UBS: China CRO Industry — Post H225 Outlook: Resilient CDMO Demand; CRO Recovery Gains Momentum
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UBS observes that the Chinese contract research organization sector enters 2026 with substantially improved sentiment following broadly positive second-half 2025 results. Overseas demand for Chinese contract development and manufacturing organizations remains robust, while domestic preclinical and clinical trials appear to have bottomed out.
Strong momentum in new modalities, including bispecific and multispecific antibodies, antibody-drug conjugates, peptides, and oral GLP-1 therapies, has driven significant revenue growth across leading CDMOs. For 2025, WuXi Biologics reported a 16.7% year-over-year revenue increase, WuXi AppTec grew 15.8%, Pharmaron expanded 14.8%, and WuXi XDC led with 46.7% growth. Although revenue growth for traditional clinical CROs like Tigermed remained modest, new order intake accelerated sharply, with Tigermed and Joinn Laboratories securing 20.6% and 41% year-over-year order growth, respectively.
This recovery is fundamentally supported by resilient biopharmaceutical financing. Domestic funding surged 151% year-over-year in the first two months of 2026, while global funding rose 96%. Robust year-end order backlogs and strong licensing deal activity further validate the positive outlook for R&D spending. UBS identifies WuXi AppTec and WuXi XDC as top picks, citing attractive valuations and robust forward guidance. WuXi AppTec trades at 19.5 times its 2026 estimated earnings, while WuXi XDC offers a compelling 36% earnings CAGR through 2028, resulting in a PEG ratio of 0.9.