CXO Sector Davis Double Click Potential Analysis (2025-2026)

Based on an in-depth analysis of the CXO sector, I believe the sector does have the potential to achieve a Davis Double Click in 2025-2026, but export-oriented and domestic-demand-oriented companies will present distinct differentiated investment opportunities.

From the 2025 performance of core representative companies, the CXO sector has already started a valuation repair trend:

• WuXi Biologics (2269.HK)
  : Year-to-date gain of 93.70%, P/E ratio of 29.79x [2]
• WuXi AppTec (2359.HK)
  : Year-to-date gain of 90.22%, P/E ratio of 18.47x [3]
• Pharmaron (300759.SZ)
  : Year-to-date gain of 15.97%, P/E ratio of 34.03x [4]

As seen from the chart, the two leading companies achieved nearly double-digit growth in 2025, reflecting strong market expectations for industry recovery.

1. US Interest Rate Cut Cycle Initiated
   : The Federal Reserve’s shift to accommodative monetary policy has reduced financing costs for biopharmaceutical companies and stimulated demand for R&D spending

2. Biopharmaceutical Investment and Financing Recovery
   : US biotech companies’ stock sales in 2025 recorded the strongest quarterly performance since 2021 [6], and increased M&A activities have boosted industry valuations

3. New Molecule Orders Driving Growth
   : With the expansion of innovative drug R&D pipelines, especially for new molecule types such as ADCs and cell therapies, demand for CXO services has grown significantly

According to Huatai Securities research report data, export-oriented CXOs emerged from difficulties in the second half of 2024, achieving year-on-year growth in both orders and revenue in the first three quarters of 2025, with potential for continued acceleration.

• Technology Platform Advantages
  : Leading companies with integrated biopharmaceutical service capabilities
• Overseas Market Layout
  : Companies with physical operations in Europe and the US are more favored by overseas pharmaceutical companies
• Emerging Therapy Areas
  : Enterprises with technical accumulation in cutting-edge fields such as cell and gene therapy, ADCs

Domestic-demand-oriented CXOs experienced a period of concentrated price cuts from 2023 to 2024, and currently, the order side has shown a trend of “volume growth and stable prices”. This is mainly due to:

1. Domestic Innovative Drug Industry Adjustment
   : Policies such as medical insurance cost control and volume-based procurement have affected the R&D investment intensity of pharmaceutical companies
2. Intensified Competition
   : Rapid expansion of domestic CXO capacity has led to fierce price competition
3. Tightened Financing Environment
   : Domestic biopharmaceutical investment is relatively cautious

According to research report analysis, the revenue side of domestic-demand-oriented CXOs is expected to gradually see a turnaround starting from 2026, mainly based on:

1. Improved profitability of domestic innovative pharmaceutical companies
2. Marginal optimization of the policy environment
3. Completion of industrial chain structure adjustment

Domestic-demand-oriented CXOs are more suitable for medium-to-long-term allocation, with a focus on:

• Strong cost control capabilities
• Differentiated technology platforms
  with competitive advantages
• Diversified customer structure
  to reduce reliance on a single customer

As an integrated CXO service provider, Pharmaron’s performance in 2025 was relatively moderate (year-to-date gain of 15.97%), reflecting the challenges faced by domestic-demand-oriented companies [4][7].

1. Geopolitical Risks
   : The US Biosecurity Act may affect some Chinese CXO companies [6]
2. Regulatory Policy Changes
   : FDA policy adjustments may affect the pace of drug development [5]
3. Exchange Rate Fluctuations
   : Export-oriented companies face the impact of exchange rate fluctuations on performance

: Focus on export-oriented CXO companies, benefiting from the recovery of overseas biopharmaceutical investment and financing and the US dollar interest rate cut cycle

: Gradually allocate to leading domestic-demand-oriented CXOs, waiting for performance elasticity brought by the recovery of the domestic innovative drug industry

:

• Export-Oriented Priority
  : WuXi Biologics (2269.HK), WuXi AppTec (2359.HK) and other leaders with complete global layouts
• Domestic-Demand-Oriented Selection
  : Pharmaron (300759.SZ) and other platform companies with full industrial chain service capabilities

Overall, the CXO sector does have the foundation for a Davis Double Click, but differentiated investment strategies need to be adopted based on company types. Export-oriented companies have clearer short-term opportunities, while domestic-demand-oriented companies require more patience to wait for the industry inflection point.

[0] Gilin API Data - Stock prices, financial indicators, market data
[1] Zhihu - “What are the differences between CRDMO/CRO/CXO/CDMO?”
[2] Gilin API Data - WuXi Biologics company profile and financial data
[3] Gilin API Data - WuXi AppTec company profile and financial data
[4] Gilin API Data - Pharmaron company profile and financial data
[5] FDA Official Website - Regulatory policy information
[6] Bloomberg - “Biotech Share Sales in US Deliver Biggest Quarter Since 2021”
[7] Xueqiu - “Analysis of Pharmaron’s Q3 2025 Financial Report”