Nestle SA and Hutchison China Meditech Ltd., the drugmaker controlled by Hong Kong billionaire Li Ka-shing, agreed to form an alliance to develop gastro- intestinal treatments based on traditional Chinese medicines.

Nestle Health Science and Chi-Med will each own half of the Nutrition Science Partners Ltd. venture, the companies said in a statement today. NSP will also take on an experimental medicine known as HMPL-004 and oversee late-stage clinical trials on treatments for ulcerative colitis and Crohn’s disease.

The collaboration gives Vevey, Switzerland-based Nestle exclusive access to Chi-Med’s botanical library of more than 1,500 purified natural products and 50,000 extracts from medicinal plants. Chi-Med entered an agreement with AstraZeneca Plc in December to develop an experimental cancer drug.

“We believe traditional Chinese medicine has a real potential to become part of innovative solutions,” Luis Cantarell, CEO of Nestle Health Science, said on a conference call.

Nestle shares rose 1.2 percent to 60.60 Swiss francs in Zurich trading, for a gain this year of 12 percent. Chi-Med advanced 5.8 percent in London, the most in almost four months, for a gain this year of 43 percent.

Brain Health

The partnership may extend into metabolic diseases and brain health, the companies said. The venture will also tap the capabilities of Prometheus Laboratories Inc., which Nestle bought last year. Prometheus focuses on tests and treatments for cancer and gastroenterology.

“As an old Nescafe ad used to say: ‘One thing leads to another,’” Cantarell said.

The joint venture’s initial focus will be on the U.S., and Chi-Med has already been discussing late-stage testing of HMPL-004 with regulators. The third and final phase of testing is expected to begin “early next year.” The companies didn’t disclose the amount of investment in the collaboration.

“Nestle seems to us to be a perfect partner for HMPL-004,” given its investment potential in research and development, Savvas Neophytou, an analyst at Panmure Gordon, wrote in a research note.

“Although the deal structure revolves originally around gastrointestinal assets, it should be noted that a broader collaboration on the entire botanicals portfolio could materialize in coming years,” he wrote.

Nestle established the health science business early last year to develop personalized nutrition treatments for conditions such as diabetes, obesity and heart disease.

(Source: Bloomberg)