Hutchison China MediTech represents the past and the future of China’s pharmaceuticals industry.

Much of its revenues come from traditional Chinese medicines and herbal remedies sold through a marketing network that spans 13,000 hospitals in 600 cities and towns.

But its greatest potential growth comes from several cutting-edge drugs currently undergoing clinical trials. Christian Hogg, chief executive, says he believes the company can produce China’s first truly homegrown blockbuster drug.

Among its best prospects are fruquintinib, a colorectal cancer drug being co-developed with Eli Lilly of the US, and volitinib, for renal cell cancer, with AstraZeneca.

Both are in phase two trials – the middle stage of clinical testing – after promising early results. Normally, about 20-30 per cent of drugs that reach this stage go on to be launched on the wider market. Even if they fail, however, Chi-Med has more in its pipeline, including one drug being developed in collaboration with Johnson & Johnson, and others it is developing alone.

There have been setbacks. This month, an independent data monitoring committee recommended the termination of one of Chi-Med’s most advanced studies, involving a treatment for ulcerative colitis in partnership with Nestle’s health unit.

However, shares in the company, which are listed on London’s Alternative Investment Market, are up by two-thirds this year on rising optimism over its prospects.

Whether through its traditional or innovative medicines, analysts say Chi-Med is well placed to benefit from growing healthcare spending in China. Revenues rose 73 per cent in the first half of this year to $30m, producing profits of $6.4m.

“Favourable demand trends, coupled with the supportive environment for clinical research, means the prospects for Chinese healthcare companies are compelling,” say analysts at Edison. “Demographics and government support will continue to drive demand.”

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