimodal algorithm platform, particularly Pep2MARS, is forming technical barriers in the fields of peptides, cyclic peptides, and complex macrocycles. The company's collaboration with international giants to promote an AI-driven "dry-wet loop" drug discovery model has also been effectively validated.
Currently, while VIVA BIOTECH's AI CRO business still has some distance from scale realization, if MNC platform licenses, major collaborations, or continued increases in AI project revenue share emerge, its business valuation could accelerate from a CDMO logic expansion to an AI pharmaceutical platform logic, potentially earning certainty-driven growth pricing from market investors.
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