Chi-Med expands its horizons with joint venture in China

The new Nanyang Baiyunshan Hutchison Whampoa Guanbao Pharmaceutical Company (known as HBHG) will initially operate in Henan province, one of China's most populous regions - it is home to more than 99 million people.

Until now the national over-the-counter (OTC) drug team at Chi-Med has only been able to sell its own products because of strict licensing laws. The creation of NBHG will allow the team to also sell third-party products in all provinces in China.

Analysts said that rolling HBHG out across the rest of China could "significantly" improving Chi-Med's profits.

Hogg's firm is pumping $3.2 million (2m) into the joint venture, taking a 60 per cent stake.

He said: "Henan is centrally-located both geographically and in regards to population distribution in China. It represents an optimal base from which to manage national OTC drug distribution."

Robin Campbell, an analyst at Religre, said: "The potential to extend this initiative throughout China could be a significant future driver for sales and earnings.

"This strategic move should allow Chi-Med to start adding complementary but relevant non-Chi-med products to the portfolio in order to increase sales through a broader product reach and deepen the strong brand awareness that Chi-Med already has in China."

Chi-Med's controlling shareholder is Hutchison Whampoa, the Hong Kong-listed conglomerate that owns 3, the UK mobile phone network. Its chairman, Li Ka-shing, earlier this month launched a 2.4 billion takeover bid for Northumbrian Water through his Cheung Kong Infrastructure fund. Chi-Med was launched in 2000 and joined Aim in May 2006.