Novartis Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Novartis is the outcome of the consolidation of three Basel-based firms—Sandoz, Ciba, and Geigy—that in 1996 created the second-largest pharmaceutical firm in Switzerland and the third-largest in the world at that time. Talks of a possible merger began in the early 20th century (between Ciba and Geigy), and by 1918, the three firms came together to form Basler Interssengemeinshaft (also known as Swiss IG) to face competition from the large international cartels based in Germany, France, and England. Swiss IG was dismantled in 1950. In 1970 Ciba merged again with Geigy to form Ciba-Geigy, and 26 years later, a merger with Sandoz created Novartis.

All three firms started operations in the 19th century with the production and commercial exploitation of a newly discovered process to create synthetic (aniline) dyes and technological complementarities to the textile industry cluster.

History Of Sandoz

Sandoz was founded in 1885 by businessman Edward Sandoz and chemist Alfred Kern under the name Chemische Fabrik Kern und Sandoz. In 1893, after the death of Kern, Sandoz transformed the firm into a public limited company under the name Chemische Fabrik vormals Sandoz. The firm changed its name again in 1939 to Sandoz Ltd. In the early days, the firm produced mainly dyestuffs and textile chemicals; saccharine, a sugar substitute; and some basic pharmaceuticals. Sandoz’s early attempts to diversify further in pharmaceuticals did not meet with success. Only the soaring prices of pharmaceuticals during World War I and the favorable conditions of the Swiss environment persuaded the board to commit to research and development in drugs.

The new laboratory was headed by Arthur Stoll, who elevated research quality; introduced new processes to achieve more accurate dosing of drugs; set the foundations of calcium therapy; and developed ergot, the first successful home-developed product and one from which many other drugs were subsequently developed, notably lysergic acid diethylamide (LSD).

History Of Geigy And Ciba

Geigy traces its origins to Johann Rudolf Geigy-Gemuseus, who commenced his import business in 1758 in Basel. His descendants built the first dyestuffs production facility in 1833 and, in 1859, began production of the synthetic dye fuchsin. Commercial success led to the development of an extensive network of sales representatives. In 1911 the firm became a limited company, and at about the same time, the production of the first pharmaceutical products started. During the interwar period, Geigy diversified into chemicals used for the protection of textiles and subsequently into the development of pesticides, notably dichlorodiphenyltrichloroethane (DDT).

In 1859 Alexandre Clavel, who had run a silk dyeworks since 1838, obtained the license of the Venguin process to produce fuchsin and became the first producer of aniline paints in Basel. In 1864, due to environmental complaints, production moved outside Basel, and in 1873, the company was sold to Bindschedler und Busch.

Under chemist Dr. Robert Bindschedler and businessman Albert Busch, the company grew rapidly. In 1884 the owners transformed it into a limited company and renamed it Gesellschaft für Chemische Industrie in Basel. The abbreviated form of the company name, Ciba, became widely known and in 1945 was adopted as the official name of the company.

In the 1960s Geigy surpassed Ciba in terms of sales due to the worldwide success of the pesticide DDT. The benefits of a merger in terms of international expansion and economies of scale and scope became apparent. The two firms, which were already running joint international operations, started negotiations for a joint research center that led in 1970 to an “absorption fusion” of J. R. Geigy Ltd. into Ciba Ltd. under the name Ciba-Geigy. The new firm expanded further in genetic engineering with the acquisition of Chiron Corp.

Market Position

Today, Novartis is the fourth-largest pharmaceutical firm in the world and represents 8 percent of world sales of drugs. The firm is highly internationalized, with 99 percent of its sales and 53 percent of its assets in 2004 outside Switzerland.

Although Sandoz expanded abroad as late as 1964, Ciba and Geigy internationalized much earlier. In the late 19th century, J. R. Geigy built a plant at Maromme, and in 1899, Ciba acquired the French branch of the Basel firm L. Durand & Huguenin, established in 1882 in St. Fons to avoid rising duties on imported dyes. Today, Novartis has 253 of its 280 affiliates outside Switzerland.

Bibliography:

F. Haber, The Chemical Industry During the Nineteenth Century: A Study of the Economic Aspects of Applied Chemistry in Europe and North America (Clarendon Press, 1958);
Antje Klitkou and Aris Kaloudis, “Scientific Versus Economic Specialisation of Business R&D: The Case of Norway,” Research Evaluation (v.16/4, 2007);
Rajesh Kumar and Tore Markeset, “Development of PerformanceBased Service Strategies for the Oil and Gas Industry: A Case Study,” Journal of Business and Industrial Marketing (v.22/4–5, 2007);
Landau, B. Achilladelis, and A. Scriabine, Pharmaceutical Innovation: Revolutionizing Human Health (Chemical Heritage Foundation, 1999);
Novartis, www.novartis.com (cited March 2009);
Renate Riedl, “A Brief History of the Pharmaceutical Industry in Basel,” in Pill Peddlers: Essays on the History of the Pharmaceutical Industry, J. Liebenau, G. Highby, and E. Stroud, eds. (American Institute for the History of Pharmacy, 1990);
Razeen Sally, “The Basel Chemical Multinationals: Corporate Action Within Structures of Corporatism in Switzerland,” West European Politics (v.16, 1993);
Mert Sandalcı and Bahadır Taşkın, Novartis (Novartis, 2006);
UNCTAD World Investment Report, FDI From Developing and Transition Economies: Implications for Development (United Nations, 2006)

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