21st Century Business Herald reporter Tang Weike
Since April, the A-share pharmaceutical sector has welcomed a comprehensive recovery, showcasing a wave of &#34;medication&#34; market.
Among them, the A-share pharmaceutical sector has experienced a full recovery, with innovative drugs and CXO (pharmaceutical research and production outsourcing) two core tracks jointly performing a strong rebound, forming a distinct industrial chain resonance effect, becoming the core focus of market capital allocation.
As of the close on April 8, the Tonghuashun Innovative Drug Concept Index and the CXO Index surged by 6.55% and 7% respectively during the week, with both indices breaking 5% in a single day on April 1. Leading stocks such as WuXi AppTec, Asymchem, Heng Rui Medicine, and BeiGene collectively strengthened with increased trading volume, northbound capital continued to increase positions, and the CXO-themed ETF saw significant net subscriptions, with net inflows into the sector exceeding 10 billion yuan, marking the official arrival of a cyclical reversal for the pharmaceutical sector after half a year of dormancy.
A pharmaceutical analyst from a medium-sized brokerage in South China told the 21st Century Business Herald that this round of market performance is driven by a cyclical reversal at the valuation repair level, on one hand due to the triple fundamental drivers of global R&amp;D recovery, domestic innovation explosion, and the expansion of emerging tracks; on the other hand, it also reflects sector rotation, with the fluctuation cycle of the main rising wave affecting the performance of sub-sectors.
Sun Jialin, general manager of Gaotejia Investment Group, also stated that China's pharmaceutical industry chain is transitioning from &#34;valley repair&#34; to a new stage of &#34;capability output,&#34; and the linkage between innovative drugs and CXO will continue to deepen.
Looking back at previous trends, from September 2025 to March 2026, affected by the cooling of global biopharmaceutical financing, geopolitical disturbances, and the previous high valuations of the sector, both the innovative drug and CXO sectors underwent deep adjustments, with the CXO index cumulatively retreating over 20%, and the sector's dynamic price-to-earnings ratio once falling below 25 times, approaching the valuation bottom of the past three years; the innovative drug index cumulatively retreated over 15%, with leading stocks generally retreating by 5% to 15%, and market sentiment dropping to a temporary low.
Entering April, as the industry fundamentals continued to improve, the market direction quickly reversed, with both sectors rebounding simultaneously.
The aforementioned analyst told the 21st Century Business Herald that this round of market performance has a significant characteristic of strong synchrony, with the rebounds of the CXO and innovative drug sectors highly overlapping, forming a complete transmission chain from the prosperity of innovative drugs, CXO orders, performance realization to valuation repair.
Leading global platform stocks such as WuXi AppTec and Asymchem have seen significant gains, highlighting capital's recognition of global capabilities. The sector's price-to-earnings ratio has recovered from 25 times to 26.53 times, but it still remains at a historical low.
From the perspective of the CXO sector, the strong rebound is supported by the confirmation of dual turning points in orders and performance. In the first quarter of 2026, leading companies in the industry generally exhibited explosive growth in orders, with WuXi AppTec's orders reaching 58 billion yuan, a year-on-year increase of 28.8%; Asymchem's new CDMO orders grew by 26% year-on-year, with commercial orders growing at an impressive rate of 32%; Tigermed's clinical orders increased by 31% year-on-year, with domestic order growth reaching 36%, and overseas orders also achieving a steady growth of 24%
In terms of performance, starting from the fourth quarter of 2025, CXO companies are generally expected to turn losses into profits or see a rebound in growth. Leading companies like WuXi AppTec and Asymchem have provided guidance for revenue growth of 18% to 22% in 2026, significantly higher than market expectations. Meanwhile, with the recovery of capacity utilization and the increase in the proportion of high-value new businesses, the gross profit margin and net profit margin of CXO companies continue to improve, further solidifying the profit foundation and providing strong fundamental support for the valuation recovery of the sector.
The core logic supporting the resonance and strengthening of the two major sectors is driven by three factors: the global recovery of R&amp;D, the explosive growth of Chinese innovation going overseas, and the expansion of emerging tracks. In the first quarter of 2026, global biopharmaceutical financing exceeded $28 billion, a year-on-year increase of 68.2%. The prolonged financing winter for Biotech is gradually coming to an end, with the R&amp;D budgets of the global Top 20 pharmaceutical companies generally increasing by 10% to 15%. Coupled with the rising expectations of interest rate cuts by the Federal Reserve, overseas demand for pharmaceutical outsourcing is experiencing explosive growth. Chinese CXO companies, leveraging their advantages in cost, efficiency, and technology, are continuously increasing their market share globally, becoming an indispensable core force in the global pharmaceutical R&amp;D supply chain.
At the same time, domestic innovative drug business development (BD) going overseas has entered a harvest period. In the first quarter of 2026, the number of License-out transactions for Chinese innovative drugs reached 45, a year-on-year increase of 73%, with a total amount of $57.5 billion, a year-on-year increase of 135%. Each overseas transaction directly translates into clinical CRO (international multi-center trials) and CDMO (global commercial production) orders for CXO companies, driving a comprehensive acceleration in local CXO demand.
In addition, the outsourcing penetration rates in cutting-edge fields such as ADC, peptides, oligonucleotides, and CGT have exceeded 65%, becoming the core engine for the growth of the CXO sector. Among them, China's ADC pipeline accounts for over 60% of the global total, with related orders from companies like WuXi AppTec and Asymchem continuing to surge. Leading companies like WuXi AppTec and Kanglongda are also accelerating their layout in CGT and small nucleic acids, further opening up growth space in the industry.
Sun Jialin, General Manager of Gaotejia Investment Group, has provided a systematic interpretation of the interconnected development logic between innovative drugs and CXO, which aligns closely with current market trends and offers a clear industrial perspective for industry development and investment layout. Sun Jialin stated that innovative drugs and CXO are interdependent communities. In the transformation process of Chinese innovative drugs from &#34;bringing in&#34; to &#34;going out,&#34; CXO is an indispensable key infrastructure. The year 2026 is expected to be a year of value reassessment and upward resonance for the Chinese pharmaceutical industry chain. In her view, after previous deep adjustments, the sector's valuation has fully reflected the risks, while the industry fundamentals continue to improve. Whether it is the commercialization of innovative drugs or the explosion of CXO orders, both indicate that the industry has entered a golden period of value return.
Regarding future investment directions, Sun Jialin clearly pointed out that as the industry recovery process advances, market differentiation will further intensify. Only companies with global service capabilities, cutting-edge technology platforms, and commercialization capabilities will be able to traverse cycles and achieve valuation premiums
Specifically, global CDMO leaders will continue to benefit from the increase in overseas orders, the rise in commercialization demand, and the explosion of new molecular tracks, possessing long-term investment value; clinical CRO leaders will achieve steady growth driven by the dual engines of domestic innovative drug recovery and international multi-center trials; and in new molecular tracks such as ADC, CGT, and oligonucleotides, hidden champions with high growth, high barriers, and high gross profit characteristics will become the most resilient growth points in the sector.
In addition, she emphasized that there is no ceiling for China's innovative drug sector, which has now entered a stage of value return, making it a good time for patient layout. As the core support of the industry chain, CXO will achieve high-quality development in sync with innovative drugs, jointly promoting the Chinese pharmaceutical industry chain to move towards the high end of the global value chain.
Looking ahead, the linkage between the innovative drug and CXO sectors will continue to deepen, and the structural bull market pattern will become more pronounced. In the short term, the valuations of the two sectors are still at historical lows, combined with high growth expectations for 2026, there is still ample room for valuation recovery, although there may be periodic fluctuations along with the broader market.
In the medium to long term, as global R&amp;D recovery continues, breakthroughs in Chinese innovative drugs going abroad, and the continuous expansion of emerging tracks, the global competitiveness of the Chinese pharmaceutical industry chain will further enhance. The global market share of CXO companies is expected to increase from the current 22% to over 30%, and the valuation center of the sector will shift from &#34;cyclical OEM&#34; to &#34;global innovation enabler,&#34; achieving a dual enhancement of valuation and performance.
For investors, the current market has bid farewell to the previous broad-based rally, and selecting quality targets has become key. Leading companies with global platform advantages, cutting-edge technology barriers, stable order support, and commercialization capabilities will become the core force to navigate through cycles, while the resonance opportunities between innovative drugs and the CXO industry chain will also become the core main line for future pharmaceutical sector investments

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Since April, the A-share pharmaceutical sector has fully rebounded, with innovative drugs and the CXO track experiencing a strong rebound, creating a resonance effect in the industry chain. As of April 8, the innovative drug concept index and the CXO index have risen by 6.55% and 7%, respectively. Analysts point out that this round of market performance is driven by factors such as the global recovery in research and development and the domestic innovation explosion, with the pharmaceutical industry chain moving from a low point of recovery to a capability output stage. Market funds have net inflows exceeding 10 billion yuan, with leading stocks like WuXi AppTec and Asymchem performing outstandingly

Innovative drugs and CXO jointly strengthen: How will the market trend after resonance repair?