CNBC Interview with Roche Chairman, Christoph Franz from the World Economic Forum 2019

Following are excerpts from a CNBC interview with Christoph Franz, Roche Chairman, and CNBC's Steve Sedgwick and Geoff Cutmore.

GC: Well, let's speak now with Christoph Franz, Chairman of Roche, who's joined us on the set here in Davos. Good morning, Christoph, nice to see you.

CF: Good morning.

GC: Can I just pick up off that-, there are many other things we want to talk to you about, but can I just pick up off Alexander Stubb, you have taken steps around your drug safety operation, and moving that out of the UK here. What is your current position on Brexit, and the consequences, and you see them, for Roche?

CF: I think it is obvious that, for us, priority number one is the British patient. So, what we have to make sure, in the next forthcoming months, is delivering our medicines, which, in many cases, are lifesaving medicines, to the patient in an uninterrupted flow, and this is exactly what our logistics people are focusing on, and that is our major priority.

GC: There's a lot of panic at the moment, talk about bringing in the military, to make sure there's a smooth progression in this area of logistics. As far as Roche is concerned, and you are not a UK company, do you have any intention at all of withholding drugs from the UK population? I suspect not. Is there a lot of hype around this issue, of medicines, and them being available for UK citizens, if Brexit ends with no deal?

CF: I think there's no even thinking about withholding any kind of medicines for patients, the other way around, we have already built up enough stocks to be able to provision the British patient as he should be provisioned. So I don't see that this is affecting, at least in the case of our company, any of-, of the patients who needs our medicines.

SS: Let me change the subject, I think you've covered that ably there. You're in a quiet period, I should say, but you raised guidance twice in 2018, and had a very respectable year, as well. As we see this flurry of activity in the pharma sector, this desperation, in some quarters, for M&A, perhaps for the sake of M&A, like in the bad old days, we saw 20 years ago, as well. Do you think your sector is using capital efficiently? Or it's doing it just for the sake of M&A, just for the sake of scale, so that they don't get taken over, as well? Because it's a big thematic here in Davos, as well, the efficient use of capital, going forward, rather than just returning it to shareholders, rather than just increasing dividends and buybacks.

CF: In the case of Roche, our position is very clear, that we are extremely cautious when it comes to any kind of mega merger, since we feel that this is not only implying use of capital, but at the same time, then, you have to integrate, it's a merger of cultures, it's creating a new entity, performing entity, which is deviating you, maybe some of your core activities, like, for example, research and development, and that's the reason why we are focusing on targeted ideas, outside our company, and then create partnerships, in some cases also do some M&A activities, but this is small/medium size.

SS: But is the mistake being made, yet again, that too many people think, in your sector, pharma consolidation, as opposed to other consolidation, is just something you have to do, to protect yourself and remain independent?

CF: I think there is always a consideration, in the individual companies, to be taken, but in our company, we would be extremely cautious to go that way, and it is obviously also depending on the need you have. We are benefitting from one of the best innovative pipelines, with new medicines upcoming, so there is no need to-,

SS: Sure.

CF: Focus on acquisitions to create size.

GC: Christoph, thanks so much for coming out to see us here, we're going to wrap up with you, but we'll catch up with the company again on the earnings, nice to see you this morning.

CF: Thank you.

GC: Christoph Franz, Chairman of Roche.

ENDS