Despite inroads made by alternative therapies, consumers in the west still tend to view conventional medicine as offering the best remedies. Hutchison China Meditech (Chi-Med), led by Scots-born Christian Hogg, is seeking to challenge that notion by developing traditional Chinese medicine – “TCM”, as it is referred to – for western markets.
In a laboratory just outside Shanghai, he has built up a team of 200 scientists and support staff and spent $100m on research and development. The idea is to produce medicines derived from roots and herbs documented in Chinese texts, some dating back 2,000 years.
“Prospects are quite incredible,” says Hogg. “The Chinese healthcare market is growing at 20% a year, and 40% is accounted for by TCM.”
But the challenge is to crack the US and Europe, where he must break down resistance to remedies that have “worked for years in the east”. It’s an uphill task: Chi-Med’s shares have bombed since the company floated on the junior London Aim market in 2006, from a float price of 275p to 80p. In part, this is due to impatience by investors who want results sooner rather than later.
A note by Charles Stanley flagged up the fact that almost the entire value of the business, which last year generated revenue of $100m, was accounted for by TCM sales in China itself. The R&D side has yet to produce anything of significance that has received western regulatory approval, so the broker has discounted its future potential value.
Developing TCM for developed countries is made more difficult by the fact that the Chinese government is anxious to safeguard herbal patents, viewing many as part of the country’s heritage. To underline the point, Beijing recently assigned “state secret status” to up to a dozen ancient remedies.
Hogg, 43, has lived in Hong Kong for 10 years but grew up in Scotland where he studied civil engineering at Edinburgh before undertaking an MBA in the US. He was headhunted by Procter & Gamble and sent by the US consumer goods giant to China in 1995 to market the firm’s range of laundry detergents. There, he met Hutchison Whampoa’s Chinese boss, Simon To, who recruited him to Chi-Med in early 2000.
In the past 20 years, the pharmaceuticals industry has often looked for inspiration to the thousands of natural products used in traditional Chinese medicine. The best current malaria medicine is based on an ancient Chinese treatment for fevers that comes from star anise fruit, and two recent cancer drugs are derived from Camptotheca acuminata, a tree found in China.
But there is still skepticism within the industry about the scientific potential of natural products. The British Medical Association says: “It’s important that the many patients interested in exploring complementary therapy can be confident they are seeing bona fide practitioners providing treatments supported by an evidence base. Currently, osteopathy and chiropractic are the only alternative treatments fully regulated by law.”
But Hogg counters: “Our aim is to modernize and globalize traditional Chinese medicine.” He says there are 1,200 drug manufacturers across China and the industry is ripe for consolidation.
