Merck KGaA chief Oschmann 'absolutely certain' a biopharma major will rise from China

Merck kgaa
Merck KGaA chief Stefan Oschmann considers China “by far the most promising growth market” for the German drugmaker. (Merck KGaA)

Merck KGaA chairman and CEO Stefan Oschmann has made bullish comments about China’s biopharma sector on several occasions. But now, he's going a step further, counting China among three of the world’s best-working ecosystems for innovation.

And his home continent of Europe is not even close, Oschmann said.

On the sidelines of this year’s World Economic Forum in Davos, Switzerland, Oschmann once again expressed his confidence in the emerging market, telling CNBC that he is “absolutely certain” a top 50 biopharma company will emerge from China.

Oschmann bases his rosy forecast on China's recent work streamlining its drug evaluation process and adopting new policies for intellectual property protection.

Deficiency in IP protection was one of reasons the Trump administration cited to back its recent tariff actions against China. In response, China in December unveiled a new directive—cosigned by 38 government bodies including the Supreme Court and the National Medical Product Administration—laying out several measures to crack down on IP theft. Still, China’s IP laws and regulations have been in place for a while; foreign firms’ concern has always lain in their actual enforcement.

When asked about the pricing landscape, Oschmann applauded the Chinese government’s welcoming attitude toward innovative medicines as compared to essential medicines. “Prices [wise], China is not a paradise for the pharmaceutical industry, but it is a foreseeable environment, in which we think we can work well,” he said.

Perhaps the most surprising comment comes from Oschmann’s view on China’s innovation.

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“I see three ecosystems for innovation in the world that are really working, and that is China, the U.S., and Israel,” he said. “In these three places, you have strong collaboration between your platform technologies, between the military, academia and private companies.” And as Oschmann sees it, “Europe is by no means in the same league.”

But China's innovations will take some time before they come to fruition—at least in the biopharma sector. For example, Chi-Med’s Elunate just became the first China-made cancer drug to win a nod in a major indication last September—and the approval was in China. And when did a China-discovered novel therapy first win an FDA breakthrough designation? It was just last week, when BeiGene earned the title for its BTK inhibitor zanubrutinib.

On the heels of Oschmann’s CNBC interview, Merck said Wednesday it had signed a strategic collaboration with Chinese internet tech giant Tencent—a popular partner for multinational pharma companies in China—to work on digital health services in the country. According to Merck, the partnership will focus on disease education and healthcare accessibility in therapeutic areas of interest to Merck, including allergies, infertility, diabetes, thyroid disorders, cardiovascular disease and oncology.

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Oschmann’s praise of the Chinese market falls in line with a tone he has adopted before. In prepared remarks at Merck’s annual general meeting in April, he dubbed China “by far the most promising growth market” for the company. “Here it is very important to us to be recognized as a partner that supports the economic policy direction of the government,” he said.

Merck has deep roots in China, having maintained a presence there for 85 years. Back in 2016, the German drugmaker opened its largest plant outside of Europe in the form of a $188 million facility in Nantong, near Shanghai, and simultaneously announced plans to invest about $90 million into a nearby production facility for its life sciences business.