Wind data shows that among 29 listed companies in the A-share CXO sector, 20 reported year-on-year revenue growth for the first three quarters. The performance of innovative drug companies has been driven by internationalization, and the upstream CXO sector—often referred to as the industry's "shovel sellers"—has also seen rising demand, contributing to overall earnings growth.
Currently, the innovative drug industry is benefiting from dual tailwinds: policy support and surging demand. These factors are jointly stimulating R&D demand for new drugs, which is further transmitted to the upstream CXO sector.
Three major trends are emerging in the innovative drug field: 1. **Deepening Internationalization 2.0**: By 2025, license-out transactions reached a record high of 103 deals, with upfront payments totaling $8.45 billion. Companies expanding overseas independently are enjoying valuation premiums. 2. **Unprecedented Policy Support**: Medical insurance negotiations have become more efficient, and a commercial insurance catalog for innovative drugs has been introduced for the first time. 3. **Technological Breakthroughs**: Advances in ADC, IO bispecific antibodies, GLP-1 weight loss drugs, and small nucleic acid drugs are flourishing.
CMB International believes that with the recovery of capital market financing, the expansion of overseas transactions for innovative drugs, and the rebound in domestic R&D demand—coupled with the U.S. entering an interest rate cut cycle—CXO companies are expected to see a performance recovery in the second half of the year. The clinical development of authorized innovative drug pipelines overseas could become the most significant catalyst for the sector.
CITIC Securities highlights that CXO industry adjustments are largely complete, with stable overseas demand and a rebound in domestic investment. Key focus areas include CDMO companies with strong overseas capabilities and leading clinical CRO firms. The upstream supply chain is showing significant recovery, with ample room for localization rate improvements. Intelligent and digital production, along with international expansion, are driving growth.
Prominent CXO sector leaders include: - ASYMCHEM (06821) - Pharmaron (03759) - Joinn Laboratories (06127) - WUXI BIO (02269) - WUXI APPTEC (02359)