Supply and demand significantly improve! CRO concept strengthens across the board, latest margin trading client target stocks exposed

The CRO sector performed strongly in the morning trading session on March 24, with notable gains in companies such as Jin Kai Shengke, WuXi AppTec, Bide Medicine, InnoS, and Baihua Medicine.

According to Shanghai Securities News, the current escalation of tensions in the Middle East has not only driven up oil prices but also reversed the market’s previous single-minded “technology faith.” Some fund managers are participating in short-term inflation trades, while others are shifting their focus elsewhere. Among them, the contrarian strength of the innovative drug sector has attracted attention from multiple institutions.

Data shows that CRO (Contract Research Organization) is a core outsourcing service provider and infrastructure for innovative drug R&D. The two are highly synergistic, coexisting and thriving together: innovative drugs are the demand side and final products, while CROs are the professional service providers and efficiency engines.

High Prosperity in the Innovative Drug Industry

From data on financing scale, BD (business development) transactions, IND (Investigational New Drug) applications, and Phase I/II clinical trials, the demand for CRO services is clearly in a high-growth phase.

According to YaoYao Magic Cube, domestic innovative drug financing is projected to reach $14.684 billion in 2025, a year-on-year increase of about 127%, indicating a rebound from the bottom; the total BD transaction amount for Chinese innovative drugs in 2025 is expected to be $138.8 billion, with an initial payment of $7.5 billion. This not only helps advance existing R&D pipelines domestically but also supports the initiation of new pipelines.

Cinda Securities states that the number of clinical IND approvals in China in 2025 will reach 2,703, up about 19% year-on-year, showing an accelerating growth trend; the number of Phase I clinical trials will be 1,168, up about 13%, and Phase II trials will reach 671, an increase of approximately 42%.

Will Domestic CRO Exceed 180 Billion by 2030?

A series of impressive data points suggest that the industry will usher in a new peak in CRO demand. According to Frost & Sullivan’s statistics and forecasts, the overall scale of China’s CRO industry is expected to reach 185.49 billion yuan by 2030.

Based on different R&D stages, the CRO industry can be divided into drug discovery CRO, preclinical CRO, and clinical CRO, with clinical CROs holding the highest value. Their services include clinical registration submissions, trial monitoring, trial execution, data analysis, and biological sample testing.

Frost & Sullivan forecasts that the domestic clinical CRO market will reach 44.24 billion RMB in 2023. Demand was relatively sluggish in 2023 and 2024, with single-digit growth rates, but from 2025 onward, the industry is expected to enter a boom cycle, with growth rates returning to double digits. The market size is projected to reach 95.56 billion RMB by 2030, with an annual compound growth rate of about 13% from 2024 to 2030.

Cinda Securities believes that the high growth of CRO is driven by the trend toward globalization: on one hand, the global clinical CRO market is roughly nine times the size of China’s, and the quality of domestic clinical trials is increasingly recognized internationally. Leading clinical CROs are expected to expand overseas alongside innovative drug BD; on the other hand, China’s clinical trial execution efficiency is far ahead globally, especially in early-stage trials. As China’s clinical research rapidly integrates into the global system, leading clinical CROs are poised to undertake more multi-center international projects.

Bottom of the Cycle, Capacity Cleared

In addition to high demand, the CRO industry, especially clinical CROs, is at the bottom of the cycle, with capacity being cleared and competition becoming more concentrated among leading firms.

Cinda Securities notes that in recent years, due to insufficient demand, the domestic clinical CRO industry has experienced internal competition and downward pressure on order prices, leading to the gradual exit of small and medium-sized companies. According to Tigermed’s data, since 2021, the number of domestic clinical CRO companies has decreased significantly, with a cumulative decline of 69% by 2025. The largest drop occurred in 2024. Despite industry demand rebounding in 2025, the number of clinical CRO firms continues to decline.

As a light asset industry, clinical CROs mainly rely on clinical teams and project experience. Leading companies have significant competitive advantages. Despite industry pressures in recent years, these leaders have maintained growth against the trend. As smaller firms exit, leading companies leverage their advantages to gain market share, increasing industry concentration.

Rising Interest from Financing Investors

From a stock perspective, many CRO-related stocks have seen active accumulation by leveraged funds this month. WuXi AppTec was net bought by financing for 529 million yuan; Lianhua Technology, Sunshine Nuohe, and others received net financing inflows exceeding 50 million yuan; Kanglong Chemical, Yaoshi Technology, Tailong Pharmaceutical, and others also saw net buying.

However, in terms of stock performance, the overall CRO concept has been relatively flat this year. As shown in the chart, YaoShi Technology, Tigermed, Yaokang Bio, Bide Medicine, and Haoyuan Medicine have all fallen more than 10% year-to-date. Sunshine Nuohe, Kanglong Chemical, and NuoSiGe have also experienced declines.

HuaXia Fund believes that 2026 may be the year when Chinese innovative drug companies realize their performance. On one hand, revenue from Chinese innovative drug companies is expected to be realized in earnest. Based on typical cycles of drug R&D and approval, 2025 to 2026 will be critical periods for the first batch of star products from domestic companies to submit overseas listing applications. Several payments have already been received, which will be reflected in current earnings. On the other hand, the high cost-performance ratio of Chinese innovative drug R&D has made these companies an indispensable part of the global pharmaceutical industry chain. When these factors converge, their combined effects will directly show up in corporate financial statements.

Industrial Securities points out that in 2026, the “innovation + internationalization” theme will remain central for the CRO industry, with the industry’s prosperity expected to continue upward. External demand for CXO services will maintain an upward trend, while domestic demand CXO opportunities are currently on the left side of the cycle, with performance improvement cycles anticipated.