China Healthcare_ Mid-Cap Life Science Tools & Services_ 2024 Preview and 2025 Market Catalysts

Summary of Conference Call on Mid-Cap Life Science Tools & Services Industry Overview - The conference call focused on the CRO/CDMO (Contract Research Organizations/Contract Development and Manufacturing Organizations) sector within the China Healthcare industry, particularly in the Asia Pacific region. [1][2] Key Insights - The general outlook for CRO/CDMO companies is improving in 2025, driven by better-than-expected tariff scopes, solid overseas order trends, and stabilized domestic pricing. Quality players with high-quality order books and visible earnings recovery paths are expected to outperform peers. [3][23] - Pharmaron is highlighted as the most preferred pick among mid-cap CRO/CDMOs, showing continued earnings recovery due to robust CMC (Chemistry, Manufacturing, and Controls) progress and minimal tariff exposure. [4][23] - GenScript is undergoing a turnaround in its non-cell business, with potential catalysts including further disposals of its subsidiary Legend Biotech. [5][29] - Asymchem has a favorable geographical revenue mix but faces margin pressure in the next 12 months. [5] - Joinn Lab and Tigermed are viewed positively for their long-term prospects due to domestic leadership, although significant earnings improvement is expected to take time. [5] Financial Performance and Projections - Pharmaron anticipates a 10-15% revenue growth in 2025, supported by a 20%+ new backlog growth in 2024. The company reported a preliminary adjusted non-IFRS net profit range of Rmb1.55-1.66 billion for 2024, indicating a potential earnings turnaround. [26][27] - GenScript expects stable bottom-line performance for its non-cell business units, with high-single-digit revenue growth anticipated in 2024 and further recovery in 2025. [29] - Asymchem recorded over 20% new backlog growth in 2024, with expectations of double-digit revenue growth in 2025, despite limited margin visibility. [33] - Tigermed reported preliminary 2024 results with operating revenue between Rmb6 billion and Rmb7 billion, and recurring net profit between Rmb830 million and Rmb1 billion, which fell below estimates. [34] Market Dynamics - Milder-than-expected tariff scopes are creating a positive landscape for 2025, with long-term decoupling risks largely priced in. [9][23] - The impact of AI applications in drug R&D and manufacturing is expected to create long-lasting positive value for CRO/CDMO companies, although significant breakthroughs are not anticipated in the near term. [16][20] - Domestic policies supporting innovative drug development are expected to benefit CRO/CDMO companies, leading to improved funding and cash positions for domestic clients. [18] Price Target Adjustments - Price targets for Pharmaron have been maintained at Rmb27.4 for A-shares and HK$23.3 for H-shares, reflecting the company's solid preliminary results. [28] - Tigermed's price target has been adjusted from Rmb41.3 to Rmb57.5, reflecting changes in earnings estimates and updated DCF assumptions. [37] Conclusion - The CRO/CDMO sector in China is poised for growth in 2025, with key players like Pharmaron and GenScript leading the way. The overall market dynamics, including tariff adjustments and AI integration, are expected to support this growth trajectory. [23][38]