Orient: High operating performance in the CXO industry, steady realization of business performance.

Orient released a research report stating that based on the latest data of key indicators of CXO confidence, multiple factors such as domestic funding, research and development, and orders are resonating upwards in the first five months of 2026, leading to a sustained high level of confidence in the domestic CXO industry. The bank believes that domestic CXO companies have sufficient orders and prices are rising, and as these orders are executed, there will be significant improvements in financial statements. The main points of Orient's view are as follows: Funding side: Multiple resonances, financing improving 1) Primary market: Continuation of heat, concentration of top players. In the first five months of 2026, the total investment and financing amount in the domestic medical and health primary market reached 41.7 billion yuan, a year-on-year increase of 57%. The number of investment and financing transactions during the same period increased only slightly by 3% year-on-year, indicating that the trend of funds in the primary market gathering towards top players has not changed, and the industry funds continue to skew towards a small number of high-quality companies. 2) IPO: Hong Kong stocks rising, sci-tech innovation restarting. In the first five months of 2026, the financing amount of Hong Kong stocks for 18A reached 6.9 billion yuan, a year-on-year increase of 60%. On June 4th, the China Securities Regulatory Commission officially approved the registration application of Tainuo Maibo's sci-tech innovation board IPO, making it the first project to receive approval after the restart of the fifth set of listing standards on the sci-tech innovation board. Since May 2026, four bio-pharmaceutical companies have submitted IPO application materials, aiming to raise funds of 12.4 billion yuan, indicating that under the boost of policy dividends, innovative drug companies are entering a period of concentrated reporting, and a new round of financing cycle on the sci-tech innovation board is expected to begin. 3) BD: Trend unchanged, reaching new highs. Recently, a series of U.S. legislation limiting the export of Chinese innovative drugs have been proposed, causing concerns in the market about the sustainability of the offshoring of Chinese innovative drugs. However, the bank believes that the short-term policy risks are overestimated by the market, and China's comparative advantages in drug discovery and conceptual verification remain unchanged, and the overall trend of offshore expansion remains unchanged. According to data from Pharma Cube, as of May 14, 2026, the upfront payment and total potential transaction amount of China's innovative drug outbound transactions reached 4.6 billion U.S. dollars and 79.2 billion U.S. dollars respectively, accounting for 66% and 58% of the total for the year 2025, reaching historical highs for the same period. 4) Domestic sales: Rapid volume growth, supporting research and development. The market size of domestically approved innovative drugs after 2015 was 40.8 billion yuan in 2025, a year-on-year increase of 29%, accounting for only 14% of the domestic innovative drug market. With the approval and listing of domestic new drugs, inclusion in medical insurance, and the start of ramping up, sales are expected to maintain high growth rates and further support research and development. Research and development side: Preclinical high level of confidence continues 1) IND: Overall acceleration, high marginal growth. In the first five months of 2026, a total of 511 applications for Class 1 innovative drug IND were submitted domestically, a year-on-year increase of 30%, with 89 applications submitted in May, representing a 25% year-on-year growth, indicating sustained high growth. 2) Clinical side: Early research-driven, enthusiastic new openings. During the same period, the total number of Phase I-III clinical trials newly opened in China was 1,042, a 15% increase year-on-year, with the growth of new clinical trials in China since 2025 mainly coming from Phase I/II clinical trials. Order side: Evaluation of flexibility, leading high growth 1) Evaluation: Upside trend, huge flexibility. Joinn Laboratories and Shanghai InnoStar Bio-tech signed new orders in the first quarter of 2026 amounting to 910 million and 730 million yuan respectively, with year-on-year growth rates of 112% and 199% respectively. As orders are executed, service profit margins are highly flexible. 2) CDMO: Strong guidance, promising performance. WuXi AppTec expects a year-on-year growth of 18-22% in operational business income in 2026, and will adjust guidance in a timely manner, while maintaining confidence in maintaining a stable and resilient non-IFRS net profit margin level after adjustment. WUXI BIO expects a compound annual growth rate of 20% in revenue over the next 3 years, benefiting from the increase in commercialization projects, while its performance growth in 2027-2028 will significantly accelerate. In addition, WUXI XDC expects a compound annual growth rate of 30%-35% in revenue from 2025 to 2030, demonstrating confidence in the long-term development of the ADC and XDC tracks. Risk warning 1) Domestic policy risks; 2) Geopolitical risks; 3) Technological cycle risks.