'Watershed' year depends on US drugs trial says Chi-Med chief

If the summer brings positive results from US trials of Chi-Med's flagship drug then the group may even return a maiden profit, Christian Hogg said.

Chi-Med's chief executive yesterday unveiled a 34 per cent rise in group turnover to $87 million (62m) in the year to 31 December.

The Hong Kong firm's operating loss narrowed from $14.8m in 2007 to $14.2m last year, following further investment in drug research and development and in consumer products.

Chi-Med's China healthcare division – which sells traditional remedies in the Far East – reported a 31 per cent rise in sales to $80.7m and a 34 per cent jump in operating profit to $9.1m.

The drug research and development division posted a 156 per cent rise in sales to $2.3m from its partnerships and reported a $15.4m operating loss.

Sales of Sen products – Chi-Med's consumer brand – rose by 41 per cent to $4.1m. Sen's London shops posted a 17 per cent increase in like-for-like sales, while 34 of its leading lines went on sale in 125 Marionnaud shops in France, which are owned by Hutchison Whampoa, Chi-Med's parent company.

Hogg told The Scotsman: "It's a huge year for us. Our China Healthcare division grew by 34 per cent in 2008 and I think that 2009 will see growth of more than 20 per cent.

"In June, we expect the results of the US phase-II clinical trial for our Crohn's disease drug. We had reported a good result for this drug for treating ulcerative colitis in China. If the US result is positive then that's the watershed moment for Chi-Med.

"We will out-licence that drug and bring in a big up-front payment from a partner, who will also pay for phase-III trial testing of up to $50m."

Crohn's disease is a condition that causes an inflammation of parts of the gut.

Hogg added: "As far as profits are concerned, it will be a massive improvement compared with 2008. If everything goes to plan then the operating loss will be single figure millions but, if it's a really good result on the Crohn's disease drug then it could lead to a couple of things that could turn us black."

Panmure Gordon, Chi-Med's corporate broker, said the present share price provided an "excellent entry point", noting Chi-Med is expected to benefit from the Chinese government's attempt to broaden healthcare to 90 per cent of the population.

Brokers at Charles Stanley also maintained their "buy" recommendation on Chi-Med.

Shares in Aim-listed Chi-Med last night closed up 6.2 per cent or 3p at 51.5p.