HAITONG INT'L: The overseas innovative drug industry chain is showing a structural recovery trend.

HAITONG INT'L released a research report stating that in the third quarter of 2025, the overseas CXO industry has shown resilience under macroeconomic pressures, and overall business sentiment has bottomed out and stabilized. With the recovery of macroeconomic indicators such as interest rate reductions and investment, it is recommended to pay attention to the overall recovery of domestic CXOs. Key points from HAITONG INT'L: - Confirmation of the bottoming out of overseas CXO business sentiment, showing a structural recovery trend - The industry has passed the cyclical bottom, but the recovery is showing significant structural differentiation. Clinical CROs (represented by IQVIA and Medpace) have become the pioneers of recovery with strong orders and forward guidance; CDMOs (represented by Lonza) demonstrate resilience through long-term contracts; while preclinical CROs (Labcorp, Charles River) and research services (Danaher) are still in the "mixed signals" stage with improvements in inquiry or order cancellation rates. The industry is judged to have entered the early stages of an upturn in business sentiment, but the intensity and sustainability of the overall recovery will depend on the continuation of the biotechnology funding frenzy. Clinical CROs: Benefit from pharmaceutical pipeline investment, highest visibility in orders and performance 1) IQVIA: Data showing overall improvement, solid leading position. Net book-to-bill is 1.15, with RFP flow increasing by about 20% year-on-year, while cancellation amounts have returned to a normal level of $2.2 billion annually from over $3 billion previously; 2) Medpace: Showing the strongest performance, with a high Net book-to-bill of 1.20, and more critically, its pre-backlog size is over $3 billion with a year-on-year increase of over 30%, providing high visibility for its income in 2026, hence the guidance for "low double-digit income growth" in 2026; 3) ICON: Demand is picking up, but fluctuations in project execution are still impacting short-term performance. Despite double-digit growth in RFPs and early confirmation of the business sentiment bottoming out, $900 million project cancellations are still suppressing the net book-to-bill ratio to 1.02 . CDMOs: High certainty with long-term contracts, less affected by short-term funding fluctuations 1) Lonza: Steady performance. The company's strategic long-term agreement with Vacaville, as well as the structure where "early business accounts for only 10% of revenue," gives it natural resilience to fluctuations in biotechnology funding. At the same time, production capacity in America, Europe, and Asia has become the preferred choice for customers in uncertain environments; 2) Samsung Biologics: Maintaining unchanged revenue growth guidance of about 25%-30% for the full year and cumulative contracts exceeding $20 billion, demonstrating its strong order backlog and growth visibility; 3) Synegene faces short-term profit pressure, but the signing of the first global Phase III clinical trial order and the new production capacity for ADCs/peptides will begin production gradually from H2, showing that it is in a key stage of upgrading capabilities and climbing orders. Investment recommendations: Focus on CXO companies with global competitive advantages such as WuXi AppTec, WUXI XDC, WUXI BIO, Pharmaron Beijing, Asymchem Laboratories, Porton Pharma Solutions, Zhejiang Jiuzhou Pharmaceutical, etc.; focus on innovative drug industry chain-related companies with gradually improving profitability such as Shanghai Haoyuan Chemexpress; focus on companies with primarily domestic revenue that are expected to gradually recover as innovative drugs go global, such as Hangzhou Tigermed Consulting; also suggest focusing on Bide Pharmatech, BaioSatu, etc. Risk warnings: The sustainability of the biotechnology funding recovery, unexpected interest rate cuts, geopolitical uncertainties such as the PAMA legislation and tariff policies in the United States are still uncertainties.