According to Zhitong Finance APP, Zhejiang Merchants Securities released a research report stating that from Q1 2024 to Q2 2025, the revenue of many leading CXO companies is expected to increase quarter by quarter on a year-on-year basis. Large orders and financing are dragging down the bottom rebound, and order execution is expected to drive revenue year-on-year to remain stable. Starting from Q1 2025, the average year-on-year revenue growth for CXO companies in a single quarter will return to positive growth (from Q1 2024 to Q1 2025), reaching 8.2%, with revenue year-on-year in Q2 2025 further increasing compared to Q1 2025, reaching 11.6%. From the supply and demand perspective, Q2 2025 represents fluctuations in capital expenditure for CXO companies, with ongoing construction projects remaining at a high level. The absolute value of capital expenditure for most CXO companies is basically in a state of slight fluctuations, overall relatively stable. The ongoing construction projects remaining at a high level indicate that CXO companies still have an optimistic expectation for capacity expansion.
<h2>The main viewpoints of Zhejiang Merchants Securities are as follows:</h2>
Stock Price Review
Domestic: Performance &amp; Fundamental Turning Point is the Main Line. From December 31, 2024, to September 4, 2025, the medical research outsourcing index rose by 60.41%, outperforming the pharmaceutical and biotechnology (Shenwan) index by 36.15 percentage points, with Medicilon, WuXi AppTec, WuXi Biologics, and JOINN performing well.
Overseas: General Upward Revision of Performance, Signs of Demand Recovery. Looking at the overseas CXO guidance for 2025: most have been revised upward, with Medpace having the largest increase, showing signs of recovery in front-end demand, and strong order demand for CDMO continuing.
Financial Analysis
Growth: Revenue Year-on-Year Trend Continues to Improve. From Q1 2024 to Q2 2025, the revenue of many leading CXO companies is expected to increase quarter by quarter on a year-on-year basis. Large orders and financing are dragging down the bottom rebound, and order execution is expected to drive revenue year-on-year to remain stable. Starting from Q1 2025, the average year-on-year revenue growth for CXO companies in a single quarter will return to positive growth (from Q1 2024 to Q1 2025), reaching 8.2%, with revenue year-on-year in Q2 2025 further increasing compared to Q1 2025, reaching 11.6%.
Profitability: Continuous Recovery, Capacity Climbing &amp; Price Pressure Basically Digested. The average gross profit margin in Q2 2025 is 32.45% (year-on-year +0.18 percentage points). Tigermed, JOINN, and PHARMABLOCK saw significant declines, dropping 11 percentage points, 8 percentage points, and 7 percentage points respectively, mainly due to poor financing, price fluctuations, and capacity utilization rate fluctuations. However, some companies saw significant year-on-year increases in gross profit margin, with Medicilon +12.3 percentage points, Porton +7.08 percentage points, and WuXi AppTec +5.92 percentage points. The average net profit margin excluding non-recurring items in Q2 2025 is 10.24% (year-on-year +0.31 percentage points). Porton, Medicilon, and WuXi AppTec showed the most significant increases, rising 14 percentage points, 12 percentage points, and 3.5 percentage points respectively.
Operational Efficiency: Improved, Outlook Positive. Inventory turnover rate: The average inventory turnover rate in H1 2024 was 1.56, increasing to 1.81 in H1 2025, a year-on-year increase of 0.25 percentage points, with Medicilon, Hongbo Pharmaceutical, and PHARMABLOCK showing more significant improvements, mainly due to positive changes brought about by increased capacity utilization
Fixed Asset Turnover Ratio: The average fixed asset turnover ratio for H1 2025 is 0.95, an increase of 0.05 percentage points year-on-year. Among them, Hongbo Pharmaceutical, Medicilon, and WuXi AppTec have seen significant increases in turnover ratios, accompanied by the continuous execution of orders from leading CXO companies and sustained improvements in capacity utilization, indicating that overall operational efficiency is expected to gradually improve.
Thoughts and Outlook
PE/VC Investment and Financing: Bottom Fluctuations. From Q4 2022 to Q2 2025, the quarterly investment and financing amounts in the global healthcare industry have remained stable at a low point. In Q2 2025, the absolute values of domestic and global investment and financing have further declined year-on-year and quarter-on-quarter. However, with the continuous improvement in global IPOs and the booming BD transactions, demand is expected to continue to recover.
IPO Financing: A-shares and U.S. stocks hit bottom, while Hong Kong stocks rebound significantly. From the perspective of IPO financing amounts, A-shares remain relatively stable. The IPO amount in the H-share healthcare industry has reached HKD 20.7 billion from 2025 to date, showing a significant rebound. As of September 8, 2025, the IPO financing amount in the U.S. healthcare industry is USD 3 billion.
Supply and Demand: High levels of construction projects, with greater emphasis on new businesses. In Q2 2025, capital expenditures of representative CXO companies have shown fluctuations, with construction projects remaining at high levels. Most CXO companies' capital expenditures are in a state of slight fluctuations, overall remaining relatively stable. The high level of construction projects indicates that CXO companies still have an optimistic outlook on capacity expansion. More companies are laying out business and capacity in new directions such as ADC, peptides, and oligonucleotides, which are expected to gradually become new growth drivers.
Investment Strategy: Industry Recovery, Allocation Turning Point
Based on the above financial data and order data analysis, the fundamental turning point for CXOs has emerged and is continuing to recover. We are optimistic about the continuous realization of commercialization orders for small molecule/large molecule CDMOs, the sustained development of businesses such as peptides, oligonucleotides, and ADC CDMOs, as well as investment opportunities in clinical CROs under the continuous promotion of domestic innovative drug support policies.
Risk Warning
Risks of fluctuations in domestic drug review policies; risks of new orders and performance falling short of expectations; risks of new business integration not meeting expectations; exchange rate risks

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Zhejiang Merchants Securities released a research report indicating that from Q1 2024 to Q2 2025, the revenue of leading CXO companies will increase quarter-on-quarter and year-on-year. It is expected that the year-on-year revenue growth will return to positive in Q1 2025, reaching 8.2%, and further increase to 11.6% in Q2 2025. The high level of ongoing construction projects shows that CXO companies are optimistic about capacity expansion. Overall, the performance and fundamental turning point of the CXO industry are the main driving factors

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Tigermed

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Medicilon

JOINN

Porton

Zhejiang Merchants Securities: The growth trend of the CXO sector in 25H1 continues to improve, and the construction projects remain at a high level