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Source: 21st Century Health (original reporting)
The warmth spreading through China's pharma space is now radiating downstream to the entire outsourcing chain.
WuXi AppTec now expects 2025 top-line growth of 13–17 % (raised from 10–15 %) and full-year revenue of RMB 42.5–43.5 bn (up from 41.5–43 bn), while staying laser-focused on its integrated CRDMO model and continuous operational efficiency gains.
CXOs—the "pick-and-shovel" players that power drug R&D and manufacturing—have become the latest magnet for capital. Related ETFs have seen almost 1 billion new units flow in within a single month.
China's CXO universe has reached an earnings inflection. WuXi AppTec's H1 2025 guidance—revenue of RMB 20.8 bn (+20.6 % YoY) and net profit of RMB 6.3 bn (+44.4 % YoY)—underscores the global leader's resilience.
A South-China-based analyst told 21st Century Business Herald the logic is straightforward: cash from biotech business-development (BD) deals is being funnelled straight into clinical trials, while ever-improving reimbursement policy keeps the engine running. Result: CXOs are finally catching up.
Multiple tailwinds
BD cash is morphing into clinical spend faster than ever.
Under the National Healthcare Security Administration's (NHSA) push to globalize innovative drugs and devices, domestic biotechs are signing more and larger license-out agreements; >60 % of these proceeds are earmarked for clinical development.
Clinical phases (Ph I–III, BE, MRCT) absorb >60 % of total R&D outlays and determine commercial fate; ≥80 % of this work is outsourced to CXOs.
Faster trials = faster market entry = higher valuations, giving firms every incentive to place BD dollars with CXO partners.
Meanwhile, the 11th volume-based procurement (VBP) round has moved away from "lowest-price-wins." Bidders must now justify low offers and guarantee cost coverage, stabilizing price expectations and encouraging sustained clinical investment instead of short-term cash hoarding.
Continued spending smooths CXO order books and reduces volatility.
Large innovators—whose trials are larger and more complex—generate outsized CXO demand. As VBP’s competitive shake-out moderates, the gap between cash-rich leaders and smaller peers widens, concentrating orders with top-tier CXOs and supporting their valuation catch-up.
Valuation re-rating in motion
Rising clinical spend is driving demand across the full CXO chain, sparking a catch-up rally.
Clinical-trial services sit closest to the BD cash spigot; every protocol design, patient-recruitment drive and data-management task converts directly into new orders.
After languishing for months, multiple CXOs now show clear recovery signals.
Offshore demand is re-joining the party.
Huatai Securities notes that easing USD-rate pressure is thawing global early-stage R&D budgets, amplifying domestic momentum.
Valuation is historically attractive: Wind data show the CXO cluster trading at ~33× TTM P/E—below the broader pharma average and far below the 45–50× commanded by global leaders.
Guotai Juhai’s latest report shows rising clinical-equipment tender activity, a leading indicator of trial volume.
Q3 is traditionally the busiest clinical season; BD-funded acceleration should magnify the seasonal uptick, delivering sequential order and earnings beats.
Capital flows confirm the thesis:
• Medical-device ETFs have added ~1 bn units in a month, with CXO heavyweights taking larger index weights.
• HK-listed healthcare ETFs—overweight CXOs—have rallied on cross-border inflows.
In the catch-up phase, leaders with deep pipelines, rigorous quality systems and global footprints gain disproportionate share and pricing power.
Long-term, a virtuous loop is forming: more BD cash → more clinical spend → more CXO demand. NHSA's globalization push, VBP rule refinement and payer preference for innovation ensure the cycle is durable. CXOs—especially those with technical moats, scale and global reach—are set to migrate from valuation repair to sustained outperformance.
