The origins of todays mega cap $2T Pharma companies


The origins of today’s most well-known pharmaceutical companies such as Roche, Novartis, Merck, Pfizer, Eli Lilly, Bristol Myers Squibb collectively have over $2T USD of market capitalisation. They all started with a first product some even selling heroin and poisonous compounds that killed patients. Most of the success of these companies was not from pioneering novel science but from commercial and industrial execution (Merk – Commercial Scale Morphine, Squibb – Standard Ether, Bayer – Aspirin marketing, Pfizer – Penicillin fermentation, Eli Lilly –purification and commercialization). Read below for the history of these incredible compounders. This material has all been drawn from the book Drug Hunters by Donald Kirsch a retired veteran drug hunter.


Morphine – Merck


In 1826 a young German pharmacist named Friedrich Serturner isolated the active components of opium (derived from the poppy flower) to invent Morphine (named after Morpheus the god of dreams). Drugs can fall into four large categories (Replace a bodily inadequacy, Combat infection, Change regulation or alter mood/ behavior) Morphine falls into the fourth category and is most prone to abuse. Commercial quantities of Morphine were produced in 1827 at the Engel-Apotheke owned by Emanual Merck this eventually expanded to become the Merck we know today. Merck began selling Morphine as an alternative to Opioids and soon became an addiction to more people than opium! Shortly after in 1897 along came Bayer Company who altered Morphine and created Heroine, Bayer dubbed Heroine as a more effective treatment than Morphine for Coughs and to combat Morphine addiction (!). These Heroine kits including needles, syringes, and vials were sold in Seers for $1.50. Heroine has a stronger euphoric effect and was therefore much more addictive, after some time and public education Bayer suffered significant public relations backlash, such an activity would be criminal under today’s law.


Opiates work by acting on receptors in neurons called Endorphin’s (Which stands for Endogenous Morphine – Natural Morphine). Endorphin’s are naturally occurring hormones produced in the pituitary gland and hypothalamus that produce feelings of well being and reduce pain. These hormones produce their effect by binding to the endorphin receptors. We have 9 different types of these receptors in our body and each opium compound has a distinctive action which changes the therapeutic effect (euphoria, sedation, analgesia etc). Today over 500 tonnes of morphine is produced for use worldwide.


Ether – Bristol Myers Squibb


Ether was a compound that was initially known as Oil of Vitriol and used to treat Angina (unsuccessfully), a better use of this compound was discovered by dentist William T G Morton. He discovered that the fumes could be used to sedate patients without any effect on the well-being. In 1846 there was a public presentation completed at Massachusetts General Hospital in which Dr Morton publicly sedated a patient for pain free surgery. This was a miracle in the 1840’s, during which time surgery was completed while patients were awake (!). The demand for Ether exploded but it was difficult to make and at that time apothecaries had no standard manufacturing procedures for compounds. Surgeons learned that Ether varied between suppliers.in 1857 Edward Robertson Squibb came along and built his first pharmaceutical factory at Brooklyn Naval Yard, After burning both his eyelids off he succeeded in standardizing a formula for Ether which could then be scaled to produce large amounts for nation-wide use. Squibb was later purchased by Bristol Myers during the 1980s.


Aspirin – Bayer


Aspirin is the chemical compound Acetylsalicylic acid, which was discovered along with diacetylmorphine (later named Heroin), Bayer who discovered both the these compounds didn’t have sufficient budget to pursue both of them so abandoned Aspirin, after some considerable persistence by the inventor Bayer admitted its use was very effective and safe. Aspirin subsequentially failed to secure an exclusive patent in parts of Europe so they decided to complete a marketing push under the drugs Generic Name (Drugs have a Chemical name – the name that describes the chemical structure, a Generic Name – the name given by an official body and the Trade Name – the branded name). The Generic name for Apsirin is monoacetic acid ester of alicyclic acid. This was incredibly clever and led many doctors to simply prescribe two aspirin, this is what created an embedded user base that still exists today over 100years later.

Aspirin was the first blockbuster drug of the age of synthetic chemistry and its population grew further when it became the standard treatment for the Spanish flu of 1918, despite patents finishing for Aspirin it still remains a steady seller and today over 70 million pounds of Aspirin is sold each year and is still one of Bayers best selling Pharmaceutical products producing €560M in 2019 over 100years old:





Sulfanilamide - GlaxoSmithKline


Prontosil was discovered by another Bayer Research team that discovered its effectiveness in treating Streptocci Bacteria, however it only worked on living biological organisms because the compound was broken down by enzymes in the stomach into a smaller molecule known as sulfanilamide. However, this compound was well known and was subsequentially formulated into an Elixer by S.E.Massengill company using Diethylene Glycol (An Elixer is a preparation that has the drug dissolved In alcohol, other liquid drug preparations are Syrups – sugar and suspension – drug suspended). Tragically in the case of Sulfanilamide Massengill failed to test this formulation before selling it, the elixir went on sale, more than 100 people around the country died including children who had it prescribed for a sore throat. The elixir was shortly after taken off shelves but during the 1930’s the Federal government didn’t regulate drug approval so legally speaking the S.E Massengill company did nothing illegal. This was the first major drug crisis after which congress passed the Food, Drug and Cosemetics Act in 1938 to establish the modern-day FDA. Massengill continued to operate as a private family owned firm until 1971 when it was taken over by GlaxoSmithKline.


Penicillin - Pfizer


In 1928 a microbiologist at St Marys Hospital in London discovered penicillin, a well-known story, but whats interesting about the discovery was that penicillin sat unused and unexamined for over a decade. This lack of use was due to two main factors, firstly it was not clear how to manufacture penicillin on a commercial scale as the compound is extracted from a fungus culture (p. chrysogenum). Secondly it was found that penicillin took a long time to overcome the bacteria in the patient, we now know this is due to the administration method used at the time. Penicillin was originally administered topically (we now know that topical administration only has local effects and is not distributed systemically like parental and enteral administration methods). After this decade of non-use two immigrant scientists in 1940 produced more research on the compound with greater purification and a systemic administration method. Unfortunately, despite stellar results the first issue persisted (commercial scale production requirement). This changed the problem to an industrial production issue, The Rockefeller foundation who was funding some of the secondary research via Oxford introduced the scientists to the USDA who added materially to the production issues by improving the scalability of fermentation methods. A club of big pharma companies collaborated further to manufacture the compound, including Merck, Squibb, Pfizer, Abbott and Eli Lilly. In 1944 Pfizer perfected the process and became the largest producer in the world producing enough doses for 100 patients a month. Penicillin is estimated to have saved over 200 million lives in the world since its discovery.


Insulin – Eli Lilly


Eli Lilly was founded by Colonel Eli Lilly in 1876 and was a pharmaceutical distributor. Eli’s grandson (also Eli) was the third-generation family member to become the chairman. Eli the second decided that drug hunting was the game to be in and so In 1919 he recruited a scientist Alec Clowes to scour the world for ideas. After some time Clowes began to focus on Diabetes as an incurable disease that had interesting research. Two European scientists proposed that the Pancreas produced a hormone (now known as insulin) that controls how the body metabolizes glucose (Glucose is a cells prime energy source, Insulin acts as a key that unlocks a door on the cell membrane to allow glucose into the cell for consumption). Clowes from Lilly attended a conference where these scientific findings of this discovery were presented and then licensed the drug into the USA. Lilly spent $200,000 to build the commercialization and purification processes for widespread use. By Late 1922 Lilly had produced a potent insulin on industrial scale. Around 60years later a significant leap forward in insulin technology emerged. Herb Boyer and Bob Swanson of Genentech cloned the human insulin gene. At this time Lilly commanded a 95% Market share of the Insulin market worldwide, Squibb held the other 5%. Genentech eventually partnered with Lilly for a mere $3M upfront, today virtually all insulin is human insulin not animal based. Had Squibb decided to license the Genentech technology instead the global pharmaceutical powerhouse of Eli Lilly might had failed to survive. In total Eli Lilly spent $3.2M for the Animal Extracted and Human cloned Insulin products and In 2019 Lilly insulin therapeutics produced the company $11B in sales.





Anti-hypertensives – Merck & Squibb


For decades in the mid 1900’s the medical establishment believed that high blood pressure was essential for maintaining good health. This long held belief was finally disproved by the longest running epidemiological study of all time – the Framingham Heart Study. The study started in 1948 and tracked over 5209 residents of a small town for over 20 years. Virtually all of today’s heart benefits of diet, exercise and aspirin use all stem from this study. Among many findings were that stroke was correlated with clogged arteries (atherosclerosis), elevated serum cholesterol (Hypercholesterolemia) and hypertension. Concurrently to this study Merck was working away on hunting a drug that inhibited an enzyme called carbonic anhydrase which reduces blood acidity. Blood acidity is vitally important for good health, the carbonic anhydrase inhibitors worked but also had an unintended side effect of increasing urination. This unintended side effect had the impact of reducing hypertension (The primary mechanism by which kidneys regulate blood volume is by adjusting the amount of water and sodium lost in urine). These drugs were called diuretics. Merck, while developing this compound stumbled upon a drug that did not inhibit carbonic anhydrase but was a more powerful diuretic, they named it Diuril. Shortly after approval Diuril was rarely prescribed but then the first rounds of the Framingham study were released showing the links between hypertension and stroke, The FDA then supported the prescription of anti-hypertensives. In the years that followed the Centers for disease control and prevention noticed there was a clear reduction in the number of people who were having strokes. This is where the unhealthy hypertension notion was born. From 1955 to 1980 the incidence of stroke in the USA declined by almost 40%. Today the Diuretic market produces over $1B in sales each year.


Further development of the anti-hypertensive treatments continued by the discovery of beta blockers. These work by blocking one of the two adrenaline receptors (Alpha and Beta) that regulate blood pressure. The first beta blocker Propranolol was discovered by James Black in 1964 and selectively blocked the beta receptors and therefore reduced hypertension without the side effects of Diuretics. Propranolol became one of the best-selling drugs in the world in the 1960s-1970s.


Due the rivers of gold from Diuretics and Beta Blockers still more drug hunting was taking place in the anti-hypertensives space. Along came the ACE inhibitors, which weren’t discovered until the 1980s and from an unlikely beginning. Two drug hunters at Squibb, Dave Cushman and Miguel Ondetti discovered that snake venoms most active component known as teprotide inhibited an enzyme in the body called Angiotensin Converting Enzyme (ACE). We now know that ACE is the true controller of our blood pressure by relaxing blood vessels. This discovery eventually resulted in the invention of Captopril which was an entirely novel controller of blood pressure. The FDA approved Captopril in 1981 and in its first year generated over $1B in sales, it made more money than the rest of the Squibb portfolio combined. Ironically the stock price never reacted, and Squibb was taken over by Bristol Myers.