In a deal that promises to unite German technical efficiency with ancient Chinese wisdom, Merck, the German drugs giant, will announce plans today to develop pioneering cancer drugs using traditional Chinese herbal medicine.

Merck has signed a collaboration agreement with Chi-Med, a Chinese pharmaceutical company that develops drugs and consumer health products based on botanical ingredients used in Chinese medicine.

Under the terms of the deal, Merck will outsource part of its cancer drug discovery activities to the Chinese company, which is majority-owned by Hutchison Whampoa, of Hong Kong.

Chi-Med will draw from its library of about 10,000 herbal compounds to find promising drug candidates for cancer research. The company has about 100 research scientists based in Shanghai and two drug candidates in early stage clinical development in the United States and China.

They are HMPL-002, a compound for lung cancer, and HMPL-004, for inflammatory bowel disease.

Ulrich Betz, Merck’s head of strategic innovation and research portfolio management, said: “We are looking forward to a productive collaboration.

“It will allow us to extend our interaction with the emerging Chinese pharmaceutical industry that builds on longstanding tradition and knowledge combined with modern scientific technology.”

Samantha Du, the chief scientific officer of Chi-Med, said: “This collaboration will allow us to address important un-met medical needs by accessing natural products, a rich source of diversified chemical components with drug-like properties.”

Christian Hogg, the chief executive of Chi-Med, said: “Merck has a good record of achievement in the development and commercialisation of oncology products, such as Erbitux.” Merck launched Erbitux, a drug used to treat head and neck cancers, in 2004. The compound has predicted peak sales of $600 million (£317 million) a year.

Financial details of the Chi-Med/Merck deal are not available. Chi-Med listed on the Alternative Investment Market in May of this year.

Other Western drug companies are eager to expand their presence in the world’s most populous country. Novartis, the Swiss pharmaceutical giant, for example, has announced plans to open a $100 million conventional research and development facility in Shanghai.

Chi-Med, whose full name is Hutchison China Meditech, was formed in 2000. It operates three businesses. Hutchison Medipharma, its drug research arm, uses modern drug development techniques to analyse the chemical properties of traditional Chinese medicines. It has research links with Cambridge University and the University of California, Los Angeles.

The company also operates a domestic Chinese medicine business and an international consumer health arm, which is opening a chain of Sen branded stores in Britain and South Korea. There are now four Sen stores in London and the group has plans to open more in British department stores.

For the six months ended June 30, Chi-Med posted a loss of slightly more than $3 million on sales of $32 million.

Although Chi-Med’s research focuses primarily on compounds derived from herbal sources, some Chinese therapies for cancer are less conventional. One traditional remedy for tumours calls for baked wasp nest and male rat stools.

Natural resources

Some commonly used drugs and their sources in the plant world . . .

Aspirin (for pain relief) from the willow tree
Taxol (cancer) Pacific yew tree
Quinine (Anti-malarial) Cinchona tree
Digoxin (Heart medicine) Woolly foxglove
Morphine/codeine (pain relief) opium poppies

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