Take-off in St. Johann

LSD and antibiotics

End of an era – and the start of a new one

Independent future

Sandoz through the years

Founded in 1886, Sandoz was originally active in dye production before moving into pharmaceutical research during the First World War. After the merger with Ciba-Geigy to form Novartis, the company name briefly disappeared before being used for the generics division in 2003. Twenty years later, and the company name is back and completely independent, even though the new company has nothing to do with the old Sandoz.

Text by Goran Mijuk and Michael Mildner

Alfred Kern

Table of contents

Take-off in St. Johann

LSD and antibiotics

End of an era – and the start of a new one

Independent future

Published on 08/09/2023

At the end of the 19th century, chemist Alfred Kern and Edouard Sandoz decided to relocate their newly founded dye company – the Kern & Sandoz chemical factory – to the St. Johann quarter of Basel.

While the favorable location outside the city was a major plus, the decision to move to St. Johann was not just down to the 11 000 square meters of undeveloped greenfield where they received building approval. Above all, it was the approval of the City of Basel to dispose of the waste generated during dye production quickly and free of charge into the Rhine.

According to the report by Carl Bulacher, the cantonal chemist at the time, the company premises were “located far away from a road and will therefore not stand in the way of apartments or an expansion of the city.” He also stated that the Rhine was “the best cleaner of liquid and solid waste.”

Other companies had also taken advantage of this lax approach to waste disposal. The Gebrueder Bloch & Cie., the Durand & Huguenin chemical factory and the municipal gasworks were already located in St. Johann. On the other side of the Rhine, industrial activity had also been booming since the middle of the 19th century.

A strong start

The industrial boom had been triggered by the discovery of aniline dyes by a British chemist in 1856. First in England, then in Germany and France, artificial dyes were also being developed in Basel from coal tar.

One of the most innovative chemists was Alfred Kern, originally from the town of Buelach near Zurich, who worked for various companies until he joined forces with Edouard Sandoz in 1886. Here, he developed new dyes on his own, including Alizarin, a red dye previously extracted from rose madder that was already successfully established on the market.

The beginnings were modest. When the general partnership was founded, the company initially consisted of an office building with an attached laboratory, three production sheds and a boiler house with steam engine.

Thanks to the development of Alizarin, the Kern & Sandoz chemical factory – unlike most of the other chemical companies in Basel – was soon able to record dynamic growth. “Colossal, unprecedented, fabulous, pyramidal,” Edouard Sandoz wrote about the strong sales development three years after the company was founded.

Kern achieved great success. In a short space of time, he and his small team of less than a dozen chemists developed a range of new dyes, including a plum blue that became a success on the market. In just a few years, the company was able to develop more than 20 new dyes.

However, this early success was soon jeopardized. In 1893, Kern died of a heart condition aged just 42. Shortly afterwards, Edouard Sandoz also had to leave the company for health reasons, which later became a public limited company and operated under the name Sandoz from 1936 to 1996.

The departure of the founders ultimately turned out to be a blessing in disguise. Shortly afterwards, Sandoz was able to recruit Robert Gnehm, a leading academic and businessman. He was to play a decisive role in shaping the company’s future by focusing more on the pharmaceutical industry and bringing important talents on board.

Sandoz-Areal 1919

Take-off in St. Johann

In the meantime, the dye business continued to boom and the company premises in St. Johann took on ever more concrete forms. Ten years after it was founded, the site had grown to an area of over 63 000 square meters. But it was far from nice.

According to an eyewitness report, the still unpaved roads on site were dusty in fine weather and almost impassable when it rained: “The many carriages that brought ice, coal and more every day turned the roads into mud. It would hardly have been possible to get through without clogs, so almost everyone on site wore them all year round.”

Permanent changes were to come with the First World War. With the disappearance of the all-powerful German competition, the Basel-based chemical companies became the most important dye suppliers to the British textile industry – the industry leader at that time.

Business was booming. From 6million Swiss francs in 1914, the turnover of the “Chemische Fabrik vormals Sandoz” – as the company was then called – jumped to 29.5million francs in 1916 and then to 37 million francs in 1918. This made Sandoz one of the most successful companies in Switzerland.

Thanks to the strong results, the St. Johann site also underwent a comprehensive modernization during the First World War that continued through the 1920s and into the 1930s. The old sheds gave way to multistory production premises where vertical working methods were used for the first time.

Development of the pharmaceutical business

With dye production in full swing, the company also began to explore the pharmaceutical sector early on. While initially limited to launching imitator products, Sandoz decided to set up its own research department during the First World War.

On the advice of Robert Gnehm, the company hired ETH scientist Arthur Stoll, who succeeded in developing a first drug after just a few years. Extracted from ergot, Gynergen was the first in a series of important products that allowed the company to gain a foothold in the pharmaceutical market.

Although Sandoz was able to launch several drugs within a short period of time, management remained skeptical at first. At the meeting of the Board of Directors on May 12, 1922, Board member Albert His-Veillon remarked that “there are already several very good special preparations on the market,” but that “there are no real bestsellers yet.” As a consequence, he demanded that Stoll and his employees “now also pay attention to the processing of such cost-effective products.”

This was achieved shortly afterwards. Not only was Gynergen able to increase annual sales to almost 1 million Swiss francs – with the launch of Calcium-Sandoz in 1927, the company had its hoped-for bestseller. As early as 1929, this product – used to treat calcium deficiency – grew into the highest-selling pharmaceutical product and accounted for the lion’s share of pharmaceutical sales.

Robert Gnehm

LSD and antibiotics

This success gave the still small pharmaceutical department a boost and inspired the researchers. Among them was Albert Hoffmann, who was hired by Stoll and was able to develop several new therapies within a short period of time. Like Stoll before him, Hoffmann also worked with the ergot fungus and accidentally discovered the hallucinogenic effect of this natural product.

Later known worldwide as LSD, the molecule was first used in experimental studies of mental disorders. However, the hippie movement that began in the 1960s with its desire for social and intellectual transcendence brought LSD – which later became the ultimate party drug – into disrepute.

LSD was banned and clinical research ceased, only to resume recently. Sandoz, which never marketed the product, was happy to minimize the damage to its image. However, despite the scandal surrounding LSD, the discovery of the molecule was a milestone in medicine as it paved the way for research into psychotherapeutic drugs.

The upswing in research motivated Sandoz to also grow through acquisitions. In 1963, the company diversified into the antibiotics business with the purchase of Biochemie GmbH in Kundl, Austria. This acquisition paid off, as it enabled Sandoz to become the world’s largest supplier of Penicillin and Cephalosporin.

In the following years, the company relocated its fermentation activities to the Kundl plant and – building on this expertise in the field of antibiotics – later entered the generics business, which ultimately led to the revival of the company name Sandoz following the founding of Novartis.

The boom years of construction

While the chemical business remained strong, the pharmaceuticals division grew into the largest business unit at Sandoz during this time. Between 1950 and 1969, sales increased from 278 million to 2.5 billion francs.

The look and feel of the St. Johann site also changed fundamentally and at a rapid pace during these years. Unused plots were developed, and old buildings were demolished and replaced by modern high-rise buildings.

Whereas up to 1956 annual investments barely reached 20 million francs, investment in construction doubled in 1960 and, in 1965, even rose to 80 million francs. New office and laboratory buildings were built, such as the 77-meter-high “503.”

A new staff restaurant was also constructed, where the company logo can still be seen on the front door – one of the last remnants of the old Sandoz on site. In 1969, Sandoz took over the neighboring chemical factory Durand & Huguenin.

Sandoz-Areal 1967-1973

End of an era – and the start of a new one

The oil crises that began in 1973 marked the end of the long economic boom, giving way to an economy that was subject to much shorter ups and downs. This not only led to a standstill in construction at St. Johann. Economic pressure also increased.

With the opening up of Asian markets and the relocation of chemical production to China and other Asian countries, traditional dye production was increasingly undermined. Specialty chemicals also suffered increasingly from price pressure, which, among others, led to the merger of Sandoz and Ciba-Geigy in 1996.

Novartis not only parted ways with the traditional company names and removed their logos from the roof of its skyscrapers, but also gradually wound down its chemical business. Novartis focused its activities on the emerging life sciences market and ventured into new areas of business.

The St. Johann site was also completely renovated. Around the turn of the millennium, the company drew up a master plan for the development of a Campus of Knowledge. More than a dozen new buildings were then built to reflect the company’s future aspirations.

Architects such as Frank Gehry and Adolf Krischanitz drafted new office and laboratory buildings for the development of innovative therapies, including gene therapies, nuclear medicine applications and RNA-based drugs.

Old name, new business

However, at the turn of the millennium there was also a high demand for generics. The generics market was boosted in the 1980s when the Hatch-Waxman Act came into force in the United States in 1984, which gave the FDA the ability to approve generic drugs. From the 1990s onwards in particular, the market saw double-digit growth, prompting many companies to invest more in the generics market.

Both Sandoz and Ciba-Geigy had already been active in the generics sector in the years prior to the merger. Sandoz owned the Biochemie AG in Austria, while Ciba-Geigy ran the generics manufacturer Geneva Pharmaceuticals in the United States. Following the merger in 1996, generics activities were based in Kundl as part of Novartis Generics and included companies such as Rolab and Multipharma.

Against this backdrop, Novartis acquired several generics manufacturers, including the German Grandis Group, the US company Apothecon, the Argentinian company Labinca and the European generics business of BASF. The takeover of the Slovenian company Lek followed shortly afterwards.

At the time of the merger, Daniel Vasella stated: “I see no reason why the growth of generics should slow down significantly. It is an industry that will continue to play a very important role in the context of cost containment in healthcare, which is a global phenomenon. It is growing faster than the market for branded medicines.”

In order to better manage all activities and bring them under a single umbrella, Novartis consolidated its generics activities in 2003 and took the opportunity to revive the company name Sandoz. This was followed by further acquisitions, including Hexal, Eon Labs, Ebewe Pharma, Oriel Therapeutics and Fougera Pharmaceuticals. At the time, Sandoz was also one of the first companies to venture into the field of biosimilars. It became the first company to receive approval for a biosimilar in the United States and Europe in 2006.

The Sandoz portfolio includes around 1000 molecules.

Independent future

In the years that followed, the generics business grew strongly. The Sandoz portfolio made a significant contribution to the strategy and provided millions of people with access to affordable, high-quality medicines.

However, as a result of the company’s strategy to become a pure-play medicine company under Chairman Joerg Reinhardt, Sandoz became less and less suited to Novartis, which has been fully committed to developing innovative therapies since 2013.

Following the sale of parts of the company – such as the animal health and vaccines business and the spin-off of the former ophthalmology division Alcon – the Board of Directors of Novartis concluded in 2022 that it would also spin off Sandoz and list the company separately on the Swiss stock exchange.

“Sandoz has a strong portfolio of generics and biosimilars and, as an independent group, should be in a better position to expand its leading global market position on its own,” explained Joerg Reinhardt at the Novartis Annual General Meeting in March 2023.

According to Reinhardt, Sandoz will also benefit from being able to prioritize the use of capital and labor for its own strategic needs in future. “Our former ophthalmology division Alcon has been able to increase its market value as an independent company since 2019, and we also expect Sandoz to achieve higher shareholder returns in the long run.”

The signs for such a development are positive: Today, the Sandoz portfolio includes around 1000 molecules that cover a wide range of therapeutic areas. In addition, the company with its approximately 20 000 employees generated sales of 9.2 billion US dollars in 2022.

Even more impressive is the number of patients reached each year. At around 500 million people worldwide, this lays a strong foundation for the future. Adolf Kern and Edouard Sandoz would certainly have shared this assessment. As a result, their legacy continues in future and builds on the success they founded on a greenfield site over 100 years ago – even though today’s company has nothing to do with the original Sandoz.

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