Summary of the Conference Call on the CRO and CDMO Industry Industry Overview - The conference call focused on the **CRO (Contract Research Organization)** and **CDMO (Contract Development and Manufacturing Organization)** industries, highlighting their performance and future outlook for 2025 [1][2]. Key Points and Arguments Performance Metrics - The **CRO sector** in A-shares experienced a revenue growth rate of nearly **13%** and a profit increase of **62%** in the first half of 2025, driven by improvements in overseas markets, strong demand for new molecules, and a recovery in the domestic market [1][3]. - **CDMO companies** showed a significant order reversal, with expectations for continued high growth in performance from the second half of 2025 to 2026, despite a slowdown in order growth in the first half of 2025 [1][6]. Geopolitical Impact - Geopolitical risks have historically impacted the CRO sector's valuations, but in 2025, these risks have not significantly affected overseas performance, indicating a gradual reduction in geopolitical uncertainties [4][5]. Future Trends - The CRO industry is expected to maintain a double-digit revenue growth rate and a **62%** profit increase in the second half of 2025, supported by improved capacity utilization, stable pricing, and AI applications to control costs [5][10]. - The **CDMO sector** is anticipated to continue its recovery, with a positive turning point in the domestic market and accelerated financing in the primary market [6][12]. Additional Important Insights Company Recommendations - Recommended companies include **WuXi Biologics**, which has a relatively low valuation and clear performance acceleration, and **Kanglong Chemical**, benefiting from the Fed's interest rate cuts [11]. - **Hao Yuan Medicine** is highlighted for its strong growth in ADC (Antibody-Drug Conjugate) business, with significant changes expected post-capacity expansion [11]. Domestic Market Dynamics - The domestic biopharmaceutical and chemical reagent sectors have shown accelerated performance, with notable improvements in order volumes across various stages of clinical research [7][8]. - The CRO industry is expected to see a continued increase in new orders, with a positive outlook for both revenue and profit starting in 2026 [9]. Outsourcing Trends - The CRO industry's penetration rate is projected to increase, with expectations that outsourcing rates could reach **60%** in the biotech sector, driven by ongoing industry specialization [14]. Capacity Transfer - The trend of capacity transfer to China is ongoing, with Chinese companies expected to capture more overseas orders due to their competitive advantages in both small and large molecule sectors [15][17]. Investor Guidance - Investors are advised to monitor various indicators such as pricing, order status, personnel conditions, and capacity utilization to better understand the CRO industry's development dynamics [18].

Investment Rating - The investment rating for the CXO industry is "Outperform the Market" [1] Core Insights - The CXO index has increased by over 50% in the past year due to the easing of geopolitical risks, recovery in investment, and the digestion of high pandemic baselines [2] - Chinese CXO companies are analyzed from short-term, medium-term, and long-term perspectives to understand their global competitiveness [2] - Major players in the large molecule CDMO sector include WuXi Biologics and WuXi AppTec, with over 70% of their revenue coming from overseas [2] - The small molecule CDMO sector shows strong recovery in domestic companies, with significant order growth and a favorable competitive landscape [2] - Clinical and preclinical CROs are currently in an adjustment phase, with domestic order prices stabilizing but showing no significant recovery [2] Summary by Sections Large Molecule CDMO - Short-term performance shows high growth with competition from Japan, South Korea, and Europe [2] - Medium-term order growth is led by South Korean companies like Samsung Biologics, indicating intense competition for Chinese firms [2] - Long-term capital expenditures remain high, reflecting confidence in future demand [2] Small Molecule CDMO - Domestic companies are recovering from pandemic-related performance dips, with overall growth expected in 2025 [2] - Order growth is robust, with WuXi AppTec's orders increasing by 47% year-on-year by the end of 2024 [2] - Long-term capital expenditures show divergence, with some leaders like WuXi AppTec expected to continue increasing investments [2] Clinical/Preclinical CRO - Both domestic and international CROs are in an adjustment period, with 2022-2023 investment cooling reflected in 2024 performance [2] - Medium-term order volumes and values are beginning to show growth, while international orders remain stable [2] - Long-term capital expenditures vary among companies, indicating potential supply-demand mismatches in the short term [2] Emerging Business Opportunities - Rapid development in new molecular businesses such as peptides and oligonucleotides is expected to open up growth opportunities in the CXO sector [3] - Generic drug CROs are actively pursuing innovative transformations to seek new growth points [3]