China Securities has released a research report indicating that after an adjustment period from 2022 to 2024, the domestic CXO industry is benefiting from an early recovery in overseas financing. In 2024, leading domestic CXO companies saw a recovery in overseas orders. As domestic innovative drug assets achieved large-scale out-licensing in 2025, it spurred a continued recovery in domestic financing in the second half of 2025, with domestic demand also stabilizing and rebounding. From 2026 to the present, long-term structural opportunities in the domestic innovative drug industry have continued to materialize, domestic financing has been steadily improving, and the new drug modality track remains hot with further volume growth. In 2026, new contract signings and performance in the domestic CRO/CDMO industry are expected to accelerate growth, pushing the CXO industry chain into a new phase of development.
Where to start
External and internal demand are resonating, and industry sentiment and valuations are entering a recovery channel. CXO demand is fundamentally driven by R&D funding from pharmaceutical companies. In the first half of 2026, global innovative drug financing reached $20.177 billion, with domestic financing at $4.233 billion, already 82% of the 2025 full-year total. MNC R&D spending remains high, and since the second half of 2025, domestic BD, IPOs, and primary market financing have improved simultaneously. As funding is transmitted tier by tier from the financing end to CXO, coupled with the fact that sector valuations are still at historically low levels, industry performance and valuations are expected to continue to recover.
Why just 10 ASX 200 shares?
The globalization of innovative drugs is accelerating, and the supply-demand landscape is establishing a long-term industrial trend. The number of global new drug approvals remains high, and rising R&D costs are driving an increase in the outsourcing penetration rate, which is expected to rise from 52% in 2024 to 57% in 2026. China's competitiveness in cutting-edge fields such as ADC, bispecific/multispecific antibodies, and next-generation small molecule drugs is strengthening. In 2025, the number and value of significant license-out transactions globally accounted for approximately 44% and 49%, respectively, with BD upfront payments becoming an important source of funds. In recent years, the patent cliff has driven MNCs to continuously supplement their pipelines through mergers and acquisitions. FDA accelerated review and new methodology policies are expected to further incentivize R&D, improve efficiency, and expand global outsourcing demand.
Approach to content
The industry adjustment is largely complete, and Beta recovery and individual company Alpha are entering a realization phase. In 2025, the sector's revenue and profit returned to growth, and the trend is expected to continue in 2026. Preclinical CRO/clinical CRO new contract signings are growing steadily, with order prices rebounding to varying degrees. CDMO benefits from sustained growth in late-stage and commercial demand, maintaining relatively fast growth overall. Sub-sectors like ADC and peptides remain highly prosperous, further driving industry CAPEX back into a growth trend. At the same time, as leading companies' orders and pipelines continue to advance to later stages and commercialization, the scale effect from increased utilization, combined with internal cost reduction and efficiency enhancement measures, is expected to drive a sustained recovery in profit margins, thereby improving business operating efficiency.
Strategic outlook
Overseas CROs are seeing a mild recovery, while CDMOs remain resilient, with demand recovery showing structural divergence. In the first quarter of 2026, most overseas CXO companies saw year-on-year revenue improvement and high backlogs, but the pace of recovery differs between preclinical and clinical CROs. CRL is generally stabilizing, IQVIA is accelerating growth, and Medpace continues its high growth but with a temporary decline in its book-to-bill ratio. On the CDMO side, Lonza's revenue and profit margins are recovering after focusing on its core business, while Samsung Biologics is maintaining rapid growth by quickly ramping up commercial production capacity.
Risk Warning
Industry policy risk: Risks from changes in research and design requirements, price adjustments, volume-based procurement policy changes, and alterations to medical insurance reimbursement scope and ratios due to industry policy adjustments. In particular, changes in centralized procurement and medical insurance payment policies can have a significant impact on industry development expectations. R&D risk of not meeting expectations: During the R&D process for new drugs and devices, there are risks related to uncertain clinical enrollment progress and uncertain efficacy and safety outcome data. Approval risk of not meeting expectations: Risks of extended approval cycles due to factors such as supplementary data requests and changes in the approval process. Macro environment volatility risk: Further slowdown in global economic growth could impact downstream demand. Additionally, risks related to international relations, climate change, inflation, and exchange rate and interest rate fluctuations should be considered.
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