Weighing the risks is the primary issue that all pharmaceutical companies need to consider when going overseas. The cost of going overseas is not cheap. Not to mention the time cost required to build overseas clinical, promotion, and registration experience, the capital cost is the top priority. BeiGene provides a good reference: although it has seen the dawn of profitability, this is based on the total loss of nearly 50 billion yuan in the past five years; Legend Biotech's overseas cost is not low either. It is estimated that it has spent at least 1 billion US dollars since the establishment of the Xidaqiolunsai project. Industry insiders commented that this is far more expensive than imagined. From the perspective of capital investment alone, it can be asserted that there are not many pharmaceutical companies that can play the two cards of "local + going overseas" at the same time. To some extent, Innovent Biologics represents the dilemma of domestic leading pharmaceutical companies:

Indeed, the company has "not cheap" cash reserves. As of the end of June, Innovent Biologics had about 10.1 billion yuan in cash reserves in its account. However, referring to the money-burning efforts of BeiGene and Legend Biotech, this reserve does not seem to be able to fully support the domestic and overseas dual-front operations. If we blindly pursue overseas layout, it may destroy the advantages that have been hard-won in China.

Under this logic, domestic leading pharmaceutical companies may need continuous financing to go overseas with all their strength. Recently, Hengrui Medicine, which has more than 20 billion yuan in cash, has been rumored to plan to go public in Hong Kong to raise 2 billion US dollars. However, no one knows how much support the capital market can give. On the one hand, the capital market environment is not optimistic; on the other hand, going overseas is inevitably accompanied by risks.

A joint study by the School of Pharmacy of Fudan University and the Tufts Center for Drug Development in the United States revealed that between 2007 and 2023, the conversion rate of 177 Chinese pharmaceutical companies from Phase I clinical trials to FDA approval in the United States was only 1.7%, which is enough to show the difficulties and obstacles on the road to success. The characteristics of a life-or-death struggle doomed the overseas expansion of innovative drugs not to be in the ranks of "great efforts can produce miracles", but to require time to settle. But the paradox of the capital market is that if there are no sustained and effective results in the short term, it will be difficult for funds to continue to support.

In this regard, even Hengrui Medicine, which has a cash reserve of more than 20 billion yuan, has started to "murmur". Recently, in an interview with "Pharmaceutical Cube", Zhang Lianshan, deputy general manager of Hengrui Medicine, said that now they will not choose to go overseas independently like the double Ai combination, but are willing to seek cooperation for each product. In short, Hengrui Medicine has chosen the safest way. Of course, it is not only Hengrui Medicine, but also the first choice of pharmaceutical companies including Junshi Biosciences. For those pharmaceutical companies that hope to go overseas independently, they must also find an optimal solution.

At present, Innovent Biologics hopes to complete the construction of the overseas platform through its subsidiary Fortvita. Logically speaking, there are two potential benefits to doing so: first, reduce financial pressure and maximize the company's interests. Under this model, the parent company can support Fortvita according to its own capabilities, and at the same time, it can also achieve external financing through Fortvita, without consuming domestic business resources, and to a certain extent, realize the transfer of overseas risks. Second, although the risk is reduced, the parent company's income does not necessarily decrease. The only way to innovate drugs is to be fast. If Innovent Biologics is restricted both at home and abroad, and its overseas strategic actions are limited, it may not achieve the expected results; if Fortvita can mobilize resources more flexibly to maximize the results of innovation, the potential returns may also increase significantly. Of course, the above situation is only an ideal state. It is not easy for Innovent Biologics to play the Fortvita card well.

On the one hand, Innovent Biologics has concentrated its resources on the domestic market in the past and has not yet proved its overseas capabilities. Whether this new team can bear Innovent's good expectations remains to be verified; on the other hand, Fortvita's projects should still be concentrated in the early stage. In other words, the evaluators and the market do not seem to see the "hard currency". At the same time, the high risk of innovative drug research and development also exists uncertainty. The newly hatched Fortvita has not yet been blessed by big capital, but at this time, the company's management has personally invested in Fortvita when the risk is the highest and the uncertainty is the strongest. It shows the company's confidence and determination to accelerate its overseas expansion, and also increases the market's expectations for the company's good performance. Although the final result is still unclear, from strategic choice to process advancement, Innovent Biologics can still provide an inspiration for the industry to go overseas.

Since the beginning of this year, going overseas has become one of the hot topics for most Chinese companies, including finding more effective ways. Innovent Biologics' strong desire to go overseas and its choice of overseas strategy may not be new in the context of the overall environment.

On October 22, domestic sports brand Li Ning also announced its overseas plan, with the same model as Innovent Biologics: it signed a subscription and shareholder agreement with Founder Co (a wholly owned company of Li Ning), Hongshan Venture and HongShan Motivation managed by Sequoia China, and established a joint venture to jointly promote the exclusive development and operation of the Li Ning brand outside mainland China. It is not difficult to understand that going overseas is a trial field, and everyone needs to consider the ratio of risk to return. This logic also applies to the pharmaceutical industry. Looking back at the overseas journey of the Japanese pharmaceutical industry, most companies with dreams also established joint ventures with third parties in the early days, accumulated rich wealth and experience, and finally went global alone.

China's pharmaceutical industry is just repeating this story. Perhaps this is the biggest reason why we have confidence in China's pharmaceutical industry. At the R&D level, Chinese pharmaceutical companies are already strong. The domestic ADC boom in the past few years has proved this to some extent. This is especially true for Innovent Biologics mentioned above: from the leading PD-1, to the continuous expansion of the tumor pipeline, to the leading position of multiple molecules in the cardiovascular metabolism and autoimmune fields, Innovent Biologics has shown the market its forward-looking vision, R&D capabilities and execution.

Comprehensive strength guarantees the feasibility of domestic pharmaceutical companies' internationalization, and many attempts to go overseas reflect their enterprising spirit. Just like Innovent Biologics, although its position in China has been relatively stable, it is not satisfied with this, but is fully committed to promoting its own transformation and upgrading. In the future, we may also see a series of support from Innovent Biologics to Fortvita, including but not limited to funds and resources. All these actions will eventually be fed back to the market. If Fortvita's international layout can bear fruit, Innovent Biologics' international value will inevitably be reflected in its market value. The emergence of more such companies will inevitably allow us to see the progress of China's innovative drug industry.

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