Merck CEO sees firm’s future intertwined with Israel’s
15% of pharma firm Merck KgaA’s products have Israeli roots, and now an Israeli start-up will help the firm grow in new directions
Most people associate Merck with pharmaceuticals, but the company is active in many other areas as well – and in fact it has 60% of the world market in liquid crystal display technology.
That’s why Merck announced Monday that it would be acquiring the remaining shares of Israeli start-up Qlight Nanotech, a materials firm that makes nanocrystal display technology that enhances the color of display screens, “with technology that is far superior to anything currently on the market, and that will help us retain and expand our position as market leader,” said Karl-Ludwig Kley, CEO of Merck, at a press conference in Tel Aviv Monday.
Kley was in Israel to announce the acquisition and to participate in a special event marking the fiftieth anniversary of German diplomatic and business relations with Israel. The event in Tel Aviv brought together dozens of German firms and investors with Israeli counterparts and saw diplomats and executives praising the annual 6.5 billion euro trade between the two countries.
While Merck (there are actually two separate companies called Merck; Kley heads Merck KgaA, which operates everywhere except the United States and Canada, where an independent company called Merck and Co. operates) is a multifaceted chemical and technology company, with several subsidiaries in the chemical, life sciences, and health device industries, it’s best known for its drugs. Less known is the strong connection the company, which traces its establishment back to 1668, has with Israel, where it has been active since 1978.
“Fifteen percent of our products have an Israeli background, many of them researched at the Weizmann Institute,” said Kley. “We have strong working relationships to develop products with all of Israel’s research institutes. Since I became CEO in 2007, I have made it a point to come to Israel each year to observe the research and search for innovative ideas.”
Up till now, Merck had three development centers in Israel, with Qlight’s Jerusalem location now becoming its fourth. When and if Merck’s acquisition of US life sciences firm Sigma-Aldrich is approved by European Union anti-trust regulators (the decision is expected any day now), that company’s two Israel locations will be added to the burgeoning list of Merck locations in Israel, said Kley. With the Sigma-Aldrich staff, Merck will employ some 300 workers in Israel.
In many ways, said Qlight CEO Shlomo Amir, the Qlight acquisition was very typical of how Merck works in Israel.
“Qlight is an outgrowth of research developed at Hebrew University and brought to market by Yissum, the Hebrew University tech transfer company. Merck has been working with us since the firm was established in 2009, based on the work of Professor Uri Banin in the area of unique quantum materials that can emit and provide extra brilliance to light.”
After an initial investment, Merck increased its stake in Qlight in 2012, becoming an equity investor and 50% owner in 2013, leading to the outright acquisition announced Monday. Merck did not disclose how much it paid for Qlight.
Partnerships with Israeli companies and research institutions have resulted in some of Merck’s best products, said Kley. Two of the company’s best-selling drugs – Rebif, used to treat multiple sclerosis, and cancer treatment Erbitux – were developed with the Weizmann Institute. Now, Merck’s new partnership with the tech team at Qlight will help the company to further expand its business portfolio.
In addition to partnerships with Israeli institutions, Merck also runs a biotech incubator for early-stage firms, providing seed investments and other assistance to select companies. Through the incubator initiative, the Merck Serono Israel Bioincubator has 10 million euros available to invest in early stage opportunities, said Kley.
The Bioincubator, which began operating in 2012, currently has three members: ChanBio, which is doing advanced work on antibody-based modulators for treatment of autoimmune, cardiovascular, cancer and pain disorders; Metabomed, which is working on developing cancer treatments based on cancer metabolism; and Neviah Genomics, which uses biomarkers for the prediction of drug toxicity.
In recent years, though, Merck has been seeking to strike roots in industries outside the drug business. While Merck certainly won’t be abandoning the drug business, the company has in recent years been repositioning itself to compete in other businesses, as the pharmaceutical business is undergoing a sea change, said Kley.
“It’s hard to predict what will happen in ten or twenty years, but it seems clear to us that the model of the pharmaceutical business is changing. For example, many firms are outsourcing their early-stage research and development, and devices that monitor healthy people – all the bands and apps that are used to measure exercise levels, etc. – are becoming a focus of many new health companies. Meanwhile, data firms are using their big data analysis skills to get into the pharmaceutical business, or to partner with pharma firms to address unmet needs. All this is a paradigm shift in the traditional pharmaceutical business,” said Kley.
That’s one reason Qlight – although a relatively small firm – is an important strategic acquisition for Merck. “It opens up new doors for us,” said Kley. “For example, we could use this technology to develop lighting solutions for rooms, or to eventually replace shades and curtains, since the Qlight technology could be used to darken windows and make them as opaque as desired. We actually have been active in a number of technologies that would fit into a smart home, like communications technology.”
Israel, meanwhile, promises to be a rich source of technology for Merck, Kley believes, because of the country’s considerable capabilities in big data, cyber-security, robotics, machine vision, and materials technology – all areas Merck is seeking to grow in. “We at Merck, and the world in general, are at a strategic moment in time,” said Kley. “We are growing and moving on to new challenges, and Israel will be a part of this.”
