CITIC Securities: Overseas rate cuts + improvement in domestic financing, continue to be optimistic about the comprehensive recovery of the pharmaceutical industry chain demand.

The CITIC Securities research report stated that the domestic innovative drug BD boom has driven downstream demand to rebound, with a significant decrease in the proportion of equity financing in enterprise funding sources and an increase in the proportion of BD transactions to nearly 40%. The total amount of BD going overseas in the first quarter of 2026 exceeded $60 billion, reaching nearly half of the total for the whole year 2025. By sector, small molecule CDMO is increasing its market share with the advantage of the Chinese supply chain globally, and with domestic supply stability under Middle East conflict, it may receive more orders. With improvement in financing, the early research demand transmission in preclinical and clinical CRO is expected, with a possibility of both quantity and price rising together. Although the short-term performance of research services and upstream sectors in the fourth quarter of 2025 is affected by exchange rate fluctuations, the early research demand is expected to continue into 2026, with the revenue of leading companies expected to grow by over 20%, and current valuation is reasonable. Recommendations include focusing on: 1) leading companies in CXO; 2) key companies in preclinical and clinical CRO processes; 3) relatively reasonably valued companies in research services and upstream sectors.