Key takeaway

PHARMARON's 2025 performance validates the strong resilience of the "fully integrated" business strategy. With the continuous advancement of CMC business, the adjusted net profit growth rate improved QoQ. Commercial production achieved a historic breakthrough. The first API project supplied the US market, and the oral GLP-1 formulation project was implemented. This marks the company officially entering the commercial supply chain system for important global innovative drugs. Laboratory services advance steadily, and the CDMO segment welcomes a qualitative inflection point. Looking ahead to 2026, the company is expected to enter an accelerated profit cycle with the continuous conversion of newly signed orders, the volume growth of commercial projects, and the deep empowerment of AI technology. It is recommended to focus on changes in its CMC commercial orders, capacity utilization improvement, and profit margin improvement.

Event

PHARMARON releases 2025 results

In 2025, PHARMARON revenue was RMB14.095bn (+14.8%), and adjusted Non-IFRS net profit attributable to shareholders of the parent company was RMB1.816bn (+13.0%). Commercial production achieves breakthroughs. Ningbo/Shaoxing API workshops passed the FDA audit. The first innovative drug API project was approved for launch in the US. The commercial agreement for oral GLP-1 formulation was signed in 1Q26. Laboratory service revenue was RMB8.159bn (+15.8%), with bioscience accounting for over 56%. Small molecule CDMO revenue was RMB3.483bn (+16.5%), with 84% of revenue coming from discovery service clients. Newly signed orders grew by over 14%, and revenue from TOP20 pharmaceutical companies grew by 29.4%. Operating cash flow was RMB3.221bn (+25.0%). The company guides for a 12%-18% revenue Click here to enter text. growth in 2026.

Quick Take

Overall performance: revenue grows steadily, and profitability improves significantly

In 2025, the company achieved a revenue of RMB14.095bn, up 14.8% YoY. The net profit attributable to shareholders of the parent company was RMB1.664bn, down 7.2% YoY. This was ma inly due to the high base formed by the large investment income from the disposal of PROTEOLOGIX equity in the same period of 2024. The deducted non-net profit attributable to shareholders of the parent company was RMB1.538bn, up 38.85% YoY, showing significantly enhanced profitability of the main business. The adjusted Non-IFRS net profit attributable to shareholders of the parent company was RMB1.816bn, up 13.0% YoY. The adjusted net profit margin stabilized at 12.9%.

From the quarterly trend, revenue growth accelerated quarter by quarter. Revenue for 1Q to 4Q was RMB3.099bn, RMB3.342bn, RMB3.645bn, and RMB4.009bn respectively, showing continuous QoQ improvement. The Non-IFRS net profit margin increased quarter by quarter from 11.3% in 1Q to 14.7% in 4Q, indicating continuous optimization of profitability quality.

Newly signed orders increased by over 14% YoY, laying a solid foundation for revenue growth in 2026. The company has over 3,300 active customers. The top 20 global pharmaceutical companies contributed a revenue of RMB2.831bn, up 29.4% YoY, and the proportion increased to 20.1%. The large customer strategy achieved remarkable results. By region, North America revenue was RMB8.714bn (+11.0% YoY), Europe revenue was RMB2.895bn (+27.4% YoY), and China revenue was RMB2.137bn (+15.7% YoY). The European market growth was particularly outstanding.

2026 outlook: revenue grows by 12%-18% and commercialization volume expansion is expected

The company guides a 2026 revenue growth of 12%-18% YoY (considering exchange rate impacts, and the growth rate is higher under constant currency). The core driving forces include:

1) Newly signed orders for laboratory services grow steadily, and the proportion of bioscience continues to rise;

2) Small molecule CDMO commercialization projects expand in volume. The first API project for the US market has been approved. New orders in 1Q26 continue to exert force. The commercial production agreement for oral GLP-1 preparations is implemented;

3) Clinical research services benefit from the industry bottoming out and the integration of Haixin Zhihui;

4) The gross profit margin of macromolecule CGT services continues to improve.

Business segment analysis: laboratory services grow steadily and CDMO commercialization continues to make breakthroughs

Laboratory services: Revenue reached RMB8.159bn, up 15.8% YoY. The gross profit margin was 44.7% (+0.2 pct YoY). Newly signed orders in this segment increased by about 12% YoY. Bioscience revenue accounted for over 56%, and the structure continued to be optimized. The company participated in 887 drug discovery projects and expanded multiple strategic partnerships. New molecular type projects developed rapidly. Notably, the company acquired a controlling stake in Biortus, which significantly enhanced the capabilities of its structural biology technology platform. Meanwhile, the company deeply promoted the integrated application of AI and automation technologies to continuously improve R&D efficiency.

Small molecule CDMO services: Revenue reached RMB3.483bn, up 16.5% YoY. The gross profit margin was 33.8% (+0.7 pct YoY). Newly signed orders in this segment increased by about 13% YoY. Commercial production achieved a milestone breakthrough. The API production workshops in Ningbo and Shaoxing successfully passed the FDA pre-approval inspection (PAI). In 4Q25, the first innovative drug API project was successfully approved for launch in the US. This became the company's first commercial API production project supplying the US market. In 1Q26, the company signed a strategic cooperation agreement with a large international pharmaceutical company to provide commercial manufacturing services for its oral small molecule GLP-1 receptor agonist. In addition, the company strengthened its ADC conjugation capabilities, and the GMP conjugation workshop for early clinical drug production has been put into use. The new peptide API solid-phase synthesis workshop is expected to be completed in 2026. The synergistic effect of the integrated platform is significant, and over 84% of CDMO revenue comes from existing customers of drug discovery services.

Clinical research services: Revenue reached RMB1.957bn, up 7.1% YoY, with a gross profit margin of 11.4% (-1.4 pcts YoY). During the industry bottoming and consolidation process, Pharmaron Clinical achieved contrarian growth relying on its continuously improving brand influence and competitiveness. There are 1,397 ongoing clinical CRO projects (including 125 phase III projects) and over 1,900 ongoing SMO projects. The company comprehensively promotes the deep application of AI and digital tools in all aspects of clinical services. In 2025, it acquired a controlling stake in Haixin Zhihui, dedicating to empowering customers with real-world data to improve new drug R&D efficiency.

Macromolecule and CGT services: Revenue reached RMB475mn, up 16.5% YoY, with a gross profit margin of -40.3% (an improvement of 9.8 pcts YoY). It provided potency assay release services for 25 CGT products (including 2 commercial projects) and 19 gene therapy CDMO projects (including 1 phase III project). The company initiated multiple antibody projects from DNA to IND, and the Liverpool facility in the UK won its first monoclonal antibody GMP manufacturing order, making the project structure more diversified. Financial analysis: Gross profit margin steadily increases, cash flow is healthy, and capital expenditureincreases

Gross profit margin by segment:In 2025, the gross profit margin of laboratory services was 44.7% (+0.2 pct YoY), maintaining a high level with steady growth, mainly due to the continuous increase in the proportion of bioscience services (over 56%) and efficiency optimization brought by automation technology. The gross profit margin of small molecule CDMO was 33.8% (+0.7 pct YoY), benefiting from the increase in capacity utilization and the contribution of high value-added commercial projects, among which the gross profit margin in 4Q25 increased to 37.8%, showing an obvious improvement trend. The gross profit margin of clinical research services was 11.4% (-1.4 pcts YoY), mainly due to intensified industry competition and initial cost input for new business integration, but it has stabilized quarter by quarter since 2Q25. The gross profit margin of macromolecule and CGT services was -40.3% (a significant improvement of 9.8 pcts YoY), and the loss narrowing trend is clear as the Ningbo macromolecule CDMO platform passed the audit of international pharmaceutical companies and initiated multiple DNA to IND projects.

OPEX input:Selling expenses in 2025 were RMB306mn, with an expense ratio of 2.2% (+0.1pct YoY), mainly used for overseas market expansion and brand promotion. Administrative expenses were RMB1.736bn, with an expense ratio of 12.3% (-0.5pct YoY), showing continuous scale effects, including share-based compensation expenses of RMB82mn. R&D expenses were RMB576mn, with an expense ratio of 4.1% (+0.3pct YoY), mainly invested in AI-assisted drug discovery, automated synthesis platforms, and new molecular modality technologies. The overall OPEX ratio was controlled at 18.6%, down 0.1pct YoY, with operating leverage steadily released.

Cash flow and capital expenditure:Net cash flow from operating activities was RMB3.221bn, up 25.0% YoY, showing strong performance. Free cash flow was RMB552mn. Capital expenditure was RMB2.669bn, mainly used for capacity construction in Ningbo, Xi'an, and other campuses. At the end of the period, cash on hand and wealth management products totaled approximately RMB2.99bn (including monetary funds of RMB1.017bn, tradable financial assets of RMB714mn, and other current assets of RMB1.259bn). The financial position was robust with relatively sufficient cash reserves.

Assets, liabilities, and investments:The asset-liability ratio was 41.9%. Accounts receivable and contract assets totaled RMB3.173bn, accounting for 11.7% of total assets, with a healthy aging structure. Investment income was RMB-102mn, mainly due to an investment loss of RMB136mn in associates. Gains from changes in fair value were RMB66mn, mainly from the fair value recovery of other non-current financial assets. At the end of the period, other non-current financial assets were RMB518mn (+121.5% YoY), mainly due to increased investments in unlisted funds and fair value appreciation.

Earnings forecast and investment rating

We expect the company's operating revenue for 2026-2028 to be RMB16.31bn, RMB19.1bn, and RMB23.0bn, respectively, corresponding to apparent growth rates of 15.7%, 17.1%, and 20.4%. Considering the exchange pressure from the continuous appreciation trend of RMB against USD and the positive impact of the continuously improving CMC business on profits, we expect the adjusted Non-IFRS net profit attributable to shareholders of the parent company to be RMB2.13bn, RMB2.64bn, and RMB3.35bn, up 17.3%, 23.9%, and 26.9% YoY, corresponding to A-share PE of 26.0X, 21.0X, and 16.5X. We maintain the buy rating.

Risks:

Risk of weaker-than-expected industry demand recovery: The global biomedical investment and financing environment remains uncertain. If financing continues to be sluggish or large pharmaceutical companies shrink their R&D budgets, it may lead to reduced customer orders or delayed projects, thereby affecting the company's revenue growth.

Risk of commercial project ramp-up falling short of expectations: Although the company's first API project for the US market has been approved, the commercial production ramp-up is affected by multiple factors such as customer terminal sales and supply chain stability. If the ramp-up pace is slower than expected, it will adversely affect the revenue and gross margin improvement of the CDMO segment.

Geopolitical and trade policy risks: The company's overseas revenue accounts for over 80%. If any of the following situations occur—such as significant changes in laws, regulations, industrial policies, or political and economic conditions in countries and regions where the company operates globally, or disruptions caused by unforeseen factors such as geopolitical tensions, war, trade sanctions, or other force majeure events—there could be potential adverse impacts on the company’s ability to conduct and sustain its international business operations.

Exchange rate fluctuation risk: The company's revenue is mainly denominated in foreign currencies such as USD and EUR, while costs are mainly denominated in RMB. RMB appreciation will have a negative impact on revenue and gross margin. In 2025, the company has carried out hedging operations such as forward foreign exchange settlement and sales, but it still cannot completely avoid the risk of exchange rate fluctuations.

Merger and acquisition integration and goodwill impairment risks: The company has completed multiple acquisitions in recent years, including Haixin Zhihui and Biortus. If the operation of the acquired targets falls short of expectations, it may face the risk of goodwill impairment, which will in turn affect the current profit.