On Friday, October 30, the CXO concept sector posted strong gains. By the midday close, Bide Pharmaceutical hit the 20% daily limit, while Wanbang Pharmaceutical and Novoprotein rose more than 10%. Porton Pharma Solutions, PharmaBlock Sciences, Pharmaron, and WuXi AppTec also climbed in sympathy.
Multiple companies reported impressive results. During the third-quarter earnings window, both China's innovative drug and CXO sectors have been delivering frequent positive news. On the evening of October 27, Hengrui Medicine released its third-quarter report for 2026. In the first three quarters, Hengrui Medicine's innovative drug sales revenue reached 13.871 billion yuan, up 17.05% year-on-year, accounting for 64.59% of total pharmaceutical sales revenue, reflecting continuous optimization of its revenue structure. Among this, oncology innovative product revenue was 9.865 billion yuan, up 3.13% year-on-year, representing 71.12% of total innovative drug sales revenue; non-oncology innovative product revenue was 4.006 billion yuan, up 75.36% year-on-year, accounting for 28.88% of total innovative drug sales revenue.
WuXi AppTec also released its performance report for the first three quarters of 2026. Thanks to greater success achieved by multiple client products and its unique integrated CRDMO platform, in the first three quarters of this year, WuXi AppTec's overall operating revenue reached 45.54 billion yuan, up 38.6% year-on-year, with backlog orders for continuing operations reaching 76.7 billion yuan; net profit attributable to shareholders of the listed company was 19.40 billion yuan, up 60.6% year-on-year.
Pharmaron released its third-quarter report for 2026, showing that in the first three quarters it achieved operating revenue of 12.003 billion yuan, up 19.01% year-on-year; net profit attributable to shareholders of the listed company was 1.247 billion yuan, up 9.31% year-on-year. In terms of new orders, the company's newly signed orders in the first three quarters grew more than 30% year-on-year.
Wang Xinyuan, fund manager of Caitong Asset Management Healthcare Mixed Fund, stated that the healthcare sector is expected to welcome structural market opportunities driven by earnings realization and improving sector sentiment. In the fourth quarter, the CXO sector is expected to continue performing well during the third-quarter earnings window, with sector orders and earnings in the third quarter expected to maintain an upward trend. First-tier leaders will remain strong, while second-tier names are also expected to see valuation re-rating alongside improvements in order structure. Next year, order recovery driven by overall industry warming combined with the commercialization cycle of new molecules will support continued upward momentum in the sector.
Regarding investment direction, the fund manager stated that continued emphasis should be placed on allocating to the CXO and upstream research sectors, while gradually increasing attention to the innovative drug sector as a key reserve direction for next year. Stock selection should always adhere to strict requirements for earnings certainty. Risk warning: factors such as changes in pharmaceutical industry policies, slower-than-expected order recovery progress, and lower-than-expected commercialization results of innovative drugs may disrupt the performance of related sectors.
Huayuan Securities believes that innovative drugs are opening a new growth curve for Chinese pharmaceutical companies. Traditional pharmaceutical companies continue to advance innovation transformation, and some innovative drug companies are accelerating participation in global competition. Looking ahead to the fourth quarter, individual stock opportunities in the innovative drug field may be more prominent. It is recommended to focus on core assets and pay attention to the structural recovery of sentiment in the innovative drug industry chain.
Main forces accumulating these stocks. According to East Money Choice data, Pharmaron ranked first with net main force buying exceeding 900 million yuan; Joinn Laboratories ranked second with net main force buying exceeding 700 million yuan. Baihua Pharmaceutical, Hongbo Pharmaceutical, Yiqiao Shenzhou, Lianya Pharmaceutical, Baicheng Pharmaceutical, Opul Bio, Jinshi Yaoye, and Heyi Pharmaceutical saw net main force buying ranging from 600 million yuan to 100 million yuan.
Goldman Sachs collectively raised price targets. On October 15, Goldman Sachs raised the 12-month price targets for all seven companies under its coverage in its latest research report, with an average increase of about 9%. Among them, WuXi AppTec was raised from HK$220.1 to HK$242.6, Asymchem from HK$168.2 to HK$187.5, WuXi XDC from HK$97.9 to HK$100.5, Tigermed from HK$52.1 to HK$55.3, GenScript from HK$38.54 to HK$42.65, and Pharmaron from HK$37.2 to HK$40.1. All six companies received "Buy" ratings. WuXi Biologics had its price target raised from HK$55.8 to HK$63.1 but maintained a "Neutral" rating.
What is most noteworthy about this round of adjustments is not how much any single company's price target was raised, but that none of the seven companies was left out. Some analysts believe this means institutional judgment on China's CXO sector is shifting from individual leaders beating earnings expectations to a reassessment of overall industry sentiment.
External demand. The core incremental growth for CXO comes from new molecules moving from R&D to large-scale production. The rapid volume ramp-up of GLP-1 in weight loss and diabetes treatment has driven demand for peptide APIs, formulations, and oral small molecule R&D and production, while also pushing single-project value from clinical small-batch services toward continuous commercial-scale supply. WuXi AppTec's TIDES business revenue in the first half reached 7.26 billion yuan, up 44.3% year-on-year, with the number of served clients and molecules growing 39% and 68% respectively, reflecting accelerating transformation from "R&D to late-stage development to commercialization." At the same time, complex drugs such as ADCs, small nucleic acids, bispecifics, and multispecifics are entering a harvest period, further raising the barriers for process scale-up, quality control, and global compliance, pushing China's CXO sector from cost competition toward comprehensive competition in technology, speed, and delivery capability. WuXi Biologics saw complex molecules account for more than 70% of newly added projects, while WuXi XDC's first-half revenue and adjusted net profit attributable to parent both grew about 37%, indicating that external demand growth is shifting from a single blockbuster to multi-modal drivers.
Domestic demand. Domestic-demand CXO is showing a recovery path of "orders first, revenue later." With improvements in primary market financing, outbound licensing upfront payments, and milestone payments, Biotech R&D budgets and outsourcing demand are gradually recovering, but preclinical project execution, patient enrollment, and milestone recognition still require time, and orders will not immediately translate into profits. Therefore, in the third-quarter reports, beyond revenue growth, more attention should be paid to newly signed orders, order pricing, the proportion of late-stage projects, and personnel utilization rates: for external demand, whether commercialization projects can continue to ramp up; for domestic demand, whether orders can achieve both volume and price increases. Together, these two factors determine the sustainability of this round of CXO recovery.
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