Orient Securities has released a research report indicating that, as a core raw material for safety assessment business, the high price of monkeys reflects the rising demand for safety evaluation in China. Currently, there is a significant supply-demand gap for cynomolgus monkeys in the domestic market. Without large-scale imports, domestic monkey prices may hit new highs. In the short term, monkey resources will become a core competitive advantage for leading preclinical CRO companies in China. The firm believes that domestic CXO companies have sufficient orders with both volume and price increases, and as orders are executed and converted, their financial statements will see significant improvements.
Orient Securities' main viewpoints are as follows:
Critical to the Security of the Innovative Drug Industry Chain, Emphasizing the Strategic Resource Attribute of Laboratory Monkeys
Against the backdrop of China's original innovation in innovative drugs and the "from 0 to 1" development in globalization, laboratory monkeys are no longer ordinary animal testing consumables but rather the core upstream link for IND filings, clinical validation, and overseas expansion of biological innovative drugs. Laboratory monkey resources have become a key "bottleneck" constraining the R&D speed of domestic innovative drugs, the autonomous controllability of the industry chain, and the competitiveness of enterprises in going global. Consequently, the reserve and stable supply of laboratory monkeys have become the core competitiveness of preclinical CRO companies. It is worth noting that the rise in monkey prices is not just a short-term supply-demand mismatch but a true reflection of the high prosperity of new orders in domestic preclinical CROs and a reversal in industry demand. Monkey prices will become a key variable affecting sector performance and valuation.
Rigid Demand Support from Biological Innovative Drug Safety Assessments Sustains High Demand for Laboratory Monkeys
The current high demand for laboratory monkeys is not a short-term pulse but a sustainable, rigid need. On one hand, there is no one-time demand shock from COVID-19 vaccines and antibody R&D as seen in the previous cycle; on the other hand, the new demand mainly comes from preclinical safety evaluations, and a single IND application's repeated-dose toxicity test requires approximately 40 laboratory monkeys, indicating rigid demand. Furthermore, in this cycle, the number and quality of innovative drug pipelines have significantly improved, and going global has enabled more sustainable long-term commercial value realization. From a technological cycle perspective, cutting-edge technologies such as bispecific antibodies, ADCs, and small nucleic acids are continuously advancing; from the perspective of leading indicators for CXO prosperity, domestic financing and pipeline data continue to improve.
Supply Mismatch Gap Is Hard to Repair, and Laboratory Monkey Prices May Reach New Highs
The supply side faces multiple short-term constraints: on one hand, during the previous high monkey price cycle, the industry over-slaughtered and depleted breeding stock resources, leading to rapid aging of suitable breeding females, causing a significant decline in actual annual production capacity. Meanwhile, the expansion cycle for cynomolgus monkeys is as long as 6-7 years, making it impossible to rapidly increase capacity in the short term. On the other hand, the shortage of laboratory monkeys also occurs in the United States, and in Cambodia, a major importing source, there is competition with American companies, limiting the import of compliant laboratory monkeys. Additionally, alternative technologies such as NAMs are difficult to implement in the short term. The firm estimates that the supply-demand gap of up to 20,000 laboratory monkeys this year will be difficult to fill, and monkey prices may hit new highs again.
Risk Warnings
1. Domestic policy risks; 2. Geopolitical risks; 3. Technological cycle risks; 4. Raw material shortage risks; 5. Risks that changes in assumptions may affect calculation results.