China Postal Securities: Three indicators verify the recovery of clinical CRO prosperity. Under the resonance of multiple factors, leading clinical CROs are set to enter an upward cycle.

China Post Securities released a research report stating that clinical CROs belong to the mid-to-late stage of innovative drug development and are relatively lagging behind in terms of the transmission of investment and financing dynamics in the innovative drug sector. When investment and financing recover, the first to benefit in the CXO industry chain will be preclinical CROs (covering chemistry, efficacy, safety evaluation, etc.), with clinical CROs lagging behind preclinical CROs by 6-12 months. Although clinical CROs experience a transmission lag, their degree of prosperity is expected to surpass that of preclinical CROs, presenting investment value. The main points from China Post Securities are as follows: Leading Economic Indicators The recovery of the biotech financing environment and a significant increase in out-licensing transaction volume have directly alleviated cash flow pressure for innovative pharmaceutical companies. This is expected to executable research and development budgets within the next 6-12 months, driving growth in CRO orders. The biotech financing environment has shown signs of recovery and out-licensing transaction volumes have already rebounded ahead of schedule by 2025. Judging from the transmission rhythm, it has begun to positively impact clinical CROs. The number of IND approvals has reached a historic high, making it a strong indicator of industry vitality. Coincident Economic Indicators The rapid growth of new clinical trials continues, with leading companies experiencing a swift increase in orders, indicating that the turning point in prosperity is becoming clearer. In the first half of 2026, multiple companies in the industry are seeing orders rebound: Kang Long's clinical research services in the first half of 2026 have new signed orders growing over 30% year-on-year, while Tigermed's net new orders in the first half of 2026 have accelerated compared to the same period in 2025, with the average price of new signed orders returning to an upward trend. Considering the pace of order signing, we predict that orders in the clinical CRO industry are likely to accelerate in the second half of 2026, further improving the situation. Lagging Economic Indicators High-value orders often take 1-3 years to reflect in financial statements. Currently, lagging indicators for clinical CROs are still under pressure, but a recovery is anticipated later on. Revenue improved slightly in the first half of 2026 (Tigermed +14.1%, R&G PharmaStudies +23.3%), but profits were dragged down by the delivery of previously low-priced orders. Improvements in financial statements are expected to begin in 2027. Conclusion In the short term: The demand and supply sides of the clinical CRO industry are synchronously improving, and the turning point in prosperity is becoming clearer. In the medium to long term: The complexity of drug therapies, the expansion of MRCT demand, and the cost-cutting and efficiency improvements enabled by AI are expected to drive both volume and price growth for leading clinical CROs. It is recommended to pay attention to leading clinical CROs that benefit from both demand recovery and pattern optimization: Hangzhou Tigermed Consulting, SMO Clinplus, R&G PharmaStudies, and Boji Medical Technology. Risk Warning: Risks include downward demand persistence being below expectations, intensified industry competition, and policy changes.