Sinolink Securities has released a research report indicating a global recovery in pharmaceutical investment and financing in 2025, with the total amount reaching $192.1 billion in the first eleven months. Both domestic and international markets have shown synchronized improvement, characterized by steady inflows into traditional therapeutic areas and increased investment in emerging fields such as Antibody-Drug Conjugates (ADCs) and bispecific antibodies. Since 2025, rising interest in AI-driven drug development technologies, sustained global momentum for innovative drugs, and a rebound in domestic biopharmaceutical investment have collectively heightened market focus on the sector, making the fundamental recovery trend increasingly clear.

Looking ahead to 2026, the report suggests investors focus on two core investment themes within the Contract Research, Development, and Manufacturing Organization (CXO) industry: prioritizing leading companies and targeting firms with high exposure to overseas markets. Key viewpoints from Sinolink Securities are outlined below.

**Breakthroughs in R&D Capability Enhance Global Competitiveness** The global pharmaceutical investment and financing landscape bottomed out and recovered in 2025, with the total reaching $192.1 billion in the first eleven months. Business development collaborations in the global and Chinese biopharma sectors continue to intensify, with both the number and value of transactions increasing. The overseas expansion of Chinese innovative drugs has entered a phase involving multiple drug categories, with out-licensing deals becoming a primary form of international transaction. Concurrently, China's innovative drug R&D capabilities are becoming more prominent, evidenced by growing numbers of Investigational New Drug (IND) and New Drug Application (NDA) filings, an increasing tally of approved drugs, and leading global pipeline numbers in areas like ADCs and cell therapies. The number of First-in-Class molecules from China has risen to second globally, and the time gap between drug launches in China and the U.S. has narrowed significantly, marking an era of comprehensive harvest for domestic innovation.

**Supportive Policies Sustain Upward Industrial Trend** Since 2025, pharmaceutical sector policies have continued to optimize, with the marginal impact of volume-based procurement weakening and shifting toward a quality-oriented approach. The 11th round of centralized procurement introduced new anti-internal competition measures, such as setting anchor prices and implementing a revival mechanism to ensure selection rates and reasonable price differentials, while also raising quality and market scale thresholds. Biosimilar procurement is expected to commence in 2026, with anticipated moderate price reductions. Furthermore, multiple government departments have introduced comprehensive support policies optimizing the review and approval, procurement, and reimbursement processes for innovative drugs. Medical insurance funds are increasingly倾斜 towards innovative drugs, and commercial health insurance catalogs are expanding, forming a diversified payment system that supports rapid market penetration and high-quality industrial development.

**Results Materializing: Innovative Drug Companies Enter Harvest Phase** Biotechnology companies continue to optimize their expense ratios, gradually approaching breakeven points. Domestic firms persist in innovation, with a dense pipeline of catalysts expected for biotechs in 2026.

**Domestic and International Resonance: Focus on High-Potential Therapies and Global Expansion** Growth of traditional blockbuster drugs globally is slowing, and multinational pharmaceutical companies face pressure from patent cliffs, creating an urgent need to replenish pipelines. In this context, Chinese innovative drugs demonstrate substitution potential across multiple areas: PD-1 bispecific antibodies show promise in iterating existing monoclonal antibodies due to superior efficacy; ADC drugs exhibit significant potential to replace chemotherapy across various tumor types; and small nucleic acid drugs have become a hot field due to their unique mechanisms. Meanwhile, innovative drugs for conditions like atopic dermatitis, psoriasis, and COPD are advancing, and the R&D and commercialization of GLP-1 class drugs are accelerating. Domestic companies are actively expanding overseas through business development collaborations, becoming key partners for global pharmaceutical firms.

**Pharmaceutical Supply Chain: Sustained Upswing and New Technology-Driven Expansion** The pharmaceutical supply chain continues its upward trajectory. Since 2025, rising interest in AI-driven drug development, sustained global innovative drug momentum, and the rebound in domestic biopharma investment have increased market attention, clarifying the fundamental recovery. For 2026, CXO sector investments should focus on two core strategies: 1) Prioritize industry leaders: Leading companies, leveraging technical barriers, production capacity scale, and customer resources, are positioned to capture greater market share during the recovery cycle, offering more certain earnings growth. 2) Focus on companies with high overseas revenue exposure: Overseas market demand is more stable, and the benefits from commercial orders continue to be realized; companies with significant international business can effectively hedge against domestic market uncertainties and achieve steady growth. Additionally, as the benefits of the domestic biopharma investment recovery gradually permeate the supply chain, companies across various CRO sub-sectors are expected to reach inflection points in their performance, presenting long-term investment value.

Risk factors include foreign exchange risk, domestic and international policy risks, potential delays in clinical trial progress, and risks associated with delays in product approval reviews.