Net profit soared by 110%! This CRO hidden champion can no longer be concealed

Currently, leading CXO companies and distinctive small and beautiful enterprises have released positive signs of recovery, especially the distinctive small and beautiful CROs that show structural opportunities.

Haoyuan Medicine, which has maintained double-digit revenue growth for ten consecutive years, has unveiled a new growth landscape with a set of "bidirectional efforts" data. On one hand, the profitability data shows that both gross margin and net margin have stopped declining and rebounded in 2024, and the non-recurring net profit has escaped the shadow of the "price war" with a year-on-year growth rate of 62.5%. This growth is expected to continue in 2025, with the year-on-year growth rate in the first half soaring to 111.4% and a quarter-on-quarter growth rate of 38.6%, continuing to lead the market. On the other hand, the stock price has continuously risen more than twice in the past year, exceeding the industry average increase.

Just a few days ago, Haoyuan Medicine also announced a strategic cooperation agreement with Mabwell and InSilico Medicine Cayman TopCo. The three parties will cooperate based on the principles of "complementary advantages, resource sharing, collaborative innovation, and mutual benefit," working together to create a new ADC compound library covering hundreds of targets, screening and promoting the next generation of ADC candidate molecules, and accelerating the industrialization of innovative ADC drugs.

The resonance between stock prices and fundamentals has placed this hidden small and beautiful company in the CRO track into the sight of the capital market. The CM10 Pharmaceutical Research Center will review it from multiple aspects, including industry scarcity, financial health, business health, and comprehensive recommendations.

▲ Haoyuan Medicine's stock price performance over the past year, data source: Baidu Stock Market

CXO is Back!

As a barometer of the innovative drug industry, CROs have always played a guiding role.

From 2011 to 2021, during the "summer" period of capital in biomedicine, CROs entered a golden decade of development. However, since November 2021, investment in biomedicine began to decline, entering a winter period, during which CRO companies faced multiple pressures and challenges such as "price wars," declining demand, and financing difficulties.

Since the second half of last year, the continuous warming of innovative drug research and development has reshaped the ecological pattern of the upstream industry chain. A set of reliable data shows that global investment in innovative drug research and development is growing at a rate of 10% per year, and the number of domestic IND applications is expected to grow by 32% year-on-year in 2024. This explosive demand has directly driven the growth of upstream reagents and CDMO businesses.

By 2025, leading CXOs and distinctive CXOs are making a comprehensive comeback. In this year's mid-term report, WuXi AppTec's revenue grew by 20.64% year-on-year, and net profit attributable to the parent company surged by 101.92% year-on-year. Moreover, the order reserves are abundant, with WuXi AppTec's orders increasing by 47.1% year-on-year to 52.33 billion yuan. Several CXOs are optimistic, with Boteng Co., Ltd. turning losses into profits, and Kanglong Huacheng's non-recurring net profit growth rate reaching 34%-39% year-on-year.

Stock prices have rebounded across the board, and the heat is clearly returning. Wind data shows that the CSI CXO Index closed at 2088.04 points on August 5, up 26.54% in the past month and 50.16% in the past three months In this trillion-dollar blue ocean, Chemexpress has become a small but beautiful invisible player in the CRO industry by relying on its long-term operation in the life science reagent business and expanding into the ADC payload business.

Molecular building blocks and tool compounds are an easily overlooked area that hides great opportunities and is undergoing profound domestic substitution transformation. According to Sullivan data, the global market size is expected to grow from USD 49.5 billion in 2023 to USD 66.5 billion in 2031, with a compound annual growth rate of 7.5%. The proportion of China is expected to increase from 26% to 35%. Simply put, this means an incremental space of 70-80 billion yuan.

In this field, where high-end products have long relied on imports and the space for domestic substitution is significant, Chemexpress ranks among the top three in China with a reserve of 92,000 molecular building blocks and 47,000 tool compounds.

As a new growth point for Chemexpress, ADC CDMO is experiencing explosive growth. On one hand, the future growth potential of ADC drugs is self-evident; on the other hand, due to their complexity, the outsourcing demand is higher. These two points provide higher certainty for ADC CDMO companies, as evidenced by WuXi AppTec's valuation of HKD 70 billion in the secondary market.

In this market with extremely high technical barriers and an outsourcing rate exceeding 70%, Chemexpress has carved out a niche, with its Payload-Linker resource library gaining some recognition in the industry. The Payload-Linker resource library, which includes over 80 payloads and 400 linkers, has served over 990 clients, supporting more than 50 CMC projects and over 150 payload-linker projects, of which 5 projects have advanced to the BLA application stage.

The life science reagent business has become a cash cow in the global layout. Market Research predicts that the global market size will reach USD 66.82 billion by 2026, with a compound annual growth rate of 7.9%. Chemexpress's business covers more than 20 sub-sectors, including cell culture and gene editing, with high-end products such as PROTAC degraders and small nucleic acid modification reagents having gross margins exceeding 70%.

The synergy of these three engines perfectly aligns with the current triple dividends of demand explosion, technological iteration, and domestic substitution. Chemexpress has secured a place in these three sub-sectors through long-term cultivation and distinctive positioning.

Profit Turning Point Approaches

As a distinctive CRO company, Chemexpress has maintained relatively stable operating data due to the industry scarcity of its business.

A set of data is enough to illustrate that Chemexpress has maintained double-digit revenue growth for 10 consecutive years, with net profit only declining year-on-year in 2022 and 2023. This makes it second only to industry leaders like WuXi AppTec in the market.

▲Data source: Tonghuashun

However, those who understand CROs know that this wave of "price wars" has affected everyone. Although the chairman of Chemexpress, Zheng Baofu, has consistently emphasized the spirit of "anti-involution," the downward trend in operational data reflects the pressure. The most direct observation indicator—sales gross margin—has been declining since 2019, stabilizing and rebounding by 2024. Against the backdrop of optimizing cost control, the net profit margin from sales only began to decline in 2021, stabilizing by 2024. This indicates that Chemexpress is moving away from involution, with improving profit quality.

In 2024, Chemexpress also achieved a remarkable turnaround in its anti-involution efforts. The non-recurring net profit reached 179 million yuan, a year-on-year increase of 62.5%; in Q1 2025, the non-recurring net profit continued to grow, with a year-on-year growth rate of 323.19%.

If a comprehensive layout cannot be achieved, then focus on one direction and delve deeply. The growth secret of Chemexpress lies in its life science reagent business, characterized by an integrated business model that extends around the "front-end + back-end."

The front-end life science reagent business serves as the primary engine, not only being the center of profit and cash flow but also building a vast customer base and market insight. As of the end of 2024, the company has over 141,000 types of life science reagents, serving more than 13,000 customers globally, including leading pharmaceutical companies such as Pfizer and Roche.

This extensive coverage helps Chemexpress keenly capture R&D hotspots, providing natural traffic for back-end businesses. In 2024, this business segment generated revenue of 1.499 billion yuan, a year-on-year increase of 32.41%, accounting for approximately 66% of the company's revenue, with the molecular building block business growing by 35.7% and the tool compounds and biochemical reagents business growing by 31.2%.

The CDMO business, as another new engine, is currently in an accelerated growth phase. By the end of 2024, the company had undertaken 403 generic drug projects (including 83 commercialized projects) and 892 innovative drug projects, most of which are in preclinical and clinical phase I, with some having entered later stages, forming a large project reserve.

With the commissioning of the Chongqing ADC CDMO base, the company has achieved comprehensive vertical integration from antibody bulk production, high-activity payload synthesis, bioconjugation to sterile formulation filling, significantly enhancing customer stickiness with its one-stop service capability. In 2024, this business generated revenue of 755 million yuan, with a backlog of orders amounting to 509 million yuan, an increase of 18.5% year-on-year, and by the end of Q1 2025, the backlog of orders had increased by over 30% year-on-year.

Technological innovation is the core driving force of Chemexpress. Eight major technology platforms have built a strong moat: the ADC full-chain technology is on par with international leading levels, providing integrated services from early R&D to ton-level production; continuous flow chemistry and biocatalysis technology have tripled the efficiency of complex molecule synthesis, with chiral compound selectivity exceeding 99%; High-throughput screening technology supports the construction of its vast molecular building block library.

Unfulfilled Growth Expectations

While the market is still focused on the growth of existing businesses, Chemexpress has already laid out its future growth curve. The current PE valuation of around 25 times has not fully reflected the potential brought by the commercialization of its ADC, the layout of new technologies, and the benefits of globalization, which constitutes an expectation gap in investment.

The profitability elasticity of the ADC business is severely underestimated. Currently, its CDMO business gross margin is only 20.05%, but as five BLA stage projects gradually go into production each year, its scale effect is expected to drive the gross margin back up to over 35%. The company's leading position in the ADC field has been validated; according to the company, it has served 70% of domestic ADC R&D clients, undertaken over 110 projects, and 12 related small molecule products have completed FDA registration in the United States. The production of the Chongqing base has further enhanced its integrated service capabilities.

The layout of new technologies supports the second growth curve. In cutting-edge fields such as PROTAC degraders and small nucleic acid modification reagents, the company has reserved over 200 products, and it is expected that by 2026, the revenue share from these will reach 15%. More notably, its layout in the XDC field, including PDC (peptide conjugates), RDC (nuclide conjugates), and DAC (directional degradation antibody conjugates), has already served multiple clients. This forward-looking layout will allow it to gain an advantage in the trend of "everything can be conjugated."

The globalization dividend is being accelerated. By building overseas warehousing centers and forming an international BD team, the company has established a mature global service network. The Shanghai Zhangjiang base has passed FDA on-site audits with "zero defects," and the Chongqing base has obtained EU GMP certification, paving the way for it to undertake more high-end overseas projects. According to current trends, overseas revenue is expected to continue to rise.

The integration of AI technology further opens up growth space. The company has built a unique compound library that includes the MegaUni library, relying on generative AI technology to shorten R&D cycles; it has joined the Zhangjiang AI New Drug Alliance and formed strategic partnerships with companies such as Derui Zhiyuan and InSilico Medicine to accelerate drug pipeline construction and retrosynthetic analysis. In the ADC field, AI is being used to find next-generation payloads with higher activity and lower toxicity, and this technological integration will continue to enhance R&D efficiency.

Chemexpress's new story is just beginning, showing potential to grow into the "Chinese version of Sigma-Aldrich." The dual drive formed by its high-margin front-end business and back-end capacity release, the competitive advantages established in niche tracks such as molecular building blocks and ADC CDMO, as well as the incremental space brought by globalization, constitute a clear growth path Author of this article: E Pharma Capital, Source: CM10 Pharmaceutical Research Center, Original title: "Net Profit Soars 110%! This CRO's Invisible Champion Can't Be Hidden Anymore"

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