Surged 80% in two months! CRDMO leader Pharmaron has completely "reversed"

After being sluggish for over half a year, the stock price of Pharmaron has finally seen a significant reversal.

According to statistics, since hitting its low of 20.18 RMB/share on June 12, Pharmaron's stock price has begun to gradually recover. As of the close on July 31, Pharmaron's stock price closed at 36.8 RMB/share, with a total market capitalization of 67.61 billion RMB. Although the stock price has retreated recently, it has still rebounded by more than 80% compared to the lowest point in June, with market capitalization increasing by over 30 billion RMB.

The driving force behind the stock price recovery comes from a favorable policy: In June 2026, the adjustment of the National Medical Insurance Catalog introduced a pre-declaration mechanism for the first time, connecting basic medical insurance and commercial insurance, and continuously broadening the payment channels for innovative drugs. The CXO sector, after experiencing a financing winter, pipeline cuts, and shrinking orders from 2022 to 2024, has regained capital pricing.

However, although long-awaited good news has arrived, Pharmaron's fundamentals are not as strong as its stock price performance suggests.

Performance forecasts show that in the first half of this year, Pharmaron is expected to achieve revenue of 7.472 billion to 7.665 billion RMB, a year-on-year increase of 16% to 19%, with new contracts signed by the company increasing by more than 30% year-on-year; among them, new laboratory service contracts increased by more than 20% year-on-year, and new small molecule CDMO service contracts increased by more than 50% year-on-year. Although the revenue side performed brightly, net profit performance was weak, with an expected net profit of 729 million to 772 million RMB, a year-on-year increase of 4% to 10%, and the net profit growth rate significantly lower than the revenue growth rate.

No matter how good the stock price performance is, if there is a lack of fundamental support, there is a relatively large risk of correction in the trend. The market is also closely monitoring whether such volatility will occur in Pharmaron.

Bottoming Out and Rebounding

In 2003, Lou Boliang, who holds a Ph.D. in Organic Chemistry from the Chinese Academy of Sciences, resigned from a foreign pharmaceutical company and co-founded Pharmaron with his younger brother Lou Xiaoqiang and sister-in-law Zheng Bei.

In the early stages of establishment, Pharmaron was only a synthetic chemistry laboratory with a scale of dozens of people, relying on Lou Boliang's accumulated connections with multinational pharmaceutical companies to undertake early drug discovery outsourcing orders. From 2004 to 2019, starting with laboratory chemistry business, Pharmaron gradually built up a full industry chain business, covering CMC, clinical CRO, and biological drug CDMO.

In 2019, Pharmaron completed dual listing in "A+H" shares, and its revenue scale ranked second in China's CXO industry, second only to the giant WuXi AppTec.

Pharmaron's business model can be understood using "four levels of steps." The first level is laboratory services, which is Pharmaron's founding business, mainly carrying out compound synthesis, screening, and optimization during the drug discovery stage. Customers are mainly small and medium-sized Biotech companies around the world; these enterprises have R&D pipelines but find it difficult to build complete chemical teams on their own, so they outsource synthesis work to Pharmaron. In 2025, laboratory service revenue was 8.159 billion RMB, accounting for 58% of the company's total revenue, making it the largest business pillar.

The second level is small molecule CDMO, i.e., CMC business. After laboratory services help customers screen candidate compounds, customers need to scale up the laboratory's small-batch synthesis routes to kilogram-level and ton-level production scales, and this part of the demand is undertaken by CDMOs. Projects advance from Phase I clinical trials to Phase III, and then to commercial launch. The production scale expands step by step, and the contract amount for individual projects increases synchronously. After entering the commercialization stage, the contract scale can reach tens of millions or even hundreds of millions of yuan. In 2025, CDMO business revenue was 3.483 billion RMB, accounting for about 25% of revenue.

The third level is clinical research services, whose core business is to assist pharmaceutical companies in organizing and managing clinical trials, processing data, and interfacing with regulatory authorities. Revenue was 1.957 billion RMB in 2025, accounting for 14% of revenue; the fourth level is macromolecule and cell and gene therapy services. This is a new direction that Pharmaron has focused on investing in recent years, focusing on the process development and production of biological drugs (monoclonal antibodies, bispecific antibodies, ADCs) and cell and gene therapies. Revenue was 475 million RMB in 2025, accounting for about 3% of revenue.

Overall, these four levels of business present a progressive relationship: first relying on laboratory services to obtain a large number of early-stage projects, and then screening molecules with potential from them into the CDMO link; after the CDMO business forms a scale, it further drives the expansion of clinical and biological drug businesses. The later the business level, the stronger customer stickiness, the larger the amount of individual projects, and the higher the switching costs for customers.

However, in the past few years, this business model has simultaneously faced dual challenges from the external environment and internal operations.

External challenges mainly come from the contraction of downstream customer budgets. In 2022, the Federal Reserve launched interest rate hikes, and the global Biotech financing scale dropped significantly from the historical high in 2021. Biotech is Pharmaron's most core customer group: when the financing environment is loose, enterprise pipelines continue to expand, and outsourcing orders come continuously; after financing tightens, pharmaceutical companies 纷纷 cut pipelines and reduce outsourcing budgets. Affected by this, Pharmaron's revenue growth rate continued to decline, from 45% in 2021, dropping to 37% in 2022, falling to 12% in 2023, and further sliding to 6% in 2024. The momentum of growth slowed significantly over the four years.

Internal challenges are concentrated in the operational efficiency level. Laboratory services belong to labor-intensive businesses. The synthesis of every compound and the screening of every molecule require practical operation by R&D personnel. From 2022 to 2025, the number of employees at Pharmaron grew from 18,000 to 25,000, but the revenue scale failed to grow synchronously, and per capita revenue fell from a high of 710,000 yuan to 570,000 yuan. For reference, WuXi AppTec's per capita revenue was 1.2 million yuan. The gap does not simply come from differences in personnel capabilities; the core lies in the fact that WuXi AppTec's TIDES (peptide/oligonucleotide) CDMO business is larger, and the commercial production stage has advantages in continuity and scale.

Fortunately, in the second half of 2025, marginal turning points in the industry began to appear—global Biotech investment and financing activity recovered. In the first half of 2026, Pharmaron's new contracts signed increased by more than 30% year-on-year, and the growth rate of new CDMO contracts exceeded 50%. Early-stage R&D projects continued to flow back, and the pace of later-stage commercial projects accelerated. In the first half of the year, Pharmaron is expected to achieve revenue of 7.472 billion to 7.665 billion RMB, a year-on-year increase of 16% to 19%; the single-quarter revenue growth rate in the second quarter rebounded to above 19%, creating the fastest quarterly growth rate since 2022.

"Hidden Worries" Still Exist

Order recovery, revenue acceleration, and stock price rebound, three signals superimposed, easily lead people to the judgment that "Pharmaron has already walked out of the trough."

But if you look closely at the income statement, the actual operating situation is not so optimistic.

There is a clear divergence between Pharmaron's current revenue and net profit performance. From 2023 to 2025, Pharmaron's revenue grew from 11.538 billion RMB to 14.095 billion RMB, a cumulative growth of 22% over three years; but during the same period, net profit rose from 1.601 billion RMB to 1.793 billion RMB, and then fell again to 1.664 billion RMB, with profit size almost standing still.

If we exclude a one-time investment income of 563 million RMB in 2024, the operating trend of net profit is actually weak.

The root cause of the clear divergence between revenue and profit lies in the cost structure. Laboratory services are Pharmaron's largest business, essentially belonging to a human outsourcing model—compound synthesis and molecular screening highly rely on chemists' practical operations. Although the industry is promoting AI-enabled R&D, AI currently cannot completely replace R&D personnel. In 2025, the total number of employees at Pharmaron broke through 25,000, a net increase of 7,000 people compared to three years ago, and the speed of personnel expansion continued to be higher than the revenue growth rate.

More troublingly, in recent years, in order to make up for the shortcomings in CDMO, clinical CRO, and biological drug businesses, Pharmaron implemented several large-scale M&A deals.

In 2020, Pharmaron acquired Absorption Systems in the United States; in 2021, it acquired AbbVie's biological drug base in the UK; in 2022, it acquired Recipharm's API factory in the UK; and in 2025, it spent another 1.346 billion RMB to acquire Wuxi Baiaode. Each round of M&A pushed up the company's goodwill scale. As of the end of 2025, Pharmaron's goodwill book value reached 3.586 billion RMB, accounting for 22.78% of net assets; whereas in 2019, the company's goodwill was only 203.3 million RMB.

Goodwill belongs to the balance sheet item, and the market generally pays attention to: in periods of industry prosperity, goodwill risks are not easy to 凸显; once the acquired targets fail to meet expectations in operation, the company may face pressure for goodwill impairment.

It is worth noting that two of its businesses have yet to achieve profitability. One is macromolecule and cell and gene therapy services, with revenue of 475 million RMB in 2025, operating costs of 666 million RMB, gross loss of 191 million RMB, and a gross margin of -40.31%; operating pressure further increased in the first quarter of 2026, with revenue declining 11% year-on-year and gross margin falling to -92.80%. The other is clinical research services, with gross margin declining from 12.82% in 2024 to 11.41% in 2025, and further dropping to 7.10% in the first quarter of 2026.

In fact, although the company attempts to build a full-coverage business map by relying on M&A, crossing over from chemical synthesis to layout biological drug CDMO involves high technical and operational thresholds.

WuXi Biologics chose to break through with monoclonal antibodies as a single point, continuously polishing process development capabilities, establishing industry benchmarks, and then gradually expanding categories such as ADCs and bispecific antibodies. In contrast, when Pharmaron laid out macromolecule and CGT businesses, it advanced multiple tracks simultaneously, investing simultaneously in monoclonal antibodies, bispecific antibodies, cell therapy, and gene therapy. None of the tracks have yet built sufficiently deep competitive barriers. The two loss-making businesses account for about 17% of total revenue, continuously consuming funds and dispersing management energy and limited corporate resources. Currently, small molecule CDMO is in a critical window for volume expansion, requiring concentrated resource investment in capacity expansion and process team building, while CGT and clinical CRO businesses continue to divert resources.

In addition, Pharmaron's debt structure is also worthy of market attention. As of the end of 2025, Pharmaron's short-term borrowings were 1.265 billion RMB, an increase of more than 65% from the beginning of the year; non-current liabilities due within one year reached 3.624 billion RMB, surging more than seven times from 432 million RMB at the beginning of the year. The sum of the two liabilities is close to 4.9 billion RMB. The company explained that this was mainly due to the reclassification of long-term borrowings into liabilities due within one year on schedule. Regardless of the cause, the scale of debt that the company needs to repay or renew in 2026 has increased significantly compared to the previous year.

Conclusion

Looking back at Pharmaron's trend over the past half year, policy catalysts drove the CXO sector's sentiment to warm up, and high growth in CDMO orders brought expectations for performance growth.

But how long this round of rebound 行情 can last depends primarily on whether the profit end can keep up with revenue growth.

The current environment for Pharmaron is quite subtle. On the positive side, global Biotech financing has recovered, new contract signing has accelerated, and the proportion of CDMO business continues to increase, indeed showing signs of repair in operations; but challenges also exist objectively: the laboratory business supported by 25,000 R&D personnel remains the basic plate, and improvement in per capita efficiency is not obvious yet; 3.5 billion yuan of goodwill hangs unresolved, and two major business segments continue to lose money; short-term repayment scale has risen significantly, with multiple pressures coexisting.

The CXO industry has distinct cyclical attributes. During the upward phase of the financing environment, enterprises within the sector generally welcome valuation repair; when the financing fever fades, profit quality is the core yardstick for testing enterprise value. For Pharmaron to achieve a true reversal from stock price rebound to fundamentals, having only order growth is far from enough. The company needs to prove that early projects undertaken by the laboratory can be continuously converted into scaled CDMO revenue, and traverse cost pressures and potential goodwill risks, ultimately reflected in continuous improvement in net profit. From this dimension, Pharmaron still faces many challenges subsequently.