How pharmaceutical companies transformed from chemical synthesis to biotechnology, with case studies on Bayer, Hoechst, Schering AG and E. Merck
If you've ever taken an aspirin for a headache or insulin for diabetes, you've witnessed the end result of a scientific revolution that transformed medicine. The story of drug discovery throughout the 20th century is one of dramatic turning points—where serendipitous findings gave way to deliberate molecular design, and established pharmaceutical giants had to reinvent themselves to survive. At the heart of this transformation lies perhaps the most significant breakthrough: the advent of modern biotechnology, which changed not just what medicines we could create, but how we think about healing itself.
This article traces the fascinating journey of how four German pharmaceutical companies—Bayer, Hoechst, Schering AG, and E. Merck—navigated this seismic shift from chemical-based to biology-driven drug discovery. Their story represents a microcosm of the entire industry's struggle to adapt, offering powerful lessons about innovation that resonate today as we stand on the brink of new revolutions in gene editing and personalized medicine.
Modern drug development has evolved through three distinct periods, each marked by fundamental changes in how scientists discover and create new medicines 1 .
In the early days, drug discovery relied heavily on luck and observational wisdom. Scientists isolated active compounds from traditional remedies often without fully understanding their mechanisms.
Examples: Morphine (1803-1805), Quinine (1820)
The early 20th century witnessed the rise of systematic synthetic chemistry. Companies began deliberately modifying known compounds to create new drugs.
Examples: Aspirin (1899), Penicillin (1928)
For the first time, scientists could engineer living organisms to produce human proteins—creating medicines that previously could only be extracted from animals or human cadavers.
Examples: Recombinant insulin (1978), Monoclonal antibodies
| Period | Time Frame | Key Approach | Iconic Examples |
|---|---|---|---|
| Age of Serendipity | 19th Century | Isolation of natural compounds | Morphine (1803-1805), Quinine (1820) |
| Synthetic Revolution | Early 20th Century | Chemical synthesis & modification | Aspirin (1899), Penicillin (1928), Sulfonamides (1930s) |
| Biotech Revolution | Late 20th Century - Present | Genetic engineering & molecular biology | Recombinant insulin (1978), Monoclonal antibodies, Gene therapies |
The rise of biotechnology created what scholars term an "external discontinuity in the knowledge environment"—a fancy way of saying the rules of the game changed completely 2 . Companies that had built their fortunes on chemical synthesis suddenly needed expertise in molecular biology, genetics, and protein engineering.
German pharmaceutical companies faced a particular challenge. Bayer and Hoechst had roots in the coal tar dyestuff industry, while Schering AG and E. Merck were traditional pharmaceutical companies 2 . All four had to determine how to respond to the biotechnology revolution that emerged after the 1970s.
Research into their adaptation reveals a fascinating pattern: the companies rooted in the coal tar dyestuff industry (Bayer and Hoechst) adjusted more effectively to biotechnology than the traditional pharmaceutical companies 2 . Why? Their secret weapon was what economists call "science-based research tradition" and established research and development activities that helped them recognize and assimilate new technological possibilities 2 .
Leveraged R&D infrastructure and science-based tradition to build biotech capabilities 2 .
Pre-Biotech Strengths: Chemical synthesis, Aspirin, Heroin
Similar dyestuff background enabled better adjustment to new knowledge environment 2 .
Pre-Biotech Strengths: Chemical manufacturing, Synthetic drugs
Struggled more significantly with the transition to biotechnology 2 .
Pre-Biotech Strengths: Traditional pharmaceuticals, Alkaloids
| Company | Roots | Pre-Biotech Strengths | Adaptation Approach |
|---|---|---|---|
| Bayer | Dyestuffs (1863) | Chemical synthesis, Aspirin, Heroin | Leveraged R&D infrastructure and science-based tradition to build biotech capabilities 2 |
| Hoechst | Dyestuffs | Chemical manufacturing, Synthetic drugs | Similar dyestuff background enabled better adjustment to new knowledge environment 2 |
| Schering AG | Pharmacy (1851) | Contraceptives, Multiple sclerosis drugs, Contrast agents | Faced greater challenges as traditional pharma in adapting to biotech revolution 2 4 |
| E. Merck | Pharmacy (1668) | Traditional pharmaceuticals, Alkaloids | Struggled more significantly with the transition to biotechnology 2 |
To understand how biotechnology fundamentally changed drug development, let's examine one crucial experiment that launched the entire biotech industry: the creation of recombinant human insulin.
Before 1978, insulin for diabetics came from animal sources—primarily pigs and cows. This posed several problems: limited supply, potential immune reactions, and ethical concerns. The race was on to create human insulin through genetic engineering.
In 1978, David Goeddel's team at Genentech achieved this milestone 3 . Their experiment demonstrated that you could engineer Escherichia coli bacteria to produce authentic human insulin—a breakthrough that would become the first biotech therapy approved for human use.
Researchers began by extracting messenger RNA (mRNA) from human pancreatic cells, which contained the precise genetic instructions for making insulin 3 .
Using an enzyme called reverse transcriptase, they created a complementary DNA (cDNA) version of the insulin gene that could be inserted into bacterial cells.
The insulin cDNA was then spliced into small circular DNA molecules called plasmids—nature's delivery vehicles for moving genetic material between organisms.
These engineered plasmids were introduced into E. coli bacteria, which then began reading the human insulin gene and producing the protein.
The transformed bacteria were grown in large fermentation tanks, multiplying and producing human insulin, which was then extracted and purified for medical use.
The experiment was a resounding success. The recombinant insulin produced was identical to human insulin and effectively controlled blood sugar levels without triggering immune reactions. More importantly, it could be produced at scale—a single fermentation tank could theoretically produce enough insulin for the entire diabetic population.
This breakthrough marked a watershed moment for the pharmaceutical industry. Genentech's success "inspired many new paradigms for disease diagnosis and treatment as well as the start of many other biotechnology companies" 3 . For established pharma companies like Bayer and Schering, the message was clear: adapt or become obsolete.
| Research Tool | Function in the Experiment |
|---|---|
| Reverse Transcriptase | Enzyme that converts mRNA back into DNA, allowing creation of the insulin gene |
| Plasmid Vectors | Circular DNA molecules that carry foreign genetic material into host bacteria |
| E. coli Bacteria | Single-celled organisms serving as miniature factories for insulin production |
| Restriction Enzymes | Molecular scissors that cut DNA at specific sequences for insertion of insulin gene |
| Fermentation Tanks | Industrial-scale equipment for growing engineered bacteria in large quantities |
The biotech revolution required entirely new tools and reagents that traditional pharmaceutical companies hadn't needed. Here are some of the key materials that became essential for modern drug discovery:
The foundational toolkit for cutting and splicing genes, including restriction enzymes and ligases that allow scientists to edit DNA with precision 3 .
Laboratory-produced molecules that can be engineered to target specific cells or proteins, revolutionizing cancer treatment and autoimmune therapies 3 .
Methods for growing human and animal cells in the laboratory, enabling the production of complex biological drugs and testing compounds without animal models 3 .
Modern tools like CRISPR-Cas9 that allow precise manipulation of DNA in living cells, opening possibilities for correcting genetic defects 3 .
Delivery systems that protect fragile molecules like mRNA and facilitate their entry into cells, crucial for COVID-19 vaccines and beyond 3 .
The development of recombinant insulin was just the beginning. Biotechnology has continued to evolve at a breathtaking pace, with each breakthrough building on the last 3 :
Discovery of DNA structure by Watson and Crick, followed by Arthur Kornberg's development of DNA synthesis techniques.
Birth of genetic engineering and recombinant DNA technology, culminating in the production of recombinant human insulin in 1978.
First steps toward RNA therapeutics by Robert Malone, who mixed mRNA with lipid droplets to deliver it into human cells.
Launch of the Human Genome Project and the first successful gene therapies in humans, plus the cloning of Dolly the sheep demonstrating cellular manipulation in mammals.
Development of precise gene-editing technologies, starting with zinc finger nucleases (ZFNs) in 2005 and TALENs in 2010.
CRISPR-Cas gene-editing technology (2013) enables precise DNA manipulation in living cells, representing one of the most powerful tools in biotechnology history.
mRNA vaccines using lipid nanoparticles prove their worth during the COVID-19 pandemic, demonstrating biotechnology's ability to respond rapidly to global health threats.
Faced with the biotech revolution, companies like Bayer and Schering AG ultimately employed several strategies to bridge the knowledge gap:
They established dedicated biotech research units within their organizations, often in science hubs like Boston and San Francisco to tap into local expertise.
They acquired biotech startups that had already developed promising technologies or drugs—a pattern exemplified by Bayer's eventual acquisition of Schering AG in 2006 4 .
They formed strategic partnerships with universities and research institutions to access cutting-edge science they couldn't develop in-house.
They hired molecular biologists and geneticists to work alongside their traditional chemists, creating interdisciplinary teams that could tackle drug discovery from multiple angles.
This adaptation wasn't just about survival—it represented a fundamental shift in how pharmaceutical companies approach innovation. The most successful organizations became what we might call "knowledge integrators"—entities that could combine expertise in chemical synthesis with the new sciences of molecular biology and genetics.
The story of how traditional pharmaceutical companies adapted to biotechnology offers powerful lessons for today's scientific challenges. As we stand at the brink of new revolutions in artificial intelligence, gene editing, and personalized medicine, the ability to integrate new knowledge bases remains critical.
The companies that succeeded—Bayer and Hoechst with their dye-making heritage—demonstrate that established corporations can reinvent themselves when they maintain a science-based research tradition and remain open to external knowledge 2 . Their journey from synthesizing dyes to engineering biologics represents one of the most dramatic transformations in the history of science and business.
As biotechnology continues to evolve—with mRNA technologies, CRISPR gene editing, and personalized cancer vaccines—the lines between traditional pharma and biotech continue to blur. The next chapter in drug discovery is likely to be written by those who can best integrate multiple technological platforms, from chemical synthesis to digital health and artificial intelligence.
The knowledge base underlying drug discovery will continue to change, but the imperative to adapt remains constant. In the words of a recent analysis of this transformation, it was the "interactions to access the extramural knowledge base" that proved crucial for companies navigating the biotech revolution 2 —a lesson that remains vitally relevant as we face the next wave of scientific disruption.