FCP201-2016

Welcome to the start of Molecules to Market 2016: now in its eighth year, and facing similar challenges to any business: how can we retain its vibrancy, knowing that all successful businesses begin with enthusiasm, adapt and grow and then have to face the challenges of sustainability. In this blog post I shall introduce you to some of the issues that you will all face as you create your virtual business during this semester. I am going to begin with a short discussion on the origins of commerce, with examples drawn from the Chemical Industry, which "gave birth" to the Pharmaceutical Industry, which in turn co-exists alongside small start-up Biotech Businesses. [In the next Blog Post, I shall consider companies that have less of a focus on profit: the so-called "Social Enterprise" sector].

By the middle of the 19th Century, the Industrial Revolution was in is early "exponential" phase: wealthy, educated individuals were in a strong position: labour costs were low and the rapid growth of businesses required large scale migration of labour from Europe and Ireland [interesting parallels with events around the Southern European borders today?]. This was followed by a growing need for trained scientists and engineers. By 1870, all citizens in the UK were guaranteed a school education between the ages of 5 and 13. This was a key stage in the development of a technically based work-force required to meet the market demands for large scale production of chemicals, from salts, acids and alkalis, through dyes and plastics to the first synthetic drugs in the second half of the 20th Century.

How is this related to the course? In order to succeed in a sustainable way, any new business must incorporate a number of generic elements. And these haven't changed much at all over 500 years!

• A marketable idea for a product or a service

• A robust financial framework (understanding costs, expenses, margins)

• A mechanism for sales and marketing forecasting

• A management structure that incorporates human resource management (recruitment, reward etc)

• A technical group that develops the product or service, monitors competition and maintains a competitive edge 

• A legal resource: patenting versus "know-how", negotiation of "deals" and collaborations and, perhaps most importantly, for developing and obtaining an investment plan to fund key company milestones.

Some of these requirements can be met by the founders, but some will be obtained by out-sourcing. As a business develops, it may become sensible (economically or strategically) to bring some expertise in house at a later stage.

The early chemical companies in the UK, Germany and the USA started in the first half of the 19th century with the demand for products like salts, acids and alkalis created by food and textile businesses for example. And thereafter by other more sophisticated chemical industries; of course whilst the Pharmaceutical and construction industries drew increasingly on supplies of products from the chemical industries, the market for materials to support the development of ammunition has always been, and remains, buoyant! The early businesses operated with a handful of workers, growing to SMEs employing several hundred men by the late 19th Century. However, as demand increased alongside the greater expectations of purity and innovative products,  the need for mechanisation and increased production capacity required investment on a grand scale. Just like the need to develop the railway infrastructure, wealthy individuals alone were unable to raise the increased levels of investment, and so began the era of mergers and acquisitions and the development of stocks and shares and the commodity markets. Collaborations between SMEs in the North of England in particular led to the formation of ICI (Imperial Chemical Industries), which by the 1970s (after over 100 years of business in the UK), was producing synthetic fibres for the textile industry, anaesthetics, dressings and drugs for the NHS and paints and fertilisers for domestic and industrial use. By 2000, ICI no longer existed! Some of the original business units are still around, following subsequent mergers and take-overs, Avecia, Astra-Zeneca, Syngenta. But the business models are quite different.

The second world war proved to be a key point for the development of the Pharmaceutical sector. Fleming's discovery of Penicillin, and its "Translation" by Florey and Chain, transformed the management of military and civilian casualties in this period and through the 1950s, with Pfizer and Merck emerging as Pharmaceutical giants. We should also remember the problems of drug discovery in the form of thalidomide and its catastrophic introduction for pain relief for pregnant mothers, in Europe in the early 1960s. It is also worth thinking about those companies who accepted the challenge of producing the contraceptive pill during this period: an enormous market, but huge potential legal risks. In fact these drugs were influential in the development of the FDA, in the USA, responsible for the regulatory protocols in ensuring new drugs were tested rigorously before being made available for prescription.



 
The breakthroughs in Molecular Cell Biology, starting in the 1970s with the advances in gene cloning and the subsequent work on cancer in the 1980s alongside immunology, has led to quite a different landscape to the one that prevsiled in the 1970s. The biggest selling drugs are now antibody based and whilst just as many individuals are buying paracetamol and aspirin, these drugs are off patent and retail over the counter for a few pence per tablet. Compare this with an annual cost of 10s of thousands of pounds for the latest anti-cancer drugs. These financial pressures are shaping the drug industry in some interesting ways. This is what we shall begin to explore over the coming weeks.