Pacific Securities released a research report stating that in the first half of 2025, the CXO sector achieved operating revenue of 47.096 billion yuan, representing a year-over-year increase of 13.25%, with net profit attributable to shareholders reaching 11.743 billion yuan, up 61.19% year-over-year. Revenue maintained steady growth while profits showed rapid year-over-year expansion, primarily attributed to the gradual recovery of the CXO industry, improved operational efficiency, and cost reduction measures. Contract liabilities and advance payments totaled 7.549 billion yuan in H1 2025, increasing 3.71% year-over-year, indicating stabilizing industry demand with slight order recovery. The firm maintains an optimistic outlook on the CXO sector, expecting continued recovery in both domestic and overseas demand, and recommends focusing on clinical CRO, upstream scientific research, and AI/weight-loss drug themes.
Pacific Securities' main observations include:
**Revenue Maintains Steady Growth, Profits Show Rapid Year-over-Year Improvement** In the first half of 2025, the CXO sector achieved operating revenue of 47.096 billion yuan, up 13.25% year-over-year, with net profit attributable to shareholders reaching 11.743 billion yuan, up 61.19% year-over-year. Revenue maintained steady growth while profits showed rapid year-over-year expansion, primarily due to the gradual recovery of the CXO industry, improved operational efficiency, and cost reduction initiatives. In Q2 2025, the CXO sector generated operating revenue of 24.75 billion yuan, up 13.95% year-over-year, with net profit attributable to shareholders of 6.674 billion yuan, up 52.26% year-over-year. Revenue achieved steady growth while profits showed rapid year-over-year improvement, with sector performance stabilizing and gradually improving, demonstrating a clear recovery trend.
**H1 2025 Per-Capita Productivity Improved, Fixed Asset Turnover Rate Slightly Increased** Per-capita efficiency improved year-over-year in H1 2025, with revenue per employee reaching 411,100 yuan, up 12.62% year-over-year, and profit per employee at 114,000 yuan, up 52.41% year-over-year. This improvement primarily resulted from industry recovery and enhanced operational efficiency, with revenue and profit growth outpacing employee headcount growth. The fixed asset turnover rate reached 1.00 times in H1 2025, up 7.03% year-over-year, mainly due to gradual industry recovery and improved operational efficiency, with revenue growth temporarily exceeding fixed asset expansion.
**Demand Stabilizes with Order Recovery, Capacity Construction Pace Moderates** Demand Side: Contract liabilities and advance payments totaled 7.549 billion yuan in H1 2025, up 3.71% year-over-year, indicating basically stable industry demand with slight order recovery. Supply Side: Capacity construction showed modest growth with slight employee increases. Fixed assets reached 47.274 billion yuan in H1 2025, up 5.81% year-over-year, while construction in progress totaled 15.81 billion yuan, up 7.69% year-over-year. Additionally, total sector employment reached 94,606 people as of H1 2025, up 2.50% year-over-year.
**Investment Recommendations**
**Capital Markets:** Fed Rate Cut Cycle Begins, Liquidity Gradually Loosening: According to CME FedWatch, the probability of a 25 basis point Fed rate cut in September 2025 is 90%, with a 10% probability for 50 basis points. For October 2025, the probability of cumulative 25 basis point cuts is 20.7%, 50 basis points is 71.6%, and 75 basis points is 7.7%. As the Fed's rate-cutting process gradually advances, overall market liquidity is expected to loosen progressively.
**Fundamentals:** 1) A+H share innovative drug companies' market capitalizations have increased significantly, potentially driving improved domestic investment and financing. The domestic A+H innovative drug index continues rising, with active trading and obvious profit effects in innovative drug stocks. Secondary market improvements in innovative drugs may drive primary market investment and financing recovery. 2) Overseas demand improvement and gradual order recovery should drive CXO demand and performance enhancement.
**Industry Level Recommendations:** Focus on: 1) Changes in Fed interest rate policy, 2) Marginal changes in investment and financing, 3) Gradual overseas demand recovery, 4) China-US relations and geopolitical factors, 5) Policy releases including medical insurance Category C catalogue, commercial insurance, and detailed supportive policies for the entire innovative drug industry chain.
**Company Level Recommendations:** Focus on: 1) Domestic clinical CROs benefiting from domestic innovative drug support policies, such as Sunshine Guojian (688621.SH) and Nuosike (301333.SZ); 2) Life science upstream companies with continued overseas business improvement, such as Haoyuan Pharma (688131.SH) and Bide Pharma (688073.SH); 3) Companies in weight-loss drugs, Alzheimer's disease, ADC, and AI concepts, such as Hongbo Medicine (301230.SZ); 4) Companies with better-than-expected new order signings, such as Pureis (301257.SZ).
**Risk Warnings** Fed interest rate policy falling short of expectations, investment and financing recovery below expectations, China-US relations and geopolitical risks, intensified market competition, and foreign exchange fluctuations.
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