HK-based Chi-Med cements Hutchison MediPharma control with eyes on oncology candidates

Chi-Med CEO Christian Hogg

Hong Kong-based Hutchison China MediTech has cemented its already majority stake in Hutchison MediPharma via a share exchange deal with Japan's Mitsui & Co. in a disclosure notice with few details, but ahead of study results later this year on a promising candidate for China approval.

The transaction that raises the direct holding of Hutchison China MediTech, or Chi-Med, in Hutchison MediPharma to 99.75% comes just a few months after a May notice of a positive first proof-of-concept study result for fruquintinib, a candidate for treatment of patients with metastatic colorectal cancer in China.

A July 23 release said an exchange of around 5.25 million convertible preference shares held by Mitsui & Co., a sizable Japanese general trading firm, in Chi-Med for around 3.21 million new ordinary shares in Chi-Med was concluded on July 22 in a transaction valued at $84 million.

"Following completion of the agreement, the direct shareholding of Chi-Med in Hutchison MediPharma will be 99.75% of the share capital of Hutchison MediPharma with the balance of the shares held by employees of Hutchison MediPharma," the release said, noting Mitsui first invested in Hutchison MediPharma in November 2010 and made further investments in May 2014 and June 2014.

Chi-Med said in a May 13 release that full details of the study results will be published at a major medical meeting later this year.

The results also triggered milestone payments from Eli Lilly ($LLY) of $18 million to Hutchison MediPharma. The firms entered into a co-development, and commercialization agreement on the candidate in October 2013.

One industry observer in Asia told FiercePharmaAsia that the details of the transaction are probably linked to the upcoming review of the candidate, but it's just as possible that Chi-Med, the majority of which is owned by the multinational conglomerate Hutchison Whampoa run by Hong Kong's richest investor Li Ka-shing, has regulatory or other reasons for the transaction.

But a company spokesman said the transaction was not connected to the review.

"There is no connection between these two events," David Dible, a spokesman for Chi-Med who is based in London, said by email.

"Mitsui has been a long term shareholder on HMPL and is now exchanging this shareholding for a position in Chi Med, HMPL's parent company."

Analyst Mike Mitchel of Panmure Gordon & Co. said in a July 23 note to clients that the transaction "clarifies the shareholding structure with respect to Chi-Med/HMP" while noting that Chi-Med reports interim results on July 28 that will further update trading and the pipeline.

In March, Chi-Med said it had met the primary endpoint of progression-free survival in a Phase II clinical trial for fruquintinib (HMPL-013), putting it one step closer to China approval, which would be the first modern drug from China since artemisinin was developed in the 1970s to treat malaria.

Hutchison MediPharma said at the time the secondary efficacy endpoints, including objective response rate, disease control rate and overall survival, are still being monitored.

The trial compared fruquintinib against a placebo in patients with metastatic colorectal cancer.

In December, the unit started a Phase III study of the small molecule that selectively inhibits the tyrosine kinase activity associated with VEGF receptors to treat metastatic colorectal cancer patients who have failed at least two prior therapies.

The subsidiary also started a Phase Ib study of the compound in October 2014 to treat gastric cancer, and a Phase II study in June 2014 to treat non-small cell lung cancer.

In June, at the American Society of Clinical Oncology meeting in Chicago, Chi-Med presented preliminary data with collaboration partner AstraZeneca ($AZN) on AZD92891 for NSCLC that were called "encouraging" by Christian Hogg, CEO of Chi-Med.

- here's the release