Continued resilience in CDMO demand, CRO order recovery supports the 2026 outlook
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Continued resilience in CDMO demand, CRO order recovery supports the 2026 outlook
UBS believes that China CDMO will maintain growth resilience driven by demand for new molecular modalities, ADC, TIDES, and small molecules, while recovering CRO new orders will gradually convert into 2026 revenue, with Wuxi AppTec and WuXi XDC as top picks.
- Major CDMO companies posted strong revenue growth in 2025: Wuxi Bio up 16.7% YoY, Wuxi AppTec up 15.8% YoY, Pharmaron up 14.8% YoY, and WuXi XDC up 46.7% YoY.
- CRO companies still showed divergent revenue performance, but orders have improved: Tigermed's 2025 revenue rose 3.5% YoY, while Joinn declined 17.9% YoY; their 2025 new orders increased 20.6% and 41% YoY, respectively.
- Backlog at end-2025 indicates fundamental support: WuXi XDC up 50.3% YoY, Wuxi AppTec and Wuxi Bio up 28.8% and 28.9%, respectively, and Tigermed and Joinn up 15.3% and 18.2%, respectively.
- Wuxi AppTec and WuXi XDC are top picks; the report reiterates Buy ratings while lowering Pharmaron's target price from HK$32.90 to HK$28.90 and slightly trimming WuXi XDC's target price from HK$90.40 to HK$89.40.
Report interpretation
Overview
This report updates the outlook for China's CRO/CDMO sector following the H225 earnings releases. UBS believes overseas biopharma clients' demand for Chinese CDMO services remains resilient, with major companies showing strong 2025 revenue growth and 2026 guidance; the weak phase in domestic preclinical and clinical CRO demand has largely ended, and the recovery in new orders in 2025 is expected to gradually convert into revenue in 2026.
Core views
The core judgments include three points: first, CDMO demand remains resilient, driven by new therapeutic modalities, bi-/multi-specific drugs, ADC, peptides, and oral GLP-1; second, CRO revenue recovery lags orders, but the significant improvement in new orders at Tigermed and Joinn indicates strengthening industry recovery momentum; third, 2026 company guidance is supported by funding, BD revenue, and backlog, with Wuxi AppTec, Wuxi Bio, WuXi XDC, Pharmaron, and Tigermed all providing relatively positive revenue growth targets.
Analysis framework
The report combines companies' 2025 results, 2026 revenue guidance, new orders, backlog, biopharma financing, outbound BD deals, valuation multiples, and DCF target prices to conduct a cross-sectional comparison of covered China CRO/CDMO companies and identify names with stronger growth resilience and still-attractive valuations.
Methodology notes
Estimate target price using discounted cash flow
The report uses the DCF method to evaluate WuXi XDC, Wuxi AppTec, and Pharmaron; Pharmaron's new target price of HK$28.90 assumes a WACC of 12.0% and a terminal growth rate of 3%; WuXi XDC's new target price of HK$89.40 assumes a WACC of 10.5% and a terminal growth rate of 3%.
Assess valuation attractiveness using P/E and earnings growth alignment
Wuxi AppTec is trading at 19.5x 2026E PE, below the median of 27.9x for Hong Kong-listed peers; WuXi XDC is trading at 32.5x 2026E PE, corresponding to a 2026-2028 EPS CAGR of 36% and a PEG of about 0.9x.
Assess future revenue visibility through new orders and backlog
The report focuses on tracking 2025 new-order growth and year-end backlog changes, viewing these indicators as supportive of 2026 revenue realization and management guidance.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Wuxi AppTec (2359.HK)One of the top picks, Buy rating maintained
- Strengths
- Strong TIDES growth resilience, with a target of more than 30% YoY growth; small-molecule revenue is expected to accelerate; 2026E PE is 19.5x, below the median of Hong Kong-listed peers.
- Weaknesses
- Sensitive to pharma R&D spending, outsourcing willingness, and the geopolitical environment.
- Comparison
- Valuation is below the 27.9x median PE of Hong Kong-listed peers.
- Risks
- Fewer-than-expected early-stage project advancements, project delays or failures, escalating geopolitics, and lower-than-expected pharma R&D spending or outsourcing willingness.
- WuXi XDC (2268.HK)One of the top picks, Buy rating maintained
- Strengths
- Strong ADC demand, with the Singapore site start-up and the BioDLink acquisition expected to ease capacity constraints; end-2025 backlog increased 50.3% YoY.
- Weaknesses
- The report lowers revenue and margin forecasts due to potential FX impact, and slightly trims the target price.
- Comparison
- Trading at 32.5x 2026E PE, corresponding to a 2026-2028 EPS CAGR of 36% and a PEG of about 0.9x.
- Risks
- Slower-than-expected CMO ramp-up, slower-than-expected demand or expansion in bioconjugate drugs, drug modality shifts, escalating geopolitics, and global biopharma R&D financing pressure.
- Pharmaron (3759.HK)Buy rating maintained, target price lowered
- Strengths
- Laboratory services and CMC segment margin trends remain resilient, with steady new-order growth; 2026 revenue guidance is for 12%-18% YoY growth.
- Weaknesses
- The pace of margin recovery after Q425 is slightly below expectations, with clinical CRO and biologics CDMO acting as drags; 2026/2027/2028 EPS forecasts are cut by 14.7%/12.7%/7.7%.
- Comparison
- Target price lowered from HK$32.90 to HK$28.90, based on DCF assumptions of 12.0% WACC and 3% terminal growth.
- Risks
- Slower-than-expected CMC ramp-up, weaker pharma R&D spending, intensifying competition in small-molecule outsourcing, and delays or failures in early-stage projects.
- Wuxi Bio (2269.HK)Covered company, benefiting from resilient CDMO demand
- Strengths
- 2025 revenue grew 16.7% YoY, with 2026 revenue guidance of 13%-17% YoY growth; end-2025 total backlog was US$23.7bn, up 28.9% YoY.
- Weaknesses
- Revenue and capex remain affected by FX, project timing, and demand for biologics outsourcing.
- Comparison
- Compared with other CDMOs, growth is relatively steady but below the high-growth level of WuXi XDC.
- Risks
- Weaker biologics R&D demand, delays in project progress, a slowdown in global outsourcing, and geopolitical disruptions.
- Tigermed (300347.SZ; 3347.HK)CRO recovery watchlist name
- Strengths
- 2025 new orders were Rmb10.2bn, up 20.6% YoY; end-2025 backlog was Rmb18.2bn, up 15.3% YoY; the company targets a double-digit percentage revenue growth in 2026.
- Weaknesses
- 2025 revenue rose only 3.5% YoY, with the final result below the midpoint of guidance; revenue recovery still lags.
- Comparison
- Compared with CDMO, CRO revenue recovery is slower, but order improvement is more evident.
- Risks
- Lower-than-expected pharma R&D demand, a slowdown in global CRO outsourcing, intensified domestic CRO competition, and regulatory quality issues affecting the industry's reputation.
- Joinn (603127.SH)Preclinical CRO recovery watchlist name
- Strengths
- 2025 new orders increased 41% YoY, and end-2025 backlog was Rmb2.6bn, up 18.2% YoY.
- Weaknesses
- 2025 revenue declined 17.9% YoY, and revenue recognition from low-priced orders may keep Q1 under pressure.
- Comparison
- Order growth is faster than Tigermed, but revenue recovery still needs validation in subsequent quarters.
- Risks
- Low-priced orders affecting profitability, a slower-than-expected recovery in R&D demand, intensifying competition, and regulatory quality risks.
Key data
- Wuxi AppTec 2026 revenue guidanceRmb51.3-53.0bn, up 12.9%-16.6% YoYTIDES revenue target is for growth of more than 30% YoY.
- Wuxi Bio 2026 revenue guidanceup 13%-17% YoYGuidance already factors in about a 3 percentage-point FX impact.
- WuXi XDC 2026 revenue guidanceup more than 35% YoYSupported by ADC demand and capacity ramp-up, with end-2025 backlog up 50.3% YoY.
- Pharmaron 2026 revenue guidanceup 12%-18% YoYThe report lowers 2026-2028 EPS forecasts due to potential FX impact and the pace of gross margin recovery.
- Tigermed 2025 new ordersRmb10.2bn, up 20.6% YoYEnd-2025 backlog was Rmb18.2bn, up 15.3% YoY.
- Joinn 2025 new ordersup 41% YoYEnd-2025 backlog was Rmb2.6bn, up 18.2% YoY.
- Biopharma financingUp 151% YoY domestically and 96% YoY globally in the first two months of 2026The report believes improved financing and BD revenue will support R&D demand in 2026.
Impact & implications
For investors, the report shifts the main investment thesis for China's CRO/CDMO sector from pure earnings recovery to order quality, revenue visibility, and valuation alignment. CDMO remains the more certain direction, while CRO is in a recovery phase where orders lead and revenue lags. If financing and BD trends continue, there is further room to validate an industry recovery in revenue and profits in 2026.
Risks
- Larger-than-expected price declines in China's healthcare sector, including GPO project pricing pressure.
- Intensifying industry competition, which may compress margins and order pricing.
- Prices for innovative drugs after entering NRDL negotiations coming in below expectations.
- China consumer recovery slower than expected, affecting the healthcare demand environment.
- Regulatory policy rollout and enforcement being stricter than expected.
- Escalating geopolitical tensions affecting overseas clients and operations of Chinese CRO/CDMO companies.
- Pharma R&D spending and outsourcing willingness below expectations.
- Global biopharma financing or R&D funding pressure exceeding expectations.
- Major quality issues raised by regulators that could affect the industry's reputation.
What to watch
- Whether new orders continue to grow in 2026, especially the order quality and pricing at Tigermed and Joinn.
- The pace at which CDMO companies convert backlog into revenue, especially Wuxi AppTec, Wuxi Bio, and WuXi XDC.
- Whether outsourcing demand related to ADC, TIDES, peptides, and oral GLP-1 remains sustained.
- Global and domestic biopharma financing, PE/VC, and refinancing trends.
- Whether upfront payments and total deal value in China's innovative drug outbound deals remain at elevated levels.
- The progress of capacity ramp-up after WuXi XDC's Singapore site starts production and BioDLink integration.
- Whether the drag from Pharmaron's clinical CRO and biologics CDMO eases, and whether gross margin recovery materializes.
- The impact of FX changes on revenue, margins, and target price assumptions.