Sinolink: Domestic pharmaceutical supply chain sentiment continues to improve, suggesting to grasp the two main core themes of the CXO industry.

Sinolink released a research report stating that global pharmaceutical investment and financing are expected to bottom out and recover by 2025, with a total of $192.1 billion in the first 11 months. Both domestic and foreign markets are improving simultaneously, with a trend of traditional tracks stabilizing while new tracks such as ADC and bispecific antibodies are gaining momentum. Since 2025, the popularity of AI pharmaceutical technology has been on the rise, the global innovative drug market continues to thrive, and with the rebound in domestic biopharmaceutical investment and financing, industry market attention is increasing steadily, showing a clear trend of fundamental recovery. Looking ahead to 2026, it is recommended to focus on leading companies in the industry and targets with a high proportion of overseas business, the two main core themes in the CXO industry. Key points from Sinolink include: Breakthrough in research and development capabilities, highlighting global competitiveness Since 2025, global pharmaceutical investment and financing have bottomed out and recovered, with a total of $192.1 billion in the first 11 months. Both domestic and foreign markets have improved simultaneously, with a trend of traditional tracks stabilizing while new tracks such as ADC and bispecific antibodies gaining momentum. Global and Chinese biopharmaceutical BD collaborations continue to heat up, with both the number and amount of transactions increasing. Chinese innovative drugs are entering a stage of intensive expansion overseas, with License-out transactions becoming a major trend in cross-border transactions. Chinese innovative drug research and development capabilities are becoming prominent, with the number of INDs, NDAs, and approved products increasing continuously. In areas such as ADC and cell therapy, China leads in the number of products under research, becoming the world's second in FIC molecules, and the time difference between the launch of original drugs in China and the US has significantly shortened, indicating that China's innovative drugs have entered a stage of comprehensive harvest. Continuous support from various policies, industry trends trending upwards Since 2025, the pharmaceutical industry policies have been continuously optimized, with less marginal impact from centralized procurement and a shift towards quality-oriented measures. The eleventh batch of centralized procurement has introduced measures against "concussion", ensuring the selection rate and reasonable price difference through anchor pricing and resurrection mechanisms, while raising the quality and market size thresholds. Biosimilar centralized procurement is expected to begin in 2026, with a moderate decline predicted. In addition, multiple departments have introduced policies to support the entire chain, optimizing the review and approval process for innovative drugs, as well as procurement access and payment linkages. Medical insurance funds are shifting towards innovative drugs, and commercial insurance directories are expanding to form a diverse payment system, supporting the rapid growth of innovative drugs and the high-quality development of the industry. Achievements are clear: innovative drug companies are gradually entering a period of harvest Biotech period costs continue to improve, approaching break-even point. Local companies continue to innovate, and 2026 will be a year of intensive catalysis for Biotech. Domestic and international resonance, focus on high-quality tracks and overseas strategies Global traditional blockbuster drug growth is slowing down, multinational pharmaceutical companies are facing patent cliff pressure, and the need to replenish pipelines. In this context, Chinese innovative drugs demonstrate substitution potential in multiple tracks: PD-1 bispecific antibodies are expected to iterate existing monoclonal antibodies with outstanding efficacy, ADC drugs have significant potential for iterative chemotherapy in a wide variety of tumors, and small nucleic acid drugs have become popular tracks due to their unique mechanisms. Simultaneously, innovative drugs in the treatment areas of atopic dermatitis, psoriasis, COPD, etc., are making progress, and the development and commercialization of GLP-1 drugs are accelerating. Domestic companies are intensively deploying and expanding overseas through BD cooperation, becoming core targets for global pharmaceutical companies to collaborate. Pharmaceutical supply chain: Continued upward trend in prosperity, industry expansion driven by new technology directions Since 2025, the popularity of AI pharmaceutical technology has been on the rise, the global innovative drug market continues to thrive, and with the rebound in domestic biopharmaceutical investment and financing, industry market attention is increasing steadily, showing a clear trend of fundamental recovery. Looking ahead to 2026, investments in the CXO industry can focus on two core themes: 1) Prioritize positioning in leading companies in the industry: Leading companies, with technological barriers, production scale, and customer resource advantages, are expected to occupy a larger market share during the industry recovery cycle, with stronger performance growth certainty; 2) Focus on targets with a high proportion of overseas business: Companies with high overseas market demand stability and continuous commercial order dividend releases are able to effectively hedge against the uncertainties of the domestic market, achieving steady growth. At the same time, as the benefits of the rebound in domestic biopharmaceutical investment and financing gradually spread, various CRO sub-sector companies domestically are expected to gradually reach turning points in performance, with long-term value for investment. Risks: Exchange rate risks, domestic and foreign policy risks, risks of clinical trial progress falling below expectations, risks of product approval and review progress falling below expectations.