The CXO industry (pharmaceutical R&D and production outsourcing services), serving as the "water sellers" in the pharmaceutical sector, once enjoyed rapid growth benefits during the innovative drug development wave. However, due to tightening global financing conditions and fluctuating innovative drug R&D investments in recent years, the industry experienced a downturn. Nevertheless, as the value of innovative drug assets continues to return, the CXO industry is accelerating its recovery.

According to East Money Choice data, in the first half of this year, among 28 A-share CXO companies, 16 companies showed year-over-year net profit growth, compared to only 7 companies in the same period last year. In the capital markets, CXO stock prices have also experienced a rebound. All 28 stocks in the sector have risen this year, with Nanmo Biology, Medicilon, WuXi AppTec and other stocks achieving doubled returns.

However, the chill in the CXO industry has not completely dissipated. During the reporting period, Tigermed saw both revenue and net profit decline; Innocare, Porton Advanced Solutions and other stocks experienced significant net profit decreases. How to seize recovery opportunities and achieve long-term stable development will be an important challenge for CXO companies.

**Increase in Number of Stocks with Net Profit Growth**

Compared to the same period last year, the number of CXO companies with net profit growth increased significantly in the first half of this year. East Money Choice data shows that among 28 A-share CXO stocks, 16 companies achieved performance growth in the first half, accounting for approximately 57.14%.

Statistics show that among these 28 stocks, 8 achieved doubled net profit in the first half, with Chengdu Synthetech recording the highest net profit growth of 390.72%. Nanmo Biology ranked second with a net profit increase of 298.69%. Additionally, Asymchem Laboratories, Joinn Laboratories, GenScript Biotech, Bionova Biotechnology and other stocks also recorded significant net profit growth.

In terms of actual attributable net profit amounts, WuXi AppTec topped the list, far exceeding other companies. Financial data shows that WuXi AppTec achieved operating revenue of approximately 20.799 billion yuan in the first half, up 20.64% year-over-year; corresponding attributable net profit reached approximately 8.561 billion yuan, up 101.92% year-over-year.

Pharmaron firmly held the second position among CXO companies. During the reporting period, Pharmaron achieved operating revenue of 6.441 billion yuan, up 14.93% year-over-year, setting a new record for half-year operating revenue since the company's listing. The company's attributable net profit was approximately 701 million yuan, down 37% year-over-year. Although net profit declined year-over-year during the reporting period, this was mainly due to the impact of non-recurring gains and losses. In the same period last year, Pharmaron's non-recurring gains and losses were 648 million yuan due to the disposal of PROTEOLOGIX, INC. equity. In the first half of this year, Pharmaron's adjusted net profit was approximately 637 million yuan, up 36.66% year-over-year.

Asymchem ranked third in net profit. Financial data shows that in the first half of this year, Asymchem achieved operating revenue of approximately 3.188 billion yuan, up 18.2% year-over-year; attributable net profit was approximately 617 million yuan, up 23.71% year-over-year.

Deng Yong, Director of the Health Law Research and Innovation Transformation Center at Beijing University of Chinese Medicine, stated that there are three core drivers behind this round of CXO industry recovery. First, active pharmaceutical investment, financing and BD transactions have restored pharmaceutical companies' R&D confidence, with post-financing funds flowing to core CXO service areas, driving order growth. Second, the global pharmaceutical R&D focus has shifted toward biologics and complex molecules, with explosive demand in emerging therapeutic areas such as peptides/oligonucleotides, ADCs, and gene and cell therapies, bringing new opportunities to the CXO industry. Third, technological innovation has driven progress, with AI-driven drug discovery enhancing industry efficiency and competitiveness.

Yuan Shuai, Deputy Secretary-General of the Zhongguancun Internet of Things Industry Alliance, noted that in recent years, the CXO industry has shown rapid development globally. As pharmaceutical R&D costs continue to rise and development cycles extend, more pharmaceutical and biotechnology companies are choosing to outsource part or all of their R&D work to professional CXO institutions. This not only helps reduce costs and improve efficiency but also accelerates the drug approval process.

**Performance Differentiation Emerges**

Despite overall industry recovery, the chill in the CXO industry has not completely dissipated. During the reporting period, Innocare, Porton Advanced Solutions and other stocks experienced significant net profit declines, indicating uneven industry recovery with some companies still facing challenges.

Among them, Tigermed, which ranked third in revenue scale among the 28 stocks, experienced both revenue and attributable net profit declines during the reporting period. While Tigermed's revenue was slightly higher than Asymchem's, the net profit gap between Tigermed and Asymchem widened further.

Financial data shows that Tigermed achieved operating revenue of approximately 3.25 billion yuan in the first half, down 3.21% year-over-year; corresponding attributable net profit was approximately 383 million yuan, down 22.22% year-over-year. Additionally, Tigermed's main business gross margin decreased from 39.1% in the same period last year to 29.4%.

Tigermed's revenue decline was mainly due to decreased income from the clinical trial technical services segment. The company explained that domestic innovative drug clinical operation business revenue declined year-over-year, mainly due to industry cycles and structural changes. As of the end of 2024, the company's existing domestic innovative drug clinical operation order backlog decreased compared to previous years, leading to reduced overall workload for domestic innovative drug clinical trials executed by the company in the first half. Additionally, since 2023, affected by domestic industry competitive dynamics, the average unit price of new domestic clinical operation orders has declined, resulting in reduced revenue for the same workload when executing such orders in the first half. Furthermore, during the reporting period, some domestic innovative drug clinical operation orders were still cancelled, and some orders were actively terminated by the company due to client funding issues and significant collection pressure. These orders mainly came from domestic startup biotechnology companies dependent on external financing, negatively impacting segment revenue.

Additionally, Innocare, Porton Advanced Solutions, Hightide Therapeutics and other stocks experienced significant net profit declines in the first half. Innocare reported an attributable net loss of approximately 15.19 million yuan in the first half, turning from profit to loss year-over-year.

This differentiation phenomenon indicates that while the CXO industry is recovering overall, companies with technical advantages, diversified customer structures, and comprehensive global layouts can more quickly seize market recovery opportunities, while companies overly dependent on single businesses or specific markets may face longer adjustment periods.

According to Deng Yong, the performance differentiation among CXO companies indicates the industry is undergoing structural adjustment, with market share concentrating toward advantaged companies. For leading CXO companies, they should continue strengthening international layouts and deeply embed in global ecosystems; focus on emerging therapies and increase investment and capacity building in areas such as peptides/oligonucleotides, ADCs, and gene and cell therapies; and leverage technological innovation to enhance competitiveness, such as optimizing production processes through AI.

For small and medium CXO companies, they can focus on niche areas; strengthen cooperation with leading companies to become part of their industrial chains; and enhance specialized service capabilities to form unique advantages in specific technologies or processes.

**All Stock Prices Rose This Year**

In capital markets, CXO stock performance also reflects industry recovery trends. East Money Choice data shows that as of the close on September 3, all 28 CXO stocks posted gains this year.

Specifically, 6 stocks recorded gains between 10%-30%, including Tigermed, Pharmaron, and Innocare; 6 stocks posted gains between 30%-50%, including Asymchem, Betta Pharmaceuticals, and Jiuzhou Pharmaceutical; 10 stocks recorded gains between 50%-100%, including Haoyuan Chemexpress, Asymchem Laboratories, and Hightide Therapeutics.

Six stocks posted gains exceeding 100%, achieving doubled returns. Nanmo Biology recorded the highest year-to-date gain among the 28 stocks at 142.21%. Additionally, Chengdu Synthetech, Medicilon, and WuXi AppTec also recorded significant gains of 134.63%, 121.41%, and 105.82% respectively.

It was noted that stocks with leading price gains mostly reported positive first-half performance. Nanmo Biology achieved attributable net profit of approximately 18.17 million yuan in the first half, turning from loss to profit year-over-year; Chengdu Synthetech recorded the highest net profit growth among the 28 stocks.

Among the 6 stocks that doubled, only Sunshine Guojian saw first-half net profit decline. However, Sunshine Guojian is currently planning a restructuring, with the company proposing to acquire 100% equity of Jiangsu Longyan Life Science Holding Co., Ltd. under actual controller Li Qian.

Industry insiders believe the CXO sector's stock price recovery stems partly from fundamental support from improved individual stock performance, and partly from the warming global pharmaceutical investment and financing environment. Since this year, innovative drug R&D activities have become active again, particularly in hot areas such as obesity, Alzheimer's disease, and tumor immunology, bringing abundant orders to CXO companies.

Meanwhile, the domestic pharmaceutical innovation environment continues to optimize. Not only innovative drug companies, but also an increasing number of traditional pharmaceutical companies are increasing innovative drug R&D investment, providing broad market space for domestic CXO companies.

Looking ahead, whether the CXO industry recovery momentum can continue has become a market focus. Most experts believe that with accelerating global population aging trends and upgraded health demands, the long-term growth logic of pharmaceutical R&D remains unchanged, and the CXO industry still has broad development space. However, only companies with core competitive advantages and sustained growth capabilities can stand out in the global pharmaceutical R&D wave and enjoy long-term industry development benefits.