Merck looks for ancient Chinese cancer cure

The German drugs giant Merck is seeking help from the world of traditional Chinese medicine to find a cure for cancer. The Chinese medicine company spun out of Hong Kong's Hutchison Whampoa, Chi-Med, will today unveil a potentially lucrative deal to research oncology on behalf of the German group.

Merck will pay Chi-Med to raid centuries of Chinese medical knowhow in search of a natural cancer-fighting product that it can turn into a marketable Western drug.

The financial terms of the deal were not disclosed, but Chi-Med stands to reap tens of millions of pounds from the partnership if it comes up with a drug that is suitable to be put into trial.

Western pharmaceutical companies are increasingly outsourcing their drug discovery work, with many looking east for the solution to medical mysteries that Western doctors cannot solve.

Ulrich Betz, Merck's head of strategic innovation and research, said the partnership would allow the group to "extend its interaction with the emerging Chinese pharmaceutical industry".

Chi-Med raised £40m from listing on AIM in May. It is based in Shanghai, and controlled by the Hong Kong billionaire La Ka-Shing's Hutchison conglomerate. It has a library of 10,000 natural substances, many of which have been used for centuries, which it is scanning for medical potential.

The company has already brought two drugs into US phase II clinical studies in the oncology and auto-immune areas. One is a drug to enhance radiotherapy for cancer patients. Another drug in trial is an oral treatment traditionally used for respiratory infections and modified to treat Crohn's disease and ulcerative colitis.

The Chinese company recently struck a deal with Proctor & Gamble to screen its collection of plant extracts for possible use in the consumer giant's beauty care products.

In the UK, Chi-Med has its own chain, Sen, which sells skincare products, with outlets in high-profile shopping areas such as London's South Molton Street and the upmarket department store Harvey Nichols. It also has a retail chain in China, which had a turnover of $31m (£16.3m) in the first half of the year. The company made a $3.1m loss in the six months to 30 June compared with a $2.75m loss last year.