Performance divergence and valuation recovery: Is the CXO industry entering a structural bull market?

Ask AI · CXO industry performance diverges; how can high-growth segments drive big leaders’ growth?

21st Century Business Herald reporter Han Liming, intern Jiang Yutong

In recent days, several CXO (pharmaceutical contract outsourcing services) companies have successively released their 2025 financial reports. Unlike 2024, when the industry was generally under pressure and many companies saw both revenue and net profit decline, the CXO industry as a whole in 2025 has shown a trend of performance divergence.

Specifically, on the one hand, WuXi AppTec, Tigermed, and Brockton Pharmaceuticals have reversed the decline trend from 2024, delivering both revenue and net profit growth. Among them, on the revenue side, WuXi AppTec and Brockton Pharmaceuticals saw year-over-year increases of 15.84% and 14.91%, respectively; on the profitability side, Tigermed’s profit attributable to shareholders surged 119.15% year over year.

On the other hand, Innovent? (Actually: WuXi?); Zai? (康龙化成) achieved operating revenue of RMB 14.095 billion, up 14.82% year over year, but over the same period, profit attributable to shareholders was RMB 1.664 billion, down 7.22% year over year, showing an “increase in revenue without an increase in profit” pattern. Zhaoyan? (昭衍新药) achieved operating revenue of RMB 1.658 billion, down 17.87% year over year, while profit attributable to shareholders was RMB 298 million, up 302.08% year over year, delivering “increased profit without increased revenue.”

Reflecting this in the A-share market, data from Wind shows that in 2025, the CXO sector’s valuation repair has been obvious. Judging by the price returns by segment, for the full year of 2025, Zhaoyan? (昭衍新药), Chengda Pharmaceutical, and Haa? (皓元医药) all saw their stock prices rise more than 100% within the year; while Medact? (美迪西), WuXi AppTec, Sunshine? (阳光诺和), and BaiCheng Pharmaceutical (百诚医药) all saw within-year gains of more than 50%.

A broker analyst told the reporter at the 21st Century Business Herald that, with a rebound in downstream innovative drug investment sentiment, continued improvement in industry order demand, and the delivery of leading companies’ performance exceeding expectations—multiple positive factors have converged—since 2025 the CXO industry’s market sentiment has kept warming up. As forward-looking indicators such as newly signed orders and orders on hand in 2025 have performed beyond expectations, it is expected that, in the short term, there remains upside space for industry earnings forecasts.

High-growth segments drive a structural rally

Currently, China’s CRO (pharmaceutical research outsourcing) industry is in a stage of industry consolidation and demand recovery. On the one hand, according to data on human genetic resources filings from the National Health Commission, the number of clinical CRO companies filed in 2025 decreased by 69% from the peak in 2021; the further consolidation of the clinical research outsourcing industry is making competition increasingly benign.

On the other hand, as China’s biopharmaceutical industry gradually recovers, it is driving a steady rebound in demand for clinical research outsourcing services. Meanwhile, as Chinese pharmaceutical companies accelerate their push to go overseas, the activity of License-out transactions increases, and clinical CRO companies with global service capabilities gradually stand out with competitive advantages.

Based on the specific operating data of CXO companies that have already disclosed annual reports, industry leader WuXi AppTec stands out particularly. In 2025, revenue exceeded RMB 45.456 billion, and profit attributable to shareholders reached RMB 19.151 billion, maintaining the #1 position in the industry rankings.

From the perspective of business segments, the company’s chemical business contributes the largest absolute revenue volume. For the full year, revenue reached RMB 36.466 billion, up 25.52% year over year, accounting for more than 80% of total revenue. The main growth drivers come from three aspects: small-molecule drug discovery business continues to draw downstream demand; small-molecule process R&D and manufacturing business maintains strong growth; and the TIDES business (oligonucleotides and peptides) keeps delivering rapid growth.

In its annual report, WuXi AppTec states plainly that as newly added production capacity in 2024 ramps up quarter by quarter, in 2025 TIDES business revenue reached RMB 11.37 billion, up 96.0% year over year. As of end-2025, TIDES orders on hand increased 20.2% year over year. The number of TIDES D&M service customers increased 25% year over year, and the number of served molecules increased 45% year over year.

Laboratory chemistry, as the starting point and an important component of Kanglong? (康龙化成) development, covers service projects including small-molecule chemical drugs, oligonucleotides, peptides, antibodies, antibody-drug conjugates (ADCs), and cell and gene therapy products, among others. In the reporting period, it achieved operating revenue of RMB 8.159 billion, up 15.78% from the same period last year; for FY 2025, gross margin was 45.10%, up 0.18 percentage points from the same period last year; and new signed orders for the segment increased about 12% year over year.

Zhaoyan? (昭衍新药) also stated in its 2025 annual report that for the whole year, the company’s project signing volume for antibodies, small nucleic acids, ADCs, and peptide drugs increased significantly year over year. High-difficulty, long-cycle studies such as in vivo reproductive toxicology studies in non-human primates and carcinogenicity studies also maintained a stable upward trend.

Regarding industry growth logic, a research report from Xiangcai Securities points out that in 2025, the growth of the CXO industry is not a broad-based recovery driven by everyone, but rather a structural rally driven by high-growth segments such as GLP-1 (weight-loss drugs) and ADCs.

A research report from Wanyun Securities also analyzed that since 2024, as the marginal improvement in global fundraising and investment environment and the surge in R&D demand for hot targets such as GLP-1 and new technologies such as ADCs have emerged, preclinical CRO orders have rebounded significantly. This suggests that the preclinical CRO industry has moved out of the low point and has officially entered a new stage of “recovery + concentration.”

Price impact eases

Since 2023, under the intensifying competitive landscape in China’s CXO industry, the average unit price of newly signed orders for domestic clinical operations has declined, becoming one of the major challenges constraining industry companies’ profitability. However, based on industry performance in 2025, the impact of order price declines may gradually ease.

In its annual report, WuXi AppTec states plainly that during the reporting period, its testing business (WuXi Testing) generated gross profit of RMB 1.182 billion, with gross margin down 6.32 percentage points from the same period last year. This was mainly due to market factors, and price factors increasingly show up as orders convert. The company’s biology business (WuXi Biology) achieved gross profit of RMB 928 million, with gross margin down 3.04 percentage points from the same period last year, also mainly dragged by market price factors.

Tigermed said that during the reporting period, clinical trial technology services revenue was RMB 3.267 billion, up slightly 2.79% year over year. Among them, revenue from domestic innovative drug clinical operations declined year over year, mainly due to industry cycle and structural changes. As of end-2024, the value of the existing on-hand orders for domestic innovative drug clinical operations had decreased compared with previous years, leading to an overall decline in the amount of domestic innovative drug clinical trial work executed by the company in 2025. “However, in 2025, the average unit price of newly signed orders for the company’s domestic clinical operations has already stabilized.”

Wanyun Securities’ research report also points out that with the clearing of excess tail capacity and orders concentrating toward the top, the industry’s prior vicious “price war” situation has been mitigated. Top-tier companies can maintain or even increase service prices thanks to technical barriers and service quality, thereby driving margin repair and achieving “value returning.”

In terms of order backlog, many CXO companies’ order on hand and newly signed order performance in 2025 has been strong, providing solid support for earnings growth in 2026 and beyond.

As of end-December 2025, WuXi AppTec’s orders on hand for continuing operations reached RMB 58.0 billion, up 28.8% year over year. Based on the current orders on hand and other factors, the company predicts that its total revenue in 2026 will reach RMB 51.3–53.0 billion, with continuing operations revenue rising 18%–22% year over year.

In its annual report, Tigermed stated that in 2025, the average unit price of newly signed orders has stabilized and is expected to return to a growth trend in 2026. As of the end of the reporting period, the company’s accumulated contract amount pending execution was RMB 18.20 billion, up 15.3% year over year.

In 2025, Kanglong? (康龙化成) new signed order amount increased by more than 14% year over year. Combined with the situation of newly signed orders and business development trends, the company expects full-year 2026 revenue to grow 12%–18% year over year. BeiGene? (凯莱英) orders on hand totaled USD 1.385 billion, up 31.65% from the same period last year. Orders in its chemical large-molecule and biological large-molecule businesses grew rapidly, which is expected to lay a solid foundation for accelerating further growth in subsequent performance.

Where will things go next?

From the perspective of long-term industry prospects, the sustained growth in global pharmaceutical R&D investment provides a broad market space for the CXO industry. According to the Frost & Sullivan report, global pharmaceutical R&D investment is expected to grow from USD 277.6 billion in 2024 to USD 476.1 billion in 2034. The global CDMO market size is expected to reach USD 231.0 billion by 2030.

Against this backdrop, although geopolitical risk is still hanging over the market, internationalization remains an important direction for domestic CXO companies to strengthen their efforts. During the reporting period, several leading companies’ overseas revenue increased steadily.

In 2025, WuXi AppTec’s continuing operations revenue reached RMB 43.42 billion, including revenue from U.S. customers of RMB 31.25 billion, up 34.3%; revenue from European customers of RMB 4.82 billion, down 4.0% year over year. Kanglong? (康龙化成) revenue from North American customers was RMB 8.714 billion, up 10.97%, accounting for 61.82% of the company’s operating revenue; revenue from European customers (including the UK) was RMB 2.895 billion, up 27.42%, accounting for 20.54% of operating revenue.

In addition, Tigermed’s overseas core business revenue reached RMB 3.107 billion, up 2.75% year over year. The overseas revenue growth was mainly driven by overseas clinical business. BeiGene? (凯莱英) revenue from overseas market customers was RMB 4.921 billion, up 14.85%.

While advancing internationalization strategies, with breakthrough progress in artificial intelligence (AI) technology, technological innovation has become a key driving force for the CXO industry’s transformation and upgrading and for enhancing core competitiveness. AI’s application in pharmaceutical R&D is moving from concept to value realization.

Among them, Medact? (美迪西) also said in investor research recently that it has built a “human cell model—AI prediction—organoids” three-in-one innovative technology service platform, improving a series of important innovation R&D technology platforms, such as a one-stop preclinical R&D service platform for innovative drugs based on AI technology. At the same time, it develops AIADMET prediction models to improve the efficiency and success rate of drug development.

Tigermed also emphasized in its annual report that the integration between digitalization, intelligence, and clinical research is deepening, and improving clinical trial efficiency has become an industry consensus. The value of high-quality and compliant data assets stands out, and AI enablement has become an important capability to improve industry competitiveness. The company will treat digitalization and intelligence as its core development strategy, coordinating and advancing progress through its Intelligent Research Institute, implementing all tasks steadily throughout the year, and striving to achieve deep integration between technology and business.

In fact, many AI drug-discovery companies are already teaming up with innovative drug companies to promote the on-the-ground adoption of AI technology in pharmaceutical R&D. For example, since this year, companies such as Insilico Medicine and Recursion? (晶泰科技) have reached R&D cooperation agreements with multiple domestic and international pharmaceutical companies, and the commercial value of AI drug discovery is gradually becoming visible.

In its annual report, Insilico Medicine also clearly mentioned that with the help of its Pharma.AI platform, the average time from target discovery to the confirmation of a PCC (preclinical candidate compound) for candidate drugs is only 12 to 18 months, far shorter than the average 4.5 years of traditional R&D methods, showing a significant R&D efficiency advantage. As AI drug discovery companies continue to enter the market, the competitive landscape of the CXO industry will also undergo new changes.

Currently, the CXO industry, driven by stable global outsourcing demand and hit-drug segments such as GLP-1, is expected to become a pioneer in the reversal of the medical services sector. At the same time, a Xiangcai Securities research report also points out that the industry is undergoing intense segmentation, with resources and orders accelerating toward large leaders such as WuXi AppTec, forming a pattern of “CDMO outperforming CRO, and large enterprises outperforming small and medium-sized enterprises.” In this process, the pace of industry mergers and acquisitions is noticeably accelerating, and leading companies are expanding their footprint by acquiring smaller firms. In the future, the CXO sector’s market performance may further diverge from the performance of innovative drug sub-sectors, driven by the certainty of overseas business and the gradual recovery of domestic demand.