Executive Summary

The modern drug industry was born out of the chemical industry-particularly the German chemical industry. And as the difference in the profit margins between the two industries grew in the 1960s and 70s, even those chemical players who still hadn't made much of a commitment to the drug business, like Dow Chemical and DuPont, jumped in. But the big bang which created the drug industry in the first place now looks to be on a kind of re-wind as those companies who never managed to build a big enough drug business get out of it. In part, the issue is comparative attractiveness. Hoechst's chemical business never really recovered from the shock of losing the CFC franchise to environmental concerns, but its pharmaceutical business grew. BASF and DuPont, on the other hand, weren't able to turn the corner in pharmaceuticals--and their chemical businesses never became so unattractive as to force their hands. That's why now they're getting out of the drug business and re-focusing their efforts on what they've done well.