Merck KGaA to invest €13m in Israeli biomed incubator

Merck president Karl-Ludwig Kley: Now is the time for further collaboration with Israel on new goals.

Merck KGaA of Germany, which deals in chemicals and development of pharmaceuticals, and is traded in Frankfurt and on Nasdaq, is about to set up a biomed incubator in Israel, at its Israeli development center InterLab.

Merck's biotech division, Merck-Serono, will invest €10 million in the venture over seven years.

At the same time, Merck's chemicals division will launch a program for start-up companies in high tech and life sciences, in which it will invest €3 million in the next three years.

Merck's total financial commitment to the projects is thus €13 million.

Merck has developed and sells leading drugs such as Erbitux, Rebif, Bisoprolol, and Levothyroxine. The company had sales of €9.3 billion in 2010 and EBITDA of €2.5 billion.

Merck KGaA (not to be confused with Merck & Co. Inc. of the US, which was split off from Merck and nationalized in the US during the First World War), has enjoyed a long and successful association with Israel. "I can't imagine Merck without its Israeli connection," says company president Karl-Ludwig Kley in an exclusive interview with Globes while in Israel for the signing of the agreement for setting up the incubator.

"I became president of the company in 2007, and right at the start I became curious about the special relationship between the company and Israel

"On my first visit here I learned a great deal, and I discovered the rare combination there is in Israel between an entrepreneurial spirit and innovative science. I decided to set myself a task: to bring the Israeli incubator program to Merck.

"I believe that the fruits of the incubator's activity will be harvested during my term as president of Merck. And now is the time for further collaboration with Israel on new goals."

Kley says that the new incubator will take in companies at various stages of development, and will sign different kinds of agreements with them, according to the stage it has reached.

"We are good at collaboration with academic institutions, and excellent at buying mature companies. The aim of the incubator is to find the middle way between our two areas of expertise," he says.

What fields are attractive to you for the venture?

Kley: "I don't believe in directing research and development. I'm interested to see which projects will come.

"We are in a period in which almost all pharma companies are reexamining their R&D activity. This activity is becoming more integrative, with cooperation between the pharma, biological, chemicals, and even food units. We have also become more flexible in our collaborations with companies outside Merck."

Is the incubator your way of coping with difficulties over patents, and the growing difficulty of developing drugs?

"Merck has no patent squeeze. Unlike my colleagues, I also don't think that drug development is so difficult today. A person who takes responsibility on himself may feel that it is too great for him particularly and especially difficult, but I don't think that in this case that's true. In general, we live in a fortunate generation."

Dr. Georg Feger, vice president of Merck-Serono and responsible for development of new biological drugs, adds that "in recent decades a whole category of drugs ahs been discovered antibodies, and there is a great deal more to be discovered."

Today, Merck mainly focuses on oncology, which led it to sell its women’s health and gynecology division to Teva. "There was nothing special about this sale. It's simply normal portfolio management," says Kley, "Teva were pleasant and decent the whole time."

Teva is mainly based on generics. Doesn't that clash with your activity in specific areas?

Kley: "I have no problem with Teva's business model. As long as companies have long enough patents, generics is fine.

"The question is what happens if the country shortens out patents or tries to set profit ceilings for us. In that case, generics will be a problem, but that isn't directly connected to Teva.

"Now, with the generic threats to Coapxone, Teva suddenly finds itself on the other side of the story. It interests me to see how they will behave, and what their legal arguments will be."

Apart from drugs, Merck is also in chemicals. Among other things, it develops raw materials for LCD screens.

This division has a collaboration agreement with Israeli company Qlight Nanotech. "We are the leaders in LCD technology, which will be the leading flat screen technology in the coming decade," says Dr. Volker Hilarius, director of advanced technologies and innovation scouting at Merck.

Hilarius adds that in the past it looked as though OLED (organic light emitting diode) would compete with LCD, but that technology has not developed quickly, and LCD has maintained its lead. "Nevertheless, OLED has an opportunity in general lighting, and so Qlight suited us exactly."

Published by Globes [online], Israel business news - - on March 30, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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