(Yicai) Oct. 28 -- Shares of Hengrui Pharmaceuticals fell despite the Chinese drugmaker reporting profit jumped 25 percent in the first nine months of this year, thanks to a significant increase in revenue from out-licensing innovative drugs to overseas peers.

Hengrui [SHA: 600276] dropped 5.2 percent to CNY63.56 (USD8.94) a share as of 1.45 p.m. in Shanghai today. Its Hong Kong-listed stock [HKG: 1276] tumbled 5.8 percent to HKD75.10 (USD9.67).

Net profit was CNY5.8 billion (USD800 million) in the nine months ended Sept. 30, the Jiangsu province-based company said in a financial report released late yesterday. Operating revenue rose 15 percent to CNY23.2 billion (USD3.3 billion) from a year earlier, it added.

Hengrui's income from upfront payment by overseas pharma firms for the rights to its novel drugs in selected markets exceeded USD800 million, accounting for more than 20 percent of its total revenue, it noted.

Last quarter, Hengrui inked three out-licensing agreements for innovative drugs, including granting GSK the exclusive global rights to a portfolio of early-stage drug candidates in a deal worth as much as USD12 billion in July, with the London-based firm making an upfront payment of USD500 million.

For Hengrui to fully develop overseas markets on its own requires too much investment, so out-licensing deals have become the preferred strategy to expand overseas, Zhang Lianshan, research and development president of the firm, told Yicai at the 10th China BioMed Innovation and Investment Conference on Oct. 26. In addition, the company needs funds to enhance its overall drug production capacity and improve product quality, he said.

However, out-licensing agreements are merely the first step for Hengrui in expanding its novel drugs into overseas markets, Zhang noted, adding that it will also promote the global independent development of high-quality products.

Hengrui has set up a large team to explore the independent development of innovative drugs in overseas markets and is already advancing several international clinical trials for its products, Zhang said.

For certain investigational new drugs that have clear clinical value but have not yet become a focus for overseas pharma companies, Hengrui will leverage the clinical data accumulated in China to promote their clinical trials and market approvals overseas with relatively reasonable R&D investments, Zhang pointed out.

"While we will continue to work steadily on independent development in overseas markets, we will not set a timetable for breakthrough progress, as there are indeed many uncertainties in new drug development," Zhang stressed.

Hengrui's R&D expenses reached almost CNY5 billion in the first three quarters, while its total R&D investment has exceeded CNY50 billion. The company has more than 100 innovative drugs in the clinical development stage, conducting over 400 clinical trials worldwide.

Editors: Tang Shihua, Martin Kadiev