INTRODUCTION

success in the international pharmaceutical industry today is built on the discovery of new and better drugs for the treatment and cure of disease and their introduction to markets across the world. New drugs must be sold worldwide, since no company can fully exploit a patented product, recouping its research and development costs solely in its own home market, even in the two largest national markets, the USA and Japan. The ability of any company to innovate successfully largely depends on its resources although there is also an element of serendipity in the discovery of new drugs. Successful penetration of world markets depends on the product and its skilful marketing to secure maximum returns which, in turn, will finance further research and development.

The history of the British pharmaceutical industry and the growth of its research and development capability, to take a not insignificant place in the international industry in the late twentieth century, can conveniently be considered in three periods since the late nineteenth century. The divisions are marked by the two world wars, each of which gave a stimulus to research and development as well as bringing significant technological and organizational change to the industry and to individual players in it.

Food manufacturing and trading activities

Even before the declaration of war in September 1939, it was recognised that food supplies would have to be as carefully organised by the State as the supply of munitions and petroleum oil or the distribution of civilian manpower. Much of Britain's food was imported, and it was realised that supplies would be disrupted not only by enemy action but by the allocation of merchant shipping for other strategic purposes. Elaborate contingency planning was undertaken in the period from 1937, based partly on an analysis of the experience of the Ministry of Food of 1916–1918. Ration books were printed well in advance of the outbreak of hostilities and the second Ministry of Food was established in September 1939 to put into action the plans decided upon in the preceding two years. ‘The outbreak of war found this country better fitted than ever before to apply the findings of nutritional science to the task of feeding the population.’ To assist in this task the Ministry recruited advisers with experience of nutrition and the food industry. From 1941 to 1943 Harry Jephcott was Adviser on Manufactured Foods to the Ministry. In his absence from Glaxo, Colonel Rose acted as Managing Director.

Despite (or because of) food rationing, which for bacon, butter and sugar was imposed in 1940, Nathan's food subsidiaries performed better during the war.

From London to Melbourne

Joseph Edward Nathan, founder of the company from which Glaxo Laboratories grew, was born in London on 2 March 1835. He was the sixth son of a wholesale tailor, Edward Nathan, and his wife Rachel. Family tradition held that Nathan père was, or became, ‘a charming old man with very little brains’, while the mother ‘was a highly intelligent woman with not a great deal of education’. The Nathan family lived in Houndsditch, an area of east London just outside the boundaries of the City and for many centuries a centre of the clothing trade. By the early nineteenth century Houndsditch had a large Jewish population – they built a synagogue there in 1809 – and there were many small factories, warehouses and businesses in the area. From the age of about twelve, Joseph Nathan helped his father in his small business of making suits and clothes which he then sold in and around London. Even at that early age Joseph showed signs of business acumen and entrepreneurial zeal; from the travellers who sold cloth to his father, he learned of the possibilities of an export trade and urged his father to launch into this line. He succeeded in persuading the old man to buy a tail-coat and silk hat to make himself more presentable, and sent him to drum up connections for export business; but Edward Nathan had no heart for expansion and nothing came of the venture.

From an early date the Nathan family, with their international merchandising expertise, saw the possibilities of selling Glaxo powder in markets outside Britain and New Zealand. Agents were appointed in some countries before the outbreak of the First World War and by 1914 exports represented more than a third of the turnover of Glaxo powder. The shortage of Glaxo supplies (and sometimes their poor quality) almost destroyed the trade during the war and prevented further development in the immediate post-war years. The export business started to revive in 1922 and by 1925 had grown to represent nearly a half of the value of the Glaxo department's total turnover.

There was in the earlier years a division of international marketing responsibility between the London and Wellington offices. Its exact details are unclear, but Alec Nathan wrote in 1919 ‘that if the strict word of the arrangement was kept, [London] should not be able to do any Export Business except with South America and Spain’. In both those countries London had appointed agents before 1914.

As the business developed the Nathans were forced to begin limited local production when protective tariffs or other discriminatory regulations, intended by governments to develop local productive expertise, were introduced. The diversification into pharmaceuticals also stimulated the establishment of manufacturing capacity overseas; vitamin products were highly suitable for local production, since they could be produced on a small scale for a modest cost in capital equipment and staff.

In the interwar years the scope of the work of the Glaxo department expanded. While dried milk sales were badly affected by the depression – though they recovered in the later 1930s – the department became increasingly aware of and interested in the significant aspects of nutritional research. The identification of accessory food factors – vitamins – attracted the interest of Harry Jephcott, who saw their potential. Mothers, nurses and doctors frequently quizzed Nurse Kennedy and the Glaxo advisory service on the nutritional adequacy of their dried milk in feeding infants. Producing and marketing vitamin products as well as a new, vitamin-enriched proprietary food, Farex, turned Jephcott's and thus the Glaxo department's attention to the developments of the period in the pharmaceutical industry.

Nutritional research and accessory food factors

A series of experiments in nutrition research, comparing vitamin-enriched with vitamin-depleted diets, was conducted in the period between 1873 and 1906. The term ‘vitamine’ was coined in 1912 by Casimir Funk of the Lister Institute for Preventive Medicine in London: his paper in the Journal of State Medicine attributed beriberi, scurvy, pellagra (a disease characterised by diarrhoea and dermatitis leading to mental disorder and death), and tentatively rickets to dietary deficiency, and proposed that the substances whose absence caused these illnesses should be called vitamines (because they were vital to life and, so he believed, contained amine).

The aftermath of war

The war years and the commitment to penicillin had made it clear, both within and without the company, that Glaxo Laboratories had become a pharmaceutical house. It was therefore logical for the parent company to rid itself of its merchandising and ancillary businesses. In the two years after the war the food interests of Nathans – Trengrouse & Nathan, Bowles Nicholls and Stewarts – were sold, as too were the trading interests in New Zealand. This left the parent Nathan company with its one subsidiary, Glaxo Laboratories. In January 1947, by a share for share transfer, Glaxo Laboratories acquired the assets of its parent and, at the same time, became a public company. J. E. Nathan & Co went into voluntary liquidation. Sir Harry Jephcott who had been knighted in 1946 was already Chairman and Managing Director of Glaxo, for in June 1946 Alec Nathan had retired from business life. At the Glaxo Board meeting:

The Multinational pharmaceutical industry

In the post-war period, as the therapeutic revolution gathered momentum, it became imperative for pharmaceutical companies to market their unique, novel and patented products abroad as well as at home. The vast increase in the number of ethical drugs introduced after 1944 revealed that no country had a monopoly of the innovation or the production of drugs. Even a country such as the USA, with its large and innovative pharmaceutical corporations and its own vast market, was obliged to import ethical drugs. The worldwide need for medicines and the pressure for swift amortisation of the high investment in research were also strong incentives to export pharmaceuticals. Technological advantage often provided the first stimulus for pharmaceutical companies to internationalise. Import regulations and restrictions such as tariffs, quotas and bans imposed by governments for various economic and social reasons, spurred pharmaceutical companies on to establish foreign manufacturing establishments, as Glaxo's own overseas development before the Second World War (see chapter 5) illustrates.

Pharmaceutical companies differ from most other manufacturing businesses in their approach to multinational development. This is partly because of the unusual complexity and diversity of the local market conditions with which pharmaceutical companies are confronted. It is also partly inspired by the seniority of trained scientific personnel within the managerial hierarchies of pharmaceutical companies. Even when not directly or exclusively responsible for multinational strategy and organisation, the senior scientists nevertheless imbue the company culture with the need for clear, steady and coherent long-term views.