CITIC Securities: Overseas interest rate cuts + improved domestic financing, continue to be optimistic about the full recovery of demand in the pharmaceutical industry chain

Ask AI · How Will Over $60 Billion in Overseas Business Development for Innovative Drugs Reshape the Industry Landscape?

On April 2nd, CITIC Securities’ research report stated that the domestic surge in innovative drug business development (BD) has driven demand recovery downstream, with equity financing significantly decreasing as a source of corporate funds, and BD transactions accounting for nearly 40%. In the first quarter of 2026, the total overseas BD amount will exceed $60 billion, nearly half of the total for 2025. Looking at different segments, small molecule CDMO’s share is increasing due to China’s global supply chain advantage, coupled with stable domestic supply amid Middle East conflicts, potentially leading to more orders. Preclinical and clinical CROs are expected to see both volume and price increases as financing improves and early research demand transmits. Although the research services and upstream segments may experience short-term performance fluctuations in Q4 2025 due to exchange rate volatility, the early research demand outlook remains positive into 2026, with leading companies expected to see revenue growth of over 20%. Current valuations are considered reasonable.

Additionally, CITIC Securities’ report believes that AI’s disruption of the U.S. stock market internet narrative is overly exaggerated in the short term. In consumer scenarios, AI experience growth is limited, AI substitution faces cost constraints, and model companies have inherent capability boundaries. Therefore, AI is more likely to cooperate with existing internet platforms rather than replace them, and some high-quality companies are clearly undervalued. CITIC Securities recommends focusing on companies with competitive advantages in the AI era, such as those linked to the physical world, with strong network effects, data and algorithm accumulation, and high-quality content IP, while also exploring directions where demand expands with AI penetration.