Chi-Med License Accord for Cancer Drug Probable This Year

Hutchison China MediTech Ltd. (HCM), the drugmaker controlled by Hong Kong billionaire Li Ka-shing, is in talks to license a cancer treatment based on traditional Chinese medicines, Chief Executive Officer Christian Hogg said.

The Hong Kong-based company, known as Chi-Med, completed due diligence with potential partners and will probably reach an agreement on fruquintinib by year-end, Hogg said yesterday in an interview in London, where the shares trade. The medicine may be used to treat colorectal, lung, breast and gastric cancers, he said.

“A deal on fruquintinib is a pretty important priority,” Hogg said. “What we want to do is partner and take on in parallel clinical programs in all of those tumor types.”

A licensing agreement on fruquintinib, which has completed early-stage testing, would follow a joint venture with Nestle SA (NESN), which last month said it has started late-stage trials of HMPL-004 for ulcerative colitis. Chi-Med is aiming to be the first drugmaker to bring to market pharmaceutical products from traditional Chinese botanicals.

Fruquintinib will probably be the last product for which Chi-Med will grant global marketing rights to a partner, with subsequent agreements giving Chi-Med the rights to China, Hogg said. China’s pharmaceutical market is expected to grow as much as 18 percent a year to $165 billion by 2016, making it the world’s second-largest market after the U.S., according to consultancy IMS Health Inc.

Peak Sales

Peak sales of fruquintinib may reach $650 million, according to Guillaume van Renterghem, an analyst at UBS AG in London who has a “buy” rating on the company and raised his target price to 590 pence from 520 pence on April 24.

Chi-Med shares rose 0.9 percent to close at 580 pence yesterday in London. The stock has gained 40 percent this year.

Chi-Med also has a drug discovery collaboration with Johnson & Johnson, which will say in the third quarter of this year whether it will exercise an option to further develop a drug for arthritis and other inflammatory conditions. That will result in a milestone payment to Chi-Med and funding of remaining clinical and regulatory costs, Hogg said. He declined to disclose the amount of the payment.

The U.S. FDA introduced new guidelines for botanical treatments in 2004, applying less strict conditions to those imposed on chemical and biological drugs seeking approval. That opened up a new avenue for producers to replenish their medical research pipelines and replace expiring patents.

GlaxoSmithKline Plc and Sanofi are also exploring botanical-based medicines. Other large drugmakers will probably follow, Hogg said.

“It’s very early for these guys, and they’ve got a long way to go,” he said. “We’ve been at it for 13 years.”

To contact the reporter on this story: Makiko Kitamura in London at mkitamura1@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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