Sinolink: Clear signals of an upward trend in the pharmaceutical supply chain, with domestic and foreign demand resonating and driving performance acceleration.

Sinolink released a research report stating that the outlook for the CXO sector in 2026 is clearly trending upward. The enthusiasm for global innovative drug research and development continues to rise, with solid industry fundamentals and a clear upward trend. Once the price of raw materials continues to rise, it is expected to sustain good profitability, and it is recommended to pay attention to the profit elasticity brought about by subsequent price increases. The pharmaceutical supply chain industry is entering a new round of recovery and upward cycle with resonance of internal and external demand, volume increase in new molecular tracks, and improvement in orders and performance seasonally. It is recommended to pay attention to companies related to the CXO sector, raw material companies, and upstream life sciences companies. Key points from Sinolink: CXO industry chain: The signal of upward trend in prosperity is clear, global biomedicine investment and financing levels have significantly improved, and the industry's recovery momentum continues to strengthen. In 2025, the overseas biomedicine investment and financing amounted to 198.1 billion US dollars, a significant increase of 57% compared to 126.1 billion US dollars in 2024; driven by continuous BD activities in the domestic market, pharmaceutical companies have increased their willingness to cooperate, and demand has shown explosive growth. The report believes that the upward trend in prosperity of the CXO sector in 2026 is clear, and the industry has entered a new round of recovery and upward cycle with resonance of internal and external demand, volume increase in new molecular tracks, and improvement in orders and performance seasonally. Comprehensive CDMO companies lead the industry recovery, and new technological directions continue to drive industry expansion. In 2024, due to disturbances from geopolitical factors, the CDMO sector's revenue remained basically flat compared to the same period in 2023; in 2025, the CDMO industry was the first to reach a turning point in recovery, with sector growth significantly increasing to 17%; in the first quarter of 2026, in the face of unfavorable background of RMB appreciation and significant pressure on performance, the revenue growth of the CDMO sector further increased to 20%, demonstrating strong resilience. The global enthusiasm for innovative drug research and development continues to rise, coupled with the concentrated release of research and development demand in emerging tracks such as GLP-1, ADC, peptides, and oligonucleotides, bringing sufficient overseas order increment to domestic CDMO companies, with solid industry fundamentals and a clear upward trend. Domestic BD transactions are hot, driving significant domestic demand recovery and substantial improvement in orders. In 2024, the revenue growth rate of the CRO sector fell by 8% year-on-year, and in 2025, the revenue growth rate narrowed to 3%, indicating a clear bottoming signal for the industry; in the first quarter of 2026, the revenue growth rate successfully returned to positive growth, with a year-on-year growth of 14%, showing signs of recovery. The scale of investment and financing has rebounded significantly, fully reflecting the continuous restoration of confidence in the capital market in the innovative drug track. In addition, with the rising heat of industrial BD transactions and the revaluation of high-quality research assets, further driving pharmaceutical companies to increase research and development expenses, expand pipeline layout, and increase innovation investment. With the significant increase in research and development willingness of pharmaceutical companies, demand continues to be led to the domestic CRO industry chain, as seen from the order data disclosed by various CRO companies in 2025, domestic orders have shown a significant improvement, and the logic of domestic demand recovery continues to be realized. Raw materials: Profitability continues to improve, and the industry is expected to have opportunities for price increases. Affected by the continuous increase in international oil prices and the high overseas energy costs, various chemical products have generally experienced significant price increases, among which solvent products, due to their difficulty in stockpiling, have seen continuous high market prices, becoming one of the most elastic categories in this round of chemical price increases, directly driving the cost increase of downstream industries such as pharmaceutical intermediates and raw materials. influenced by the increase in upstream raw material costs, downstream raw material products may have opportunities for price increases. Taking into account the fact that customer inventory levels have been at a low level for a long time, once the price increase is expected to be sustainable, it is recommended to pay attention to the profit elasticity brought about by subsequent price increases Upstream life sciences: Prosperity is steadily recovering, and sector performance continues to improve. Domestic research and development investment in basic research and the biomedicine industry continues to increase, driven by strong downstream demand for innovative drug research and development, and the continuous acceleration of the domestic substitution process under policy support, the market penetration rates of core products such as research instruments, biological reagents, and experimental consumables are steadily increasing, driving the quarterly improvement of corporate revenue and profit levels, with a clear trend of fundamental recovery. The current industry landscape is still relatively fragmented, with a large number of small and medium-sized manufacturers and noticeable homogenization competition. Driven by technological barriers, economies of scale, and channel service barriers, the trend of industry leaders' integration is expected to continue deepening. Risk warning Exchange rate risk; domestic and foreign policy risks; risks of clinical trial progress falling short of expectations; risks of product approval progress falling short of expectations.