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CNBC Interview with Roche Chairman, Christoph Franz from the World Economic Forum 2018

Following are excerpts from a CNBC interview with Christoph Franz, Roche Chairman and CNBC's Akiko Fujita from the World Economic Forum 2018.

AF: It has certainly been a busy period for M&A in pharma and biotech, deals sealed by Sanofi and Celgene this week totaled more than $20 billion, all of this coming as the companies look to add new hemophilia and cancer medicines to their product lineups. Sanofi bought Bioverativ in an $11.6 billion deal. Celgene agreed to a $9 billion purchase of the shares it did not already own of the cancer specialist, Juno Therapeutics. And to talk a lot more about the pharmaceutical space, we are joined by Christoph Franz, who is the CEO of Roche, joining me here on set. Great to have you on today.

CF: Good morning.

AF: And the sun is finally out!

CF: It is beautiful today.

AF: Yes. I'd love to start bigger picture here because, you know, in the conversations we've had here at Davos so far, there seems to be an incredible amount of optimism, that this global economic recovery will continue, despite the risks that we see on the horizon, whether that's on the geopolitical front, or on the trade front. How do you-, you know, frame it up for us, how things look from your perch.

CF: Basically, I have been here for more than ten years, I share your perspective, there's a very positive mood right now among business leaders here in Davos, and I think the reason is, we see a growth perspective in, not only some specific countries, but on a global scale, and the growth is achieving numbers which we have seen only before 2007. So, the economy is taking up, and for the time being, it is growth which has been created by a lot of investment. So, we see healthy growth, and that is reducing the danger of some sudden crisis, and I think there is also learning. Learning, ten years learning how to stabilize the financial system, which, for a company coming from the real world, like our pharmaceutical business, is a very healthy situation.

AF: When you look at the pharmaceutical space, what do you see as the most significant risk?

CF: I think, in the pharmaceutical space, we have a business which is fairly independent from business cycles, and, from an individual company's perspective, in our company, we are always focusing on inventing new medicines. So, the biggest challenge for us is when we lose exclusivity for some medicines, that we replace innovation by new innovation, and that is exactly what the company is about. We have to be an innovation powerhouse.

AF: Mm. You talk about losing exclusivity, Roche expired the patents for at least there of your drugs, very lucrative ones, expiring, and I know that you've talked about the-, you know, that six medicines have already been approved by regulators, but, a lot of time, these new medicines take a while to really gain trust. How do you anticipate that revenue declines will be, as a result of these patents expiring?

CF: First of all, we hope that we will be able not to see any kind of decline, but be able to see stable, and even slight growth perspective, in the next years to come, and this is only possible because we have seen something which we have never seen in our 120 years' history. Six new treatments have been approved, and we see that these treatments have come very fast to patients. So, when we look at the first three quarters of last year, already more than 50% of our growth has come from these new medicines, and that is, I think, a very positive signal, and is creating a lot of confidence for the future of the company.

AF: Mm. There's no question we're seeing a big shift in pharmaceuticals, and a lot of questions about whether Amazon could enter the space, as well. Last year, they applied for these wholesale pharmacy licenses, setting off rumors of potential entry. Are you in the camp that thinks that Amazon will actually make an entry in to pharmaceuticals? And, if so, how disruptive do you think that will be?

CF: To be honest, I am not a specialist with regard to distribution. What we have seen is that, particularly in the United States, there has been a big consolidation with regards to the distribution of pharmacies, and this is a trend which might continue to evolve, and, in this case, big players, who could provide big logistical networks, can play a role. But, everybody who is joining this industry has to be aware that we have special safety requirements, it's heavily regulated. You need cool chains for the drug substances, in order not to deteriorate. So, patient safety first, and that is something we have to keep in mind.

AF: Okay, we'll continue to watch this space. Christoph, great to have you on today. Christoph Franz, joining us from Roche.


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