CNBC Interview with Merck Chairman and CEO, Stefan Oschman, from the World Economic Forum 2019

Following are excerpts from a CNBC interview with Merck Chairman and CEO, Stefan Oschman, and CNBC's Steve Sedgwick and Geoff Cutmore.

SS: Okay, so not so cryptically, we talked about big data, and pharma, and the relationship that they have, and will have, going forward. Stefan Oschmann is the CEO and Chair of Merck, and joins us now, Stefan, nice to see you. Look, big data is where you see a large part of your future. What does that mean for pharma, what does it mean for the privacy of pharma's clients?

SO: Well, Merck is a company that has three businesses, biopharma, which is pharmaceutical research, mostly in cancer and immunology, then we have a large, what we call life science business, and this is what the-, the big data project is-, is really about, and thirdly, we have a business that is mostly about electronic materials, we're working with-, we're working with the chip industry. Through our life science business we have, which supplies research tools, tools for making biotech products, to academic or industry-, industry clients, we basically have a-, we have an ongoing business relationship with any research-, almost any researcher in the biomedical field, anywhere in the world. We have observed data being still stored in silos, and that researchers throughout the world don't have an opportunity to [silent 08.49.50-08.49.53] and share research data from the lab, it may be, uh, clinical data, from clinical trials, or it may be so called real life data. We have formed a partnership with Palantir, which is a leading-,

SS: Mm.

SO: Data analysis company, to provide a platform, so that researchers can share this data. Contrary to other-, other concepts about data, is this-, this platform would not acquire the data, the data would stay with the researchers, and the researchers would have full sovereignty over what happens-, what happens with that-, uh, with their data-,

SS: Mm.

SO: But they could share this with colleagues, or other-, other research-, research institutions. So we think that could really provide us with a-, a lot of benefit. You know, currently, if a-, if a company, or a research institute, does research in-, let's say in immunotherapy, they have-, they have their own data, about a couple of hundred patients. If we pooled this worldwide, we could-, it is-, there is a high likelihood that we achieve a lot of progress in medicine.

GC: And yet there is a squeamishness in the west, about the use of data, and I think we've seen that expressed in Europe through the new data protection laws. To what extent do you feel that this may hold back the opportunity, around using anonymised datasets to produce better outcomes?

SO: Well, I think patients have a very legitimate interest in data privacy, or nowadays, people talk about, I think, data sovereignty is the-, is the buzzword these days, so i.e. the individual wants to know what's happening with his or her data, and they want to be-, and they want to be able to decide that. So, in-, in-, in-, it's even more important, in-, in biomedical research, these are very sensitive data, so we must take every measure possible, to-, to protect this data. We have actually no concern that data privacy will-, will hold us back, we think there are very good solutions available, so that we can safeguard privacy.

SS: I was speaking to Arjun, our Technology Correspondent, about the differences between China, where he's now working, and indeed Europe, about our own privacy, and our own data, and actually, the Chinese seem to have a very different attitude to it, they're happy to get the services, and give up those freedoms, give up those privacies, as well. Do you think that puts China, and China life science, and bio, and pharma, at an advantage going forward? The fact that they have this pool of data which there isn't the same squeamishness about?

SO: We basically see an explosion, in terms of activities-, uh, research activities in China.

SS: Yeah.

SO: Right now, there is no Chinese company among the top 50 in-, in the biopharmaceutical industry, but I'm absolutely certain that this is going to change. The Chinese government has adopted totally different policies, they're-, they're now very much in favour of intellectual property protection, they have reformed the Chinese FDA, which has become a lot more efficient and effective. Now, as we are servicing-, we-, we are a biopharma player, but we are also servicing other biopharma players, research institutions, in-, in China. This is-, this is a mixed blessing. On the one hand, it means more competition, on the other hand, there's a lot of business opportunity for us.

SS: Yeah.

GC: There is a Jekyll and Hyde to China, because, even as there is huge unmet demand, the Chinese government has been very strong on pricing, and said prices have to come down for key pharmaceutical-,

SO: Mm.

GC: Drugs. What impact is that going to have on the ability to generate better margin in that market, compared to the US, where you-, where most companies seem to get away with charging a lot more?

SO: Well, you know, the Chinese government, I feel, has achieved a lot. If you look at-, if you look at key parameters, in-, in Chinese-, in Chinese society, maternal-, maternal mortality, child mortality, life-, life expectancy, etc., the Chinese government has done a pretty decent job. Never, ever in history have more people been lifted out of poverty-, out-, out of poverty, compared to the past 40 years, and-, and the same has happened in-, in-, in medicine. If you look at-, if you look at the-, the prices for medicines, and so, the Chinese government, on the one hand, puts a lot of emphasis on making essential medicines available, at very low cost, to the general population, and they had been very restrictive, when it came to innovative medicine. That is changing. So, we have-, there is pretty good access to-, to essential medicines, and the Chinese market is opening up to innovative medicines.

SS: What-,

SO: Prices are-, you know, it's a-, China is not a paradise for the pharmaceutical industry, but-, but it is a-, a

foreseeable environment, in which we think we can work well.

SS: And just on another front, as well, China, as we know, throws out, for want of a better term, tens of thousands, if not hundreds of thousands, of very smart graduates, in these areas, where we're going to see huge development, as well. Europe is throwing up barriers, potentially, certainly with Brexit, and other such phenomena, as well, to talent moving cross-border within Europe, as well. Do you think we're going to fall further behind, because of the lack of attraction, A, of that sphere, uh, for graduates-, for smart graduates, and B, because of the barriers we're putting up to the transport of bodies and people, intra the whole continent?

SO: I see three ecosystems for innovation in the world that are really working, and that is China, the US, and Israel. In these-,

SS: Wow.

SO: In these three places, you have strong collaboration between your-, or platform technologies, between the

military-,

SS: Mm.

SO: Academia, and private-, and private-, private companies. Europe is by no means in the-, in the-, in the same league, and we really need to assess what that means for our-, for our strategic-, strategic positioning. We've seen some progress, for instance, the French government has started a couple of initiatives, but Europe-, really there's a danger that Europe falls behind.

GC: We've got to wrap it up, but it's been a pleasure-,

SS: Mm.

GC: Catching up. Thanks so much, Stefan, for joining us here. Stefan Oschmann, the Chairman and CEO of Merck.

ENDS