From September 23 to 25, Goldman Sachs hosted its second Asian Healthcare CDMO (Contract Development and Manufacturing Organization) Day in Singapore, according to a report.
The three-day event drew more than 100 institutional investors and 11 companies, including WuXi AppTec (02359.HK), WuXi Biologics (02269.HK), WuXi XDC (02268.HK), Pharmaron (03759.HK), Asymchem (06821.HK), and Tigermed (03347.HK) from mainland China, along with India's Piramal Pharma, Neuland Labs, and Laurus Labs.
In a report published on September 29, Goldman Sachs noted that industry discussions have shifted from the "pace of recovery" to the "sustainability of the next growth cycle." Improving demand for preclinical and safety assessment services, sustained order momentum, and greater exposure to commercial manufacturing all point to a more durable demand environment. Emerging growth drivers such as peptides, ADCs (antibody-drug conjugates), oligonucleotides, biosimilars, and AIDD (AI-driven drug discovery) are collectively broadening outsourcing opportunities. More importantly, management teams are no longer preparing for a recovery but are investing for the next phase of structural growth.
Improving Global Demand Visibility Overshadows Geopolitical Concerns
Goldman Sachs pointed out that one of the clearest observations from the Asian CDMO Day was the broad-based recovery in outsourcing demand across regions, modalities, and development stages. Management teams generally cited accelerating order wins, strong backlog growth, and improved commercial visibility. Second-quarter results from global CRO/CDMO peers also showed encouraging recovery in discovery, preclinical, and safety assessment activities. Goldman Sachs believes these improvements in front-end services are particularly important because they are leading indicators of future development and manufacturing demand. Combined with ongoing M&A, licensing, and business development (BD) activity in the pharmaceutical industry, the recovery appears increasingly broad-based and sustainable, helping to enhance visibility over the coming quarters.
In addition, regional companies expressed divergent views on geopolitics. CDMOs in India, Taiwan, and South Korea continued to attribute some near-term orders to supply chain diversification, while mainland Chinese companies generally reported limited impact from geopolitical developments on customer demand. Instead, supplier selection is increasingly driven by capability, quality, speed, and capacity availability. Several companies emphasized that capacity constraints and extended lead times in Europe, particularly for small-molecule API products, are driving incremental outsourcing to Asian manufacturers. Biologics customers continue to pursue dual-sourcing strategies to enhance supply chain resilience, while DP (drug product and fill-finish) activity continues to favor nearshoring due to regulatory, logistics, and customer proximity considerations.
Fed Rate Hikes Have Limited Near-Term Impact, Innovation Activity Drives Demand
Recent Fed rate hikes were generally seen as having little impact on near-term demand trends. Most management teams said it was still too early to observe meaningful changes in customer behavior. More importantly, current demand is driven less by incremental biotechnology IPOs and more by underlying innovation activity, including pharmaceutical M&A, licensing deals, business development transactions, and accelerating R&D pipeline advancement. AIDD is gradually becoming an important growth driver, especially among Chinese CRO/CDMO companies. Although the direct contribution of AIDD remains limited for most companies at present, management teams increasingly expect AIDD to expand future outsourcing opportunities by accelerating molecule creation and development activities. By contrast, regional peers such as those in India and Samsung Biologics continue to view AIDD as a long-term opportunity, with a greater focus on using AI to improve operational efficiency.
Capex Reaccelerates, Focused on Peptides, ADCs, Oligonucleotides, and Overseas Expansion
Goldman Sachs noted that capex has changed significantly compared with a year ago. Management teams in China and India are noticeably more positive on investment plans, reflecting growing confidence in backlog conversion and the medium-term demand outlook. Incremental investment is mainly concentrated in peptides, ADCs, oligonucleotides, and overseas expansion. Notably, several companies acknowledged that previous capital discipline may have limited growth opportunities and are now accelerating investment to capture the next outsourcing cycle. Samsung Biologics is expected to announce the commissioning of its sixth plant before year-end, further reinforcing industry confidence in the fundamentals of biologics demand.
Emerging Therapies Remain Key Growth Engines, Momentum Spreads Beyond GLP-1
Peptides were the most discussed topic, but company positioning is increasingly diverging between leaders and followers. Large, established players such as WuXi AppTec and Asymchem remain focused on large-scale commercial opportunities, particularly obesity-related projects, while second-wave entrants such as Neuland, Laurus, and Pharmaron are building early-stage pipelines and exposure to indications beyond GLP-1. Samsung Biologics' acquisition of PolyPeptide further validates the attractiveness of this model.
Beyond peptides, ADC remains one of the highest-conviction growth themes, with discussions shifting from platform building to commercial translation and production scale-up. WuXi XDC is one of the biggest beneficiaries of accelerating ADC outsourcing demand, while Samsung Biologics continues to expand toward end-to-end ADC solutions. Oligonucleotides are emerging as the next major investment area, particularly favored by Chinese CDMOs, with DP/formulation capabilities increasingly viewed as a strategic asset for deepening customer relationships and enhancing commercial value. Biosimilars also received more attention this year, especially among CDMOs focused on biologics, due to growing technology transfer and commercial manufacturing opportunities.
Overseas Expansion and M&A Remain Key Agenda Items, with the U.S. in Focus
Goldman Sachs noted that overseas expansion and M&A remain important agenda items, particularly in the U.S. Organic investment remains the dominant strategy, but several regional companies are still evaluating acquisition opportunities to strengthen formulation, fill-finish, and customer service capabilities. Beyond market access, companies are increasingly focused on strategic factors such as talent acquisition, technology access, and proximity to innovative customers. Several companies discussed exploring greenfield development and M&A opportunities in the U.S., with a focus on capability expansion rather than large-scale manufacturing. Bora Pharmaceuticals continues to seek overseas expansion to enhance formulation R&D and customer service capabilities. Samsung Biologics' recent acquisition of the Rockville facility also reflects the industry's growing focus on expanding geographic coverage and customer proximity while complementing existing Asian manufacturing networks. The broader industry trend is increasingly leaning toward combining Asian manufacturing scale with selective Western footprints to achieve synergies in customer engagement, drug product services, and specialized technical areas.
Stock Selection Preferences: Focus on Early-Stage R&D and Emerging Therapies
From a stock selection perspective, Goldman Sachs increasingly prefers companies with greater exposure to early-stage R&D activities and emerging therapies, rather than merely beneficiaries of traditional commercial manufacturing. The recent recovery in discovery, preclinical, and safety assessment demand is particularly encouraging, as these activities are typically leading indicators of future development and manufacturing revenue. Against this backdrop, Goldman Sachs considers WuXi XDC, Pharmaron, and Tigermed to be well positioned, given their greater involvement in early-stage innovation activities, improving order growth momentum, and exposure to emerging growth themes such as AIDD, ADCs, and next-generation biologics.
Goldman Sachs also continues to monitor catalyst-driven investment opportunities. Samsung Biologics remains one of the key companies to watch, with potential catalysts including large order announcements and the formal announcement of its sixth production line. Asymchem is a key beneficiary of accelerating peptide outsourcing demand. WuXi AppTec remains one of the most elastic plays on global GLP-1 commercialization ramp-up and broader TIDES (peptides and oligonucleotides) demand. GenScript is expected to benefit from growing AIDD demand in gene and protein synthesis. Meanwhile, Goldman Sachs remains constructive on Lonza, mainly due to its solid commercial operating track record and strong earnings resilience. Divi's Laboratories is expected to benefit from continued growth in peptide outsourcing demand. At the same time, Thermo Fisher's Patheon platform remains well positioned to benefit from the U.S. manufacturing reshoring trend, especially among small and mid-sized biopharmaceutical companies that cannot afford to build dedicated production facilities themselves.
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