Caitong: The raw material pharmaceutical sector is expected to see a cyclical rebound with the innovation chain driving the second growth curve.

Caitong released a research report stating that the chemical raw material pharmaceutical industry is under long-term pressure and has experienced a downturn. With the rise in upstream costs, policy-driven consolidation, and the maturation of new drug trends such as GLP-1 oral small molecules and small nucleic acids, leading raw material pharmaceutical companies, leveraging their core advantages in MNC supply chains, are expected to transition from cyclical stocks to innovative ShenZhen New Industries Biomedical Engineering stocks, initiating a second growth curve. Key points from Caitong include: Long-term pressure on the chemical raw material pharmaceutical PPI index In recent years, the raw material pharmaceutical industry has experienced tough times. Prices of various products have fallen, with prices of products like sartans, heparins, and animal drugs dropping to historic lows, leading some leading companies to even operate at a loss. At the same time, the price reduction effects of centralized procurement for pharmaceutical preparations have gradually spread to upstream raw materials, leading to a continuous decline in raw material pharmaceutical profit margins. The chemical raw material pharmaceutical PPI index is under long-term pressure. Raw material pharmaceutical companies are expected to initiate a second growth curve With the rise in raw material prices and exchange rates, policies against internal consumption are expected to drive the accelerated consolidation of the raw material pharmaceutical industry. Meanwhile, the maturing trend of emerging industries could lead to raw material pharmaceutical companies embarking upon a second growth curve. As prices of upstream raw materials related to petrochemicals are on the rise, coupled with policies against internal consumption driving accelerated consolidation in the raw material pharmaceutical industry, and the maturing trend of emerging industries such as small nucleic acids, GLP-1 oral small molecules, and oral cyclopeptides, benefiting from the continuous realization of downstream customer commercialization, raw material pharmaceutical companies are expected to initiate a second growth curve. GLP-1 small molecules and small nucleic acid drugs are undergoing a revolution, and the trend of the raw material pharmaceutical industry has already taken shape By 2026, GLP-1 small molecule oral drugs (such as Lilly's Orforglipron) and small nucleic acid chronic disease drugs will both undergo an industrial revolution simultaneously, giving rise to a global demand for APIs and intermediates, as the trend of the industry has already taken shape, companies positioning themselves in MNC supply chains like Lilly, Novo Nordisk, Alnylam, will be able to transition from "cyclical chemical stocks" to "innovative ShenZhen New Industries Biomedical Engineering chain" targets. At a time when entering MNC supply chains has become extremely difficult, securing a position in the supply chain of leading customers is the core competitiveness of raw material pharmaceutical companies, and these barriers will determine that the industry will present a "stronger strengths" pattern. Investment advice: Focus on leading intermediates, raw material pharmaceutical, and CDOM companies, recommend paying attention to companies such as Chengda Pharmaceuticals, Lianhe Chemical Technology, WuXi AppTec, Asymchem Laboratories, Jiuzhou Pharmaceuticals, Aurisco Pharmaceutical, Tianyu Pharmaceuticals, Pharmaron Beijing, Porton Pharma Solutions, etc. Risk warning: Risks of commercialization falling short of expectations; risks of trade frictions; risks of capacity expansion falling short of expectations.