According to a research report, based on statistics from Pharmcube, domestic innovative drug financing reached $7.75 billion in the first eight months of 2025, representing a year-over-year increase of approximately 89%. Secondary market financing amounted to $5.135 billion, up about 304% year-over-year. Domestic innovative drug financing has begun to recover from the bottom, with Hong Kong stock market recovery and BD overseas expansion playing important roles.
CDMO companies generally have high overseas revenue ratios. Since 2024, overseas investment and financing demand has recovered first, with new signed orders beginning to improve and gradually converting to 2025 financial statements. The first half of 2025 continues the positive order trend. Benefiting from strong demand for new molecules such as peptides and ADC, leading CDMO companies have generally begun to expand into these emerging sectors, driving continuous high growth in related businesses.
**CXO Overall Supply-Demand Relationship Improving, Market Recovery Underway**
Demand Side: The CXO industry essentially follows a "pick-and-shovel" business model, with its prosperity highly correlated with biopharmaceutical industry investment and financing. According to Pharmcube statistics, overseas innovative drug financing reached $22.6 billion in the first eight months of 2025, down approximately 36% year-over-year. Delayed interest rate cut expectations led to a slight decline in overseas financing conditions. With the Federal Reserve restarting rate cuts, overseas financing conditions are expected to recover.
Domestic innovative drug financing in the first eight months of 2025 totaled $7.75 billion, up approximately 89% year-over-year, with secondary market financing of $5.135 billion, up about 304% year-over-year. Domestic innovative drug financing has begun to recover from the bottom, with Hong Kong stock recovery and BD overseas expansion playing crucial roles.
Supply Side: Since 2023, the CXO industry has entered a contraction cycle. With industry demand recovery, leading companies are expected to re-enter expansion cycles. For example, WUXI APPTEC expects capital expenditure of 7-8 billion yuan in 2025, while WUXI BIO expects approximately 5.3 billion yuan in capital expenditure for 2025, both showing significant increases compared to 2024, demonstrating leading companies' confidence in market demand recovery.
Compared to leading companies, small and medium-sized CXO companies will face greater competitive pressure, with relatively weaker risk resistance capabilities at the industry cycle bottom. They are expected to gradually exit the market, with industry competitive landscape likely to concentrate toward leading players.
**CDMO: Expanding into Emerging Sectors with Sustained High Growth**
Since Q4 2024, leading CDMO companies' performance has generally begun marginal improvement, mainly due to several factors:
1) CDMO companies generally have high overseas revenue ratios. Since 2024, overseas investment and financing demand has recovered first, with new signed orders beginning to improve and gradually converting to 2025 financial statements. The first half of 2025 continues positive order trends.
2) CDMO's unique business model allows leading companies to generally possess rich project reserves and complete funnel structures. Project pipelines have inherent amplification logic - even when new project signing faces periodic challenges, advancement of existing projects can still drive performance growth.
3) Benefiting from strong demand for new molecules such as peptides and ADC, leading CDMO companies have generally begun expanding into these emerging sectors, driving continuous high growth in related businesses. WUXI APPTEC's TIDES business and WUXI XDC's ADC business are most typical examples.
**CRO: Downstream Demand Recovery Imminent, Inflection Point Expected**
Unlike leading CDMO companies, leading CRO companies continue to show performance differentiation, with some already beginning to recover, likely related to their business characteristics or operating cycles. From quarterly trends, Q2 2025 performance was generally in an improvement process, especially from the profit perspective, with most companies achieving profitability turnarounds.
Although many CRO companies still face performance pressure, orders as leading indicators have already improved first. In the first half of 2025, most CRO companies' order situations showed varying degrees of growth compared to 2024.
Laboratory monkey prices have risen slightly since 2025, potentially indicating imminent recovery in preclinical CRO demand. Laboratory monkeys are scarce resources, making CRO leading companies with laboratory monkey resources worthy of key attention.
Artificial intelligence (AI) applications can empower various stages of new drug development, shortening development cycles, reducing costs, and improving efficiency. Domestic leading CRO companies have generally begun deploying AI+ pharmaceutical development.
**Investment Recommendations**
Based on iFind consensus expectations, most leading CXO companies currently trade at PS valuations of 5-10x and PE valuations of 20-50x. Considering business characteristics, operating trends, and valuation reasonableness, ten representative companies are selected for key attention: WUXI APPTEC (02359), WUXI BIO (02269), WUXI XDC (02268), PHARMARON (03759), ASYMCHEM (06821), JOINN (06127), Pulo Pharmaceutical (000739.SZ), Haoyuan Pharma (688131.SH), Sunshine Guojian (688621.SH), and Porton Advanced (301257.SZ).
1) WUXI APPTEC: TIDES business expected to maintain high growth 2) WUXI BIO: Abundant project reserves, PPQ projects entering harvest period 3) WUXI XDC: Conjugated drug market demand maintains high growth 4) PHARMARON: Frontend CRO benefits from rate cuts, backend CMC continues conversion 5) ASYMCHEM: Emerging businesses expected to become high-growth engines 6) JOINN: Downstream demand recovering, possesses scarce laboratory monkey resources 7) Pulo Pharmaceutical: CDMO business expected to continue exceeding expectations 8) Haoyuan Pharma: ADC-focused with positive backend order trends 9) Sunshine Guojian: CRO business shows resilience, firm innovation R&D transformation 10) Porton Advanced: Downstream demand recovery, AI empowerment for cost reduction and efficiency improvement
**Risk Factors**
Risk of innovative drug investment and financing falling short of expectations; risk of new signed orders falling short of expectations; risk of intensified industry competition; geopolitical and tariff risks.