A New Start

FT: New horizons for ancient cures

New horizons for ancient cures

By Geoff Dyer

Published: November 8 2006 02:00 | Last updated: November 8 2006 02:00

In the past couple of decades, the pharmaceuticals industry has often looked for inspiration to the thousands of natural products used in traditional Chinese medicine.

The best current malaria medicine is based on an ancient Chinese treatment for fevers that comes from star anise fruit. Two recent cancer drugs are derived from camptotheca acuminata, a tree found in China.

ADVERTISEMENT

In spite of these successes, there is still much scepticism within the industry about the scientific potential of natural products. Yet one Shanghai-based company is trying to show that there is more to traditional Chinese medicine than a few flukes.

Hutchison China Medi-Tech is one of the first Chinese companies to attempt to bring the modern bio-technology model - a start-up drug discovery operation using state-of-the art screening tools - to the treasure chest of traditional Chinese medicine (TCM).

"Our aim is to modernise and globalise traditional Chinese medicine," says Christian Hogg, chief executive of the group, otherwise know as Chi-Med.

The company is in many ways a hybrid. Based in Shanghai, it is controlled by the Hong Kong conglomerate Hutchison Whampoa and listed in London, raising £40m ($76.2m) on the Alternative Investment Market in April.

It also has three very different legs. As well as the research arm, the group has a business selling existing TCM products in China and another in the UK.

The Chinese TCM business is the current revenue driver, with turnover of $31.1m in the first half of the year. It has 40 per cent of the market for Ban Lan Gen, a cold and flu medicine made from a root, which was particularly sought after at the time of the Sars outbreak.

Sales of TCM medicines are about $11bn a year - 30 per cent of all drug sales in China - but, like many consumer products in China, the market is fragmented. Mr Hogg says there are 1,200 manufacturers across the country.

As a result, the industry is ripe for consolidation. The company will consider acquisitions but is mainly looking to add to its three joint ventures, where the Chinese partner provides the assets and Chi-Med adds the marketing expertise. "The Hutchison name is a great calling card," says Mr Hogg, who spent five years of his 10-year career at Procter & Gamble managing joint ventures in China.

The market may be growing 20 per cent a year but there can be problems. The group warned in July that a rule change would affect one of its joint ventures. Executives said this was part of the normal business of a rapidly evolving market. However, the company's shareholders took fright and the shares are now trading at 162p, well below their float price of 275p, marking an inauspicious debut on the London market.

The overseas retail business, which hopes to tap growing demand for alternative therapies, is less well established and is loss-making. The company has six London shops under the Sen brand name in places such as Harvey Nichols - clean, colourful spaces that sell teas and tonics as well as acupuncture and reflexology. The concept is something like Chinese mysticism meets Absolutely Fabulous.

The main reason for Hutchison to get involved, however, is the scientific opportunity. The company has a library of 10,000 natural substances, many of which have been used for centuries, which it is scanning for medical potential.

Chi-Med now has two products in four clinical trials: a drug to enhance radiotherapy for cancer patients and an oral treatment traditionally used for respiratory infections and modified to treat Crohn's disease and ulcerative colitis.

On top of the library, there are two other attractions to pursuing drug discovery in Shanghai. One is the potential to bring back skilled Chinese scientists who trained in the US or Europe but now want to take part in the mainland's economic boom.

The research division is run by Samantha Du, a former Pfizer executive, who has brought back a number of colleagues, including Su Weiguo, a top Chinese chemistry student who went on to become a leading researcher at Pfizer. "I wanted to contribute something to my country," he says.

Chi-Med also believes there is a big cost advantage in China. The scientists themselves do not come cheap if they are returnees but it is both quicker and cheaper to do clinical trials. "If it costs $1bn to develop a new drug, then a 10 per cent cut is tremendous," Ms Du says.

Apart from the scientific obstacles in turning botanicals into drugs, one of the biggest problems facing Chi-Med is intellectual property. As its medicines are based on substances in use for thousands of years, it can be hard to establish the patents that justify heavy development costs.

Mr Hogg says any drugs the company develops will be hard to copy. But as its scientists dig deeper into the library, he says they will start to understand how the substances work on a molecular level and how they react with the human body. As a result, they will begin to isolate specific chemicals that could be the basis for potential new drugs, which would be much easier to patent.

The flotation has given Chi-Med the money to fund at least three years of research and it will receive further revenues from a deal signed this week with P&G to screen its plants against skincare targets.

In the long term, having scientists in Shanghai and shops in Harrods could be unwieldy. Mr Hogg says the drugs research business could be spun off in the future. But before then, Chi-Med's researchers will have to show that their library is full of more than just scientific curiosities.

Copyright The Financial Times Limited 2006

NYT: Marketers Trace Paths Users Leave on Internet

Marketers Trace Paths Users Leave on Internet

Ads displayed by Tacoda Systems. One, top, is shown to those who searched for mortgage data; the other to those who have checked want ads.

 

By SAUL HANSELL

New York Times:
Published: August 15, 2006

 

If you use  Yahoo’s Web search engine to learn about hybrid cars, the site will quietly note that you fit into a group of users it calls “Consciously Cruising.”

Skip to next paragraph    

Related

A Face Is Exposed for AOL Searcher No. 4417749 (August 9, 2006)

   

If you click on ads for moving van companies, you will join the “Home Hopping” group. Shop for wedding cakes and reception halls and you might be tagged as a future bride or groom.

Earlier this year, Yahoo introduced a computer system that uses complex models to analyze records of what each of its 500 million users do on its site: what they search for, what pages they read, what ads they click on. It then tries to show them advertisements that speak directly to their interests and the events in their lives.

Yahoo and the many other companies building similar systems say the systems are benign because they typically do not collect personal information like names and addresses.

“We are much more conservative than we need to be” in using information about site visitors, said Usama Fayyad, chief data officer at Yahoo.

Still, just how personal even “anonymous” information can be was shown vividly last week as a list of three months of search queries from 657,000 AOL customers began circulating online. Collectively, a person’s Web searches, it turns out, can create an eerily intimate portrait — one that some privacy advocates say should never be assembled and stored in the first place.

Still, Web companies continue refining their techniques. Advertising on search engines is already a $14-billion-a-year business because the ads can be so closely tied to what people are looking for. Yahoo’s system is meant to use search queries and other actions to select ads people see while checking their e-mail and reading other pages.

AOL is working on a similar system to display ads for products related to a person’s Web search history. MSN from  Microsoft just introduced technology to do the same. Other companies use systems that bring together information about users from across many sites. Internet companies call this behavioral targeting, and it is based on the insight that knowing what people do online can be more valuable to a marketer than knowing how old they are or what they do for a living.

“Search behavior is the closest thing we have to a window onto people’s intent,” said Jeff Marshall, a senior vice president of Starcom IP, an advertising agency. “When people are gathering information to make a choice, that means they are often going to spend money.”

Many Internet users have no idea that records of their actions are being collected and used. They might find out about these practices only if they read the fine print of Web site privacy policies.

But AOL’s release of search data has already led some privacy advocates and legislators to call for new limits on how Web sites and advertisers keep and use information about online behavior.

AOL has apologized for the release, saying that its research unit had not been authorized to publish the records. It removed the data from its site, but copies are still available online.

Not all of the behavioral marketing involves search engines. Technology from companies like DoubleClick and AOL’s Advertising.com unit allows marketing messages to follow people around the Web.

Starwood Hotels, for example, alerts members of its frequent-guest program to new promotions by placing ads that will be shown only to people who have previously visited its Web site. These ads can find customers in unlikely places, like the vast social networking site MySpace.

While most MySpace users are more likely to spend money on soda and sneakers, some of the site’s 100 million members do stay in Starwood’s Westin or Sheraton hotels and will see the ads.

Cingular Wireless uses a similar approach to advertise to people who have started shopping for a phone.

“You are no longer targeting people you think will be interested in your product,” said Les Kruger, a senior marketing manager at Cingular. “We know based on your behavior that you are in the market, and we can target you as you bounce around the Internet.”

Most of these marketing systems use cookies, unique numbers that a Web site can place on a computer to spot return visitors. Cookies are also used by companies like Advertising.com that place ads and track visitors across many sites.

Shopping sites like  Amazon.com use cookies to greet returning customers by name. But many of the targeting systems try to avoid recording personally identifiable information, like a person’s name and address.

In the late 1990’s, an outcry about an earlier wave of marketing schemes led to some restrictions on how data is shared among sites and to rules that allow users to specify that they do not want to have some data collected about themselves. These options are rarely used.

Yahoo and most of the major Internet companies do not sell profile information to others, as magazine publishers and credit card companies often do. They want to profit directly from the information they gather.

But Web publishers do sometimes trade information among themselves — often simply what sites a particular computer has visited. For example, Seevast, an Internet advertising company, pays Web sites to place its cookies on the computers of users that visit them. That way, Seevast will know more about those users when it chooses which advertisements to display on sites in its network.

Mr. Fayyad  of Yahoo said Internet companies were walking a fine line.

“If you get bombarded by ads for minivans on Yahoo, even if you are interested in minivans, it becomes creepy,” he said. “If you want to do this responsibly, you have to restrain yourself.”

For example, he said, Yahoo’s new system is based on monitoring for 300 types of behavior — some as detailed as having shopped for flowers in the last two days — but it does not keep records on more sensitive topics, like specific medical conditions.

Still, Mr. Fayyad argues that some level of targeting is necessary for Internet companies to avoid the fate of television networks.

“Every time I serve the wrong ad to the wrong person, I am training that person to tune out,” he said.

More immediately, Yahoo and many other sites see this sort of targeting as a way to increase advertising rates for material that otherwise would have little appeal to advertisers.

“We sell people, not pages,” said David Morgan, the chairman of Tacoda Systems, which sells technology for behavioral targeting to publishers including The New York Times Company. “The L.A. Times can target car buyers when they are surfing the local news.”

At first, Tacoda offered a service to allow companies to track behavior on their own sites. Now it runs a network across 3,500 sites, so Weather.com, for example, can show lucrative auto ads to its users who recently visited Car.com.

These systems can turn up some surprising results. Alamo Rent a Car, for example, found strong responses to its advertisements among people who had recently read obituaries on newspaper sites. That may have been because they were more likely to be taking a last-minute trip to a funeral, Mr. Morgan said.

Google, which runs both the largest search engine and largest advertising network, picks its targets more narrowly. When Google sells advertisements that appear on other Web sites, it selects the ad by analyzing the subject matter of the page the ads appear on. Those sites can send Google additional hints for use in ad targeting, like ZIP codes.

Google outbid its rivals last week when the  News Corporation accepted its offer of $900 million for the right to sell advertising on MySpace and other sites; it helped that Google has sophisticated technology that can make inferences about what ads are best for a particular page.

So far, however, Google has not used information about the past behavior of searchers to target advertisements, even though the company keeps logs of all searches and its privacy policy allows it to use these for advertising. Google does not collect the names of most searchers, but it is doing so increasingly as it offers more personal services like e-mail.

“We have considered every potential targeting option, and we come back every time to the idea that the trust of the user is paramount,” said Tim Armstrong, Google’s vice president for advertising. After the initial outcry over Google’s Gmail service, which displays ads based on the content of individual e-mail messages, the company has been wary of taking actions that would raise privacy concerns.

Mr. Armstrong also challenged the idea that it was effective to show people advertisements based on what they searched for hours or days earlier: “Does a user want to see an ad on cars when they are planning their weekend vacation, or do they want to see an ad related to what they are looking at?”

Indeed, some argue that behavioral targeting may be more trouble than it is worth. Web publishers worry that it will lead clients to buy fewer ads. And advertisers question whether the higher prices the Web sites charge are worth it.

One believer is Panasonic, which has found that users do respond to such advertisements. It ran a series of ads for plasma televisions on entertainment and electronics Web sites. Then it used technology from Tacoda to show ads to people who had once visited those sites while they surfed elsewhere. The response to the ads increased when they were on a site unrelated to televisions.

“The ad is less expected and is playing to your subconscious,” said Lydia Snape, the director of online marketing at Renegade Marketing, Panasonic’s Internet advertising agency.

LendingTree, an online loan broker, has experimented with aiming ads at some of the 300 categories of users in Yahoo’s new system, like newlyweds and people who have just moved. It had by far the best results advertising to people who had searched for and read information about borrowing money.

“People aren’t in the market for loans all the time,” said Darren Beck, LendingTree’s vice president for online advertising. “These behavioral targeting models seem like the holy grail. We can find people exactly when they want a loan.”