CMSC has released a research report stating that the ongoing improvement in the pharmaceutical industry's financing environment provides funding security for research and development investment. As a crucial link in the innovation industrial chain, the CXO sector has confirmed a reversal from its bottom, with fundamentals now in a clear uptrend, characterized by "order recovery, earnings delivery, and increased institutional allocation."
The report points out that global biopharmaceutical financing across primary and secondary markets in the first half of 2026 grew by 95% year-on-year. The total potential value of China's innovative drug out-licensing deals is also expected to reach a new high, providing strong support for CXO demand.
The firm recommends focusing on two core investment themes: a simultaneous increase in both volume and price for new CRO contracts, and the volume ramp-up of new molecule blockbuster drugs for CDMOs.
Global Financing Environment Improves, China's 2026 BD Deal Value Poised for Record High
1) Global: H1 2026 global biopharma financing rose 95% YoY, reaching approximately 75% of the full-year 2025 total.
2) Domestic: The sum of pharmaceutical financing and upfront payments from BD deals in 2025 exceeded the levels from 2022-2024. The potential total deal value for innovative drug out-licensing in H1 2026 reached $99.7 billion, close to 73% of the 2025 full-year figure. The total out-licensing value for the full year 2026 is expected to set a new record.
Clear Uptrend Confirmed: Orders Recover, Earnings Deliver, Allocations Increase
Orders: Starting from H2 2025, orders have achieved comprehensive and rapid growth, particularly in preclinical CRO, with backlog orders securing the fundamental growth outlook.
Earnings: A profit inflection point has materialized, with the magnitude of profit margin recovery significantly outperforming revenue growth.
Capital: Public funds have increased allocations. The CXO allocation ratio within active pharmaceutical funds rose from 12.7% in Q1 2024 to 16.9% in Q1 2026.
CRO: New Contract Volume and Price Rise Simultaneously
Preclinical CRO: New contract signings in Q1 2026 saw high-speed growth. The medium-to-long-term trend of overseas expansion warrants attention.
1) Experimental Monkeys: A supply-demand gap persists, with prices steadily rising.
2) Order Front: Both volume and price are increasing. The improving trend in new contract signings for relevant companies has been realized quarter by quarter.
Clinical CRO: The subsequent demand transmission and price recovery are viewed favorably. Industry prices have begun to recover from their bottom, with new contract signings growing in sync.
CDMO: Focus on New Molecule Demand and Blockbuster Drug Ramp-Up
Rising industry capacity utilization is diluting fixed production costs, leading to improved profitability.
Current focus areas are: 1) Demand for new molecules, including peptides, ADCs, and oligonucleotides; 2) The ramp-up pace of blockbuster drugs. Tirzepatide and semaglutide, as main products in the GLP-1 field, continue to see strong commercial demand. Newly approved drugs like orforglipron and icotrekinra are contributing incremental demand, drawing attention to related CDMO service providers.
Risk Factors
Risks include: exchange rate fluctuations; intensifying industry competition; changes in policies regarding imported monkeys; R&D projects not meeting expectations; delays in capacity construction; slower-than-expected capacity ramp-up; and international relations.