The Influence of Brexit on Operations of Global Companies in the Pharmaceutical Industry: the Cases of GlaxoSmithKline and AstraZeneca

There are also specific changes that researchers see for pharmaceutical companies that have their research and development operations in the UK: from 2018 the EU has to follow the Clinical Trial Regulation (CTR) and due to Brexit, all the trials taken in the UK may stop being regulated by CTR, and thus, the UK may not be included in the future clinical trials, or may be called at later stages. (Moore et al for PwC, 2018). Also it may interrupt the trials for the medicine originated in the UK that is now under CTR review. (Deloitte). Finally, MHRA, a UK healthcare regulatory body, has a considerable influence on the EU medical regulations that is favourable to the UK pharmaceutical companies, but since the UK will no longer be a part of the EU in 2019, MHRA will have no control over the EU medical regulatory system i.e. the UK loses this weight. (Moore et al for PwC, 2018).

To summarize political aspects, Brexit influences Research and Development operations, because of new trade barriers and loss of unitary patent and stops being a part of Clinical Trial Regulation. The costs to overcome those barriers are a part of R&D operations (sources of funding for R&D) of a company. Finally, technology transfer part of operations are influenced by MHRA's loss of a vote in European Union's medical regulations and not being able to negotiate best conditions for its companies.

Economic aspects.

Currently across the EU there is a free movement of goods and people and all the rules and authorizations are made once in a member-country and works in all other EU countries. After leaving the EU, UK loses this ability to and has to overcome these regulatory barriers, thus, it influences on technology transfer speed and cost(please, refer to “legal and regulatory” aspects). Moreover, manufacturing operations are affected by a trade barrier of an import license, without which a pharmaceutical product is not allowed to move across Europe, making again, the process longer and costly.(PwC).

On the other hand, economic effect of Brexit is possibility to find new trade partners or grow a share of its existing ones. For example, some experts are talking on the possibility of a separate US-UK trade deal. Alternatively, the UK can be included in the Trans Pacific Partnership deal. (http://www.europe-economics.com).

Another important issue for manufacture operations in a pharmaceutical company is the weakening of the British pound of sterling against euro. This results particularly in import and export prices and has a bad effect on the UK pharmaceutical companies that have at least a part of their production process outside of the UK and that sell their products in the UK, thus, it may create higher currency risks for such companies. (KPMG).

Additionally, labour regulations, being a part of economic aspects, influence operations in a pharmaceutical company. According the research conducted by the PwC, the UK's life sciences and pharmaceutical industries give employment to more that 220,000 people. (Moore et al for PwC, 2018). Seventeen percent of those employees are non-UK citizens of the EU (Campaign for Science and Engineering. Immigration: Keeping the UK at the heart of global science and engineering. 2016. http://www.sciencecampaign.org.uk). After the UK is no longer a member of the EU, the freedom of labour between countries ends, and it can bring a short-term decrease in productivity, i.e. has an impact on operations.

Moreover, the life sciences and pharmaceutical industries and highly dependable on the talent reach, and leaving a single labour market makes the UK less attractive for the academics. Even though the results of the Brexit are not yet known, the uncertainty itself already influenced the industry. Looking at the numbers, provided by the PMI, the number of European Union citizens newly registered as nurses in the UK has declined dramatically, by 92% since the process of Brexit was announced in 2016. Furthermore, according to the results of the poll, 60% of the surveyed doctors were thinking of relocating from the UK because of the uncertainty on the Brexit. (Farlane, 2017), thus, changes in labour due to Brexit have an economic impact not only on R&D and manufacturing in the pharmaceutical industry, but on all the life-sciences sector.

Finally, introduction of customs tariffs and non-tariff trade barriers in pharmaceutical industry, where the UK based companies would have to receive additional permits, would increase costs to enter the international markets (KPMG), thus, had an impact on operations of a global pharmaceutical company.

Technological aspects.

Many investors in the UK life science and pharmaceutical industry are ready to fund the research in the hope to have future access to the European market, however in the event of Brexit, it may not be the case, thus, the industry loses its investors (Deloitte), thus, influencing a speed of technological discovery in pharmaceutical industry.

Accumulating top talent is also an important issue for the research and development of the UK life science and pharmaceutical industry, that because of the Brexit, would involve relocation and additional hiring process for the research sector.(http://www.europe-economics.com). Moreover, the EU provided the funding for much different academic research in the UK, about 16% of budget for all the EU research and development is spent in the UK, including the pharmaceutical industry (PwC). However, due to the UK' withdrawal from the EU those UK research facilities can lose their funding.(http://www.europe-economics.com ). One of the most crucial issue in the R&D after the Brexit, is losing the access to the Horizon 2020 program. It is a European R&D pharmaceutical funding program that is developed by the Innovative Medicines Initiative (IMI), funded by the EU. The first step of the program started in 2007 and funded pharmaceutical research for more that 2 billion euros, and the UK research facilities, including large companies, like GlaxoSmithKline and AstraZeneca, have won the biggest proportion of the funds, over 140 million of euros; the second step of the program started in 2014 and will continue till 2024 with the budget of 3.3 billion euros, and after the UK withdrawal from the EU, it could lose this significant amount of funding. (http://www.europe-economics.com/).

Legal and Regulatory aspects.

As it was discussed before, the pharmaceutical industry is one of the most heavily regulated industries. After the UK exits European Union, there will be changes in laws and regulations in many areas.

Researchers believe, that these changes in regulations would influence R&D operations of companies: from 2018 the EU has to follow the Clinical Trial Regulation (CTR) and due to Brexit, all the trials taken in the UK may stop being regulated by CTR, and thus, the UK may not be included in the future clinical trials, or may be called at later stages. (Moore et al for PwC, 2018). Also it may interrupt the trials for the medicine originated in the UK that is now under CTR review. (Deloitte). Additionally, the UK R&D operations are influenced after leaving the EU, when United Kingdom is not covered by the Unitary Patent, i.e., the UK becomes vulnerable against criminal activity, especially in the emerging countries with a low level of control over the patents (Clariton Solicitors Limited). Due to the above, UK pharmaceutical companies as a part of development and transfer of technology operations have to consider ways to protect their new medicines and medical devices and register their designs and trademarks separately from the EU. Moreover if because of leaving the EU, United Kingdom loses the access to the EU's Unified Patent Court (UPC), the process of patent disputes becomes a longer and more expensive one for the UK pharmaceutical companies. (Moore et al for PwC, 2018).

Secondly, EMA (European Medicines Agency located in the UK), that is responsible for authorization and regulation of medicine for the EU, is now relocating to Amsterdam because of Brexit, i.e. the UK loses an access to the single market authorization of medicine through EMA, thus, the process to access the EU market becomes slower or impossible (Moore et al for PwC, 2018), thus it influences manufacturing operations of a pharmaceutical company based in the UK and wishing to sell its products in the EU.

Finally, every business that falls under the General Data Protection Regulation (GDPR), like life sciences, including pharmaceutical, industry is affected by the changes in regulation for the UK after leaving the EU, as under it the data can only be transferred outside the EU to the countries that are approved by the European Commission and provided the evidence that they have an “adequate” level of personal data protection, and since the UK will no longer be a EU country in 2019, it becomes a barrier for the UK pharmaceutical industry (Greenall, 2018) until it is approved by the European Commission.

To conclude, we were able to understand that Brexit's main problem is uncertainty. Researchers suggest as a way to deal with uncertainty a “wait and see” approach. We also divided Brexit into several aspects and analyzed their influence on operations of a global pharmaceutical company separately. We understood that its Brexit has political, economic, technological and legal factors, and each of them separately and all together have an impact on research, development, technology transfer and manufacturing of a pharmaceutical good. The aspect that penetrates all the operations and all the other aspects of Brexit is legal and regulatory aspect.

2. Case studies featuring GlaxoSmithKline and Astrazeneca

2.1 The landscape of the pharmaceutical industry in the UK

In this part of our research, we are going to look at the pharmaceutical industry in the UK and its relation to the EU. The part is based on the government reports and analytical papers of consulting firms and health associations. Also we used data from Euromonitor.

In the UK the pharmaceutical industry is responsible for more than a half of the life sciences industry's total contributions. (John Wiley & Sons Ltd). In 2015 the tax contribution created by the UK pharmaceutical industry was about 9 billion pounds of sterling, with the contribution in GDP of more than 30 billion pounds, and it gave employment to more than 482.000 people. (PwC). United Kingdom's pharmaceutical industry is one of the best performing high-technology industry in Europe.(EFPIA,2016).

Looking deeply at the pharmaceutical industry in 2015 the UK pharmaceutical industry had a total market value of 22,375 million euros, following the largest EU market values of Germany and France. (European Federation of pharmaceutical industries and associations (EFPIA, 2016). It also gave employment to more that 61 thousand people, it was the third result in the EU, after Germany and Italy. (EFPIA, 2016). Additionally, it was the fifth in the EU in the production of pharmaceutical products of more than 19,300 million of euros, and the third in the Europe in the spending on the Research and Development of 5,756 million euros. (EFPIA, 2016).

Pharmaceutical companies make a large economic contribution, compared to other UK industries. Its turnover was in 2016 about 23 billion of pounds with annual profit of 5 billion pounds.(Euromonitor database). Though only 1.4% of pharmaceutical firms are large with 250+ employees, their share in total turnover is about 20 billion pounds, where as 98,6% of pharmaceutical firms (micro (0-9 employees), extra small (10-19 employees), small (20-49 employees), medium (50-249 employees) share the remaining turnover of 3 billion pounds. (Euromonitor database).

Many multinational pharmaceutical companies are present in the UK, as well as, two of the largest pharmaceutical companies in the world have their headquarters in the UK: GSK and AstraZeneca.

AstraZeneca and GlaxoSmithKline are responsible for 18,4% and 11,8% of total production of pharmaceutical products in the UK.

If we look at the world's leaders in creations new medical drugs (please, refer to table 8), we can see that two out of ten leading pharmaceutical companies are originated in the UK, moreover, we can see that United Kingdom is the third by the number of originated drugs in 2017, just after the US and Switzerland. (please, refer to table 8).

Table 7. 10 pharmaceutical companies in the world by the number of originated drugs.

Company	Country of origin	N of drugs in the pipeline 2017	Changes from 2016	N of originated drugs 2017	Changes from 2016
Novartis	Switzerland	251	+11	161	+0
GlaxoSmithKline	UK	250	-8	149	-5
Pfizer	USA	232	+15	148	+5
Merck&Co	USA	229	+6	141	+4
Johnson&Johnson	USA	214	-13	111	-5
Astrazeneca	UK	213	-16	119	-11
Roche	Switzerland	206	-5	129	-6
Sanofi	France	193	-6	80	-7
Bristol-Myers Squibb	USA	144	+8	105	+6
Takeda	Japan	141	+2	80	+6

Composed by the author using Pharmaprojects R&D Annual Review 2016, 2017.

Table 8. Countries by the number of originated drugs.

Country	N of originated drugs in 2017	Share of the originated drugs in 2017 by the country of origin
United States	505	41%
Switzerland	290	24%
United Kingdom	268	22%
Japan	80	6,5%

Composed by the author using Pharmaprojects R&D Annual Review 2017.

Not only UK companies are third in creating new drugs, but they also play a major role in collaborations with universities and other companies. Below at the graph you can see top 40 companies by number of collaborations from different sectors. (EFPIA, 2016). We can see, that the leader is a pharmaceutical sector with the main players GSK and AstraZeneca.

Table 9. Top 40 companies by number of collaborations.

Source: The Dowling Review of Business-University Research, 2015.

Finally, we would like to look at UK's trading partners in the pharmaceutical industry. Though European Union is 43,1% of total exports in 2016, being the largest trading partner of the UK (House of Commons Library, Briefing paper, #7851, 2017), and the largest single export market for UK companies, in pharmaceutical exports, the situation is different. Over the years, the largest percentage of exports went to the US, in 2016 27% of all pharmaceutical exports were to the US. (Euromonitor Database). However, when we look at the imports in this industry, the EU is definitely number - in 2016 50% of the UK imports are from the EU members (Germany, Netherlands, Belgium). (Euromonitor Database).

Finally, we researched government papers and analitical papers from UK medical assosiations to understand what actions United Kingdom is already taking against the negative effects of Breix:

First of all, the UK government has prepared an Industrial Stratefy for four industries: life sciences, artificial intelegence, automotive and constriction sectors. These are considered to be key industries for future growth of the country. This announcesment have brought significant amounts of investments in the UK life sciences industry, including pharmaceutical industry, showing the companies in the sector that the UK is still an attractive location for R&D, as well as, for manufacturing. And this persuaded large international and global companies to invest in the country substantial amounts of money.

· “GSK is planning to invest more than Ј140m in UK production for their respiratory and HIV medicines between 2017-2020. This is in addition to the Ј275m manufacturing investment announced last year.

· MSD have announced plans to plans to establish a UK Discovery Centre and potential new EU HQ in London.

· Qiagen have announced a partnership with Health Innovation Manchester to develop a genomics and diagnostics campus.

· Novo Nordisk have unveiled a plan to invest Ј115m in a new research centre in the UK.” (Moore et al for PwC, 2018).

To conclude, the UK has a very developed life sciences, including pharmaceutical, industry. This sector brings economic growth to the whole country. The main leaders in the UK in the pharmaceutical industry are GlaxoSmithKline and AstraZeneca, they also are in a top ten companies in the world for the number of created medicine and are in top ten UK companies that have many R&D collaborations with other companies and universities inside and outside the UK.

In order to show the investors that United Kingdom is still an attractive location for investments, goverrnment introdused Industrial Strategy that drawn new investments, including those from large companies both based in the UK and across Europe.

2.2 Case study: GlaxoSmithKline

In the following paragraphs we have prepared analysis and comparison how two global pharmaceutical companies based in the UK are dealing with the consequences of Brexit and what impact do they see for their operations. We will use interviews by companies' officials, technical and journal articles, devoted to companies operations and statistics from companies' official website and their annual reports.

The two companies we focus our research are GlaxoSmithKline (GSK) and AstraZeneca.

Let us start from a brief portfolio on GlaxoSmithKline(GSK), it is one of the world's largest pharmaceutical companies, with headquarters in London, UK; that was created by the merger of SmithKline Beecham and Glaxo-Wellcome in 2000.

GSK's business can be divided into three key segments - pharmaceuticals, vaccines and consumer healthcare with core focus on pharmaceuticals. Pharmaceuticals are responsible for about 60% of sales in 2014 (Euromonitor), and is a leader in respiratory disease and HIV, in vaccines, that for our research we consider a part of pharmaceutical industry according to its definition by the House of Commons Committee(www.parliament.uk), it is accountable for 15% of total group's turnover with a portfolio of 39 vaccines, out of which 15 new in 2015. (Dominici, 2017).

The company is considered to be global and is ranked 7^th in the world (Dominici, 2017), it is present in 160 countries with primary markets in US, Germany, France, UK, Italy and Japan. (SOMO, Weyzig, 2004). 37% of total turnover was made in US market, followed by EU market with 27% of total turnover in 2016. (Dominici, 2017). It is a research-based pharmaceutical company that discovers, develops, manufactures and sells pharmaceutical products. (SOMO, Weyzig, 2004).

Below you can see a value chain of GlaxoSmithKline (Please, refer to Graph 2), where the main parts are: purchases, operations, logistics, use of products and disposal.

Graph 2. GlaxoSmithKline Value Chain.

Created by the author using an article “Less is more with advanced technologies in manufacturing”, 2015 from the GSK website: www.gsk.com.

Operations here, include impact, made in the laboratories i.e. Research and Development of a new medicine; factories' impact i.e. manufacturing of it and office's impact. Thought it was not very clear, what exactly the company meant, since the next step of the GSK value chain is the delivery of a new medicine to consumers, and also since pharmaceutical value chain should include methods of raising capital to perform R&D (Mebius, Boykov, 2014), we can assume, that office's impact is raising capital for future R&D and after the development of the medicine is dealing with patents and other regulatory documentation to be able to market the product.

To summarize, GSK's operations consist of: R&D(financing, Research and Development, Regulatory documentation) and manufacturing of a product.

In our further research, we analyze, how Brexit affected each of the elements of operations, using PETL framework. As sources we used analytical reports from of GSK, its annual reports and also interviews from company's officials given to different magazines and their video and audio interviews to TV news' organizations.

Research & Development.

Since GSK is a research-based pharmaceutical company it would be logical to start from Brexit's impact on research and development of pharmaceuticals' part of company's operations. Here the main influence is due to changes in laws and regulation, thus, political and legal part of PETL framework. Andrew Witty, CEO of GSK (2008-2017) in 2016 said that Brexit created uncertainty and added complexity for conducting business to the UK's pharmaceutical industry, adding that for the UK's life sciences, including pharmaceutical, industry it was a mistake, because GSK exploited a unified regulation of approval of drugs after its development, that remained valid across European Union. (https://www.ft.com/).

A new CEO of GSK - Emma Walmsley, appointed in 2017, in her interview at Bloomberg did not repeat Witty's words, but explained that the company expected costs on regulation and approval process to rise very soon, she also explained that it happened because, pharmaceutical producers have to follow a very complex trade regulations, that before applied to all EU members, that allowed a faster process of moving products across the EU. (Paton, 2017). Phil Thomson, GSK's president of global affairs later, in 2018, confirmed Walmsly's words, announcing that 70 million of pounds were re-directed from the development of a new cancer drug as a preparation for financing new regulatory documentation due to Brexit. (http://www.4-traders.com/GLAXOSMITHKLINE, 2018). According to him, about 1.700 goods, produced by GSK, are already affected because of a new approval process, it is more than 13.000 packs, that await a new registration. (http://www.4-traders.com/GLAXOSMITHKLINE, 2018). Moreover, company calculated additional costs of 50 million pounds annually, as an ongoing cost for additional customs duties and other regulation costs. (GSK annual report 2017, p.55).

Also, CEO of GSK in 2017 said that the company did not expect any fluctuations in accessibility of talent in R&D in the UK, that is why GSK did not take any contingency measures in this area. (https://www.ft.com).

To summarize, we clearly see that most impact of Brexit in R&D is new regulation after not being a part of the EU trade agreement, thus, Brexit having political and legal aspect that influences operations of GlaxoSmithKline.

To continue, we should look at the situation with manufacturing and if there are any effects brought by Brexit.

Manufacture of drugs.

In terms of manufacturing, GSK has 16 factories in 11 countries. (GSK annual report 2017, p. 35). In 2016 Andrew Witty announced that GSK invested 275 million of pounds in its existing manufacturing sites: Barnard Castle in County Durham, Montrose in Angus, and Ware in Hertfordshire. (GSK Retrieved from http://www.bbc.com/). The decision was explained with good tax system and skilled labour in the UK. Moreover, this decision has another economic factor - GSK decided to profit from a cheapening pound due to the uncertainty brought by Brexit, as most of GSK's production costs are in pounds, but the sales are mainly consisted of exports to other countries. (GSK Retrieved from http://www.bbc.com/). Looking at the financial results in 2016, we see a 16% growth in turnover and proportion allocated to cost of sales had declined by 4%.

Since then, company did not announce any more information, of influence of Brexit at manufacturing process, that is why we can say that Brexit has an economic aspect as its uncertainty had made UK currency cheaper, which actually is a positive factor for UK manufacturers, who sell their products overseas.

We, also, using Zephyr database researched recent acquisitions of GSK. (please refer to Table 10). We can see that these are all American companies, thus, instead of moving manufacturing or research in EU-members' countries, GSK decided to pursue its other important market - US.

Table 10. M&A' s GSK in 2017.

Aqcusition	Date	Company	Country
GLAXOSMITHKLINE	15.06.17	CADHERX THERAPEUTICS INC.	USA
GLAXOSMITHKLINE	04.08.17	UNITED THERAPEUTICS CORPORATION	USA
GLAXOSMITHKLINE	16.11.17	SPERO THERAPEUTICS INC. USA

Created by the author using Zephyr Database.

To sum up, both R&D and Manufacturing pars of GSK operations had been influenced by Brexit. However, the influence was very different:

· on R&D it had a negative impact in terms of legal and political aspects, making it more expensive;

· on manufacturing it had a positive economic impact, making manufacturing cheaper, because of lower exchange rate of the pound of sterling.

2.3 Case Study: AstraZeneca

In this part of the research we will continue to analyze how global pharmaceutical companies with the headquarters in the UK see their operations after Brexit. In the previous subchapter we researched GlaxoSmithKline, and in this one we will analize another UK based company - AstraZeneca.

We will again use interviews by companies' officials, technical and journal articles, devoted to companies operations and statistics from companies' official website and their annual reports.

To start, we will give a short portfolio of the company. AstraZeneca Plc is a biopharmaceutical company that has only one business segment and operates in five areas respiratory, autoimmunity, infection, oncology and cardiovascular diseases. (Access to medicine index, 2016, p.105). AstraZeneca is headquartered in the UK, in Cambridge. It is one of the world's biggest pharmaceutical companies in the world, that was created as a merger of Zeneca Group Plc(UK) and Astra AB(Sweden) in 1999. (Press Release by EvaluateGroup, Russel at el, 1999). Its is present in more that 100 countries (AstraZeneca Annual Report & Form 20-F Information 2017, p. 27) main market in the US(37%), Asia and Australia(together 37%). The EU, though, has 23% of all the exports in terms of turnover.( AstraZeneca Annual Report & Form 20-F Information 2017, p. 152).

Below you can see an environmental value chain of AstraZeneca (Please, refer to Graph 3), however, we can see that operations are included in it, so we can use it for our research.

Graph 3. AstraZeneca's Environmental Value Chain

Created by the author using data from the article by Owen and Snape, 2017 at www.astrazeneca.com).

To sum up, looking at the graph 3, AstraZeneca's operations consist of: Research, Development and manufacturing of a product.

Further, we make an analysis of how Brexit affected each of the elements of operations, using PETL framework, as we did previously for the GSK.

Research &Development.

Any research and development project, including R&D of a pharmaceutical product, needs talented scientists for achieving success. One of the scenarios of Brexit is the UK's loss of free movement of labour with the EU. Moreover, pharmaceutical companies are known for their international collaborations, and AstraZeneca is one of the leaders in this area (Please, refer to Graph 1).

AstraZeneca in 2016 employed 2,600 people in Research and Development part of operations. (https://www.astrazeneca.co.uk/about-us.html) and the regulatory changes due to Brexit already have an influence on company's operations. Here is what Executive Vice President of AstraZeneca, Mene Pangalos had said to the House of Lords science and technology committee: “We're starting to see people turn us down now, in the U.K., because they don't know what the outcome will be in terms of future employment, even though we tell them we have no doubt great talent is going to be accepted down the road. They haven't got that certainty and so they're saying `until we've got it, we'd rather go and work somewhere else.”

This means that even though there is no information on regulation of working visas for the EU-citizens in the UK and vise versa, the uncertainty already drives EU specialists away from the UK R&D sites.

To fight this, the company provides extra support to the employees, if influenced by Brexit, also AstraZeneca decided to focus on evolving its corporate culture to retain existing employees, as well as, continue targeted recruitment of professionals. (AstraZeneca Annual Report & Form 20-F Information 2017, p. 65).

Also, AstraZeneca anticipates changes in approval system of new medicine. And to outcome these changes, according to the Economist, AstraZeneca, as well as Eisai, a Japan based pharmaceutical company, decided to duplicate their release testing in the remaining members of the EU to be sure that they can market their products across Europe after the UK is no longer a member of the EU. (Retrieved from https://www.economist.com). This information is also a part of strategy announced in the 2017 annual report. (AstraZeneca Annual Report & Form 20-F Information 2017, p. 74).

Manufacture.

Manufacture of pharmaceutical products in AstraZeneca involves 12,600 people at 31 sites in 18 countries. (AstraZeneca Annual Report & Form 20-F Information 2017, p. 31). In 2017 the company announced that they are going to “wait and see”, what Brexit would bring, before investing anything in its UK's operations. (Kollewe, 2017).

This example shows, that AstraZeneca is afraid to make any investment during Brexit, that brings uncertainty. The uncertainty is on the future regulations on trade and which makes Brexit an economic factor.

To summarize, AstraZeneca does not see any positive aspects, brought by Brexit, but only negative ones. It has three main issues due to Brexit:

· loss of talent due to possible restrictions of working visas between the UK and the EU, which makes Brexit a political and legal factor;

· future regulation of approval system of clinical trials for new medicine forces the company to relocate or duplicate its research and development in Europe, making Brexit also a political and legal factor.

· Uncertainty about future trade agreement, that make the company hesitant to new investments in the UK, making Brexit a negative economic factor.

3. Findings and Recommendations

The goal of this part of the paper is to make a comparison of what was written in Chapter 1 and Chapter 2. This approach will help us understand if the existing research and theories are relevant and in what proportion to the operations of global companies in the pharmaceutical industry that we have assessed through GlaxoSmithKline and AstraZeneca case studies.

Researchers widely covered a topic of internal environment of an organization and external factors that influence that environment. One of the most known research to analyze internal environment of a company is Porter's value chain, where operations of a company are limited to conversion of inputs into outputs, however later Aitken showed, that for pharmaceutical company this definition is too simple and limited, dividing operations of a pharmaceutical company into research, development, technology regulatory approvals and manufacturing of a product. Both cases from chapter two showed that operations of a global pharmaceutical company, indeed, consist of the mentioned above elements.

We also analyzed the existing research on external environment of an organization and what impact it has on company's decision-making processes. Here we looked deeply at PESTL framework (originally Aguilar, 1965), first proposed by Aguilar, where any external factor can be split into political, economic, social, technological and legal aspects. Later in the research, as it is focused on the companies, not countries or people, we eliminated social factor from the framework, modifying it into PETL. After that, as the purpose of our research was to understand the impact of Brexit on operations of global companies in pharmaceutical industry, we analyzed Brexit in chapter 1. First of all, we understood that its main problem is uncertainty, that is why we analyzed the existing research on this subject. It is a highly researchable area and many scholars brought something new to it.(Knight, 1921; Garner,1962, McGrath, 1996, Duncan, 1972). The main way for a company to deal with the uncertainty is to take a “wait and see” approach (Atkins and Anderson, 1999), and this approach proved to be used, as in chapter 2, in the case study of AstraZeneca, company's official banned all the investment in the UK, until more information on the conditions of Brexit are known. However, the case study of GlaxoSmithKline showed that the company is only preparing for a worst scenario, making him a risk avoider. Also on this issue there is a research of Atkins and Anderson, where in the situation of uncertainty, different decision-makers have different view on risks.

After that, using PETL framework we divided Brexit into political, economic, technological and legal factors, specifically for the pharmaceutical industry.

Next we overlap the PETL analysis of Brexit from chapter 1 with the actual data from interviews of the companies and see that both companies are focused on the possible changes in regulation due to Brexit. Both cases also show that research, development and technology transfer, being a part of it, are influenced by legal and political aspects of Brexit.

We then have a look closer look at changes in Research and Development part of operations due to Brexit, suggested by researchers and compare it to the decisions from Astrazeneca and GSK. Many analysts believe that after the UK leaves the EU, to receive a regulatory approval for successful clinical trial can be more expensive and take more time. (Deloitte, Moore et al for PwC, Clariton Solisitors Ltd). Here the cases proved that analysts are right, however two companies took different approaches to deal with this problem: GSK calculated its new costs to receive approval on clinical trials inside the UK and took it out of future R&D budget, while AstraZeneca started to duplicate its clinical trials in the EU to speed up the process of receiving the needed approvals for registration of a new medicine. This means that both companies R&D operations are influenced by changes in regulation due to Brexit.

Secondly, as a technological aspect the main issue with Brexit, explained in chapter 1 was a loss of the EU R&D funding, especially loss of access to a government program Horizon 2020, from where both companies received significant funding for research and development of new medicine. However, in the Chapter 2 we can see that companies are not worried about government funding at all. We did not find any proof that either AstraZeneca or GSK are worried that they did not receive the funding they won from Horizon 2020, thus, Brexit does not have a technological aspect.

Furthermore, in theoretical part of our research it is explained that Brexit is weakening the British pound against euro due to its uncertainty, thus, making manufacturing more expensive for companies that have at least part of their production outside the UK. However, in our cases both companies have a full manufacturing process in the UK, moreover, GSK actually invested a significant amount of money in manufacturing in the UK, explaining that all of their costs are in pounds, while sales in other currencies, making the weakening of pound due to uncertainties of Brexit a positive economic factor for expanding its manufacturing.

Additionally, in chapter 1 it is argued that there is a trend of generics growth in the UK, as there is a much easier process to authorize those, thus, making the production cheaper and faster. We can see in the second part of our research, that GlaxoSmithKline made several acquisitions in 2017,but none of them were generic production companies, i.e. GSK is not expending its generic operations. Moreover, our literature review did not provide any information that due to Brexit M&A's are considered to be a way to expand influence on the market and a way to fight regulatory limitations imposed by Brexit in the pharmaceutical companies based in the UK. But the case actually shows that instead of moving manufacturing to the EU or invest in organic growth, GSK decided to expand its share on the US market, its main trading partner, by acquiring production companies there.

Finally, the first chapter explained that awaited changes in labour regulations between the EU and the UK decrease number of non-EU employees in the UK. This is proved by AstraZeneca, that announced that many EU citizens, that were offered a position in UK AstraZeneca office or research facility declined their offers, explain it with the uncertainty on the need of a working visas in the UK for the EU citizens, i.e. there is a proof that changes in labour regulations due to Brexit influence operations of global pharmaceutical companies, as well as, it proves that uncertainty itself can bring economic changes.

Recommendations for the leading companies in the pharmaceutical industry.

In this part of our paper we give recommendations on how to deal with Brexit to the leading companies in the pharmaceutical industry.

Our first recommendation for companies to understand whether there are any opportunities for it because of Brexit, for example, the company needs to understand if it is a subject to the government subsidy or other funding programs available for the funding, such as Horizon 2020.

Secondly, companies should evaluate both the costs of managing the clinical trials in the UK and in the EU, considering not only the cost of clinical trials themselves, but also the future reliance on the EU funding and talent reach.

Furthermore, to secure the talent reach, companies should secure UK working permits for the non-UK citizens. It is also advised, to communicate the changes brought by the Brexit to the staff and be ready to explain the new staffing requirements for non-UK citizens.

Additionally, if the company mostly manufactures generic drugs and will not reach government funding, it should be ready to relocate its operations to the EU member state and, thus, secure its budget for the relocation.

We also advise companies to see if their production costs are in pounds of sterling, and if so to recalculate manufacturing budget due to weakening of British pound.

Finally, companies should consider acquiring other EU/EEA pharmaceutical companies to reach the EU market after Brexit.

Recommendations for future researchers.

To begin with, a concept of Brexit should be expanded. The focus of paper is to analyze Brexit as separate pieces of puzzle that each of which has or has not an influence on operations of a global pharmaceutical company. We, however, believe that research papers looking at Brexit from this perspective are lacking.

Furthermore, in the framework of our research, we assessed two opposite scenarios: soft and hard, focusing on hard one. However, there are other possible scenarios that future researchers should look into.

Finally, there is a lacking research on M&A as a way to reach the EU market in the context of Brexit, however, our research showed that this can be used as a way to do it, thus, this phenomenon should be researched further.

To conclude, in the framework of our research we looked at two global pharmaceutical companies that already have operations in the UK, for future researchers it would be interesting to look into global pharmaceutical that are seeking to start R&D or/and manufacture of pharmaceutical products in the UK.

Conclusion

Our study represents a research on influence of Brexit on operations of global pharmaceutical companies. In our master thesis we first created a theoretical base for further research. We analyzed articles and studies of scholars to create an understanding of internal and external environment for an organization. We further narrowed it down to the observing of internal and external environment of a global pharmaceutical company, paying attention to its main parts of operations (R&D, technology transfer and manufacturing) and external factors that can influence those operations.

After that we began to research a phenomenon called Brexit. As Brexit is a new term, is used to call a result of a EU referendum where the UK announced that it is leaving European Union, we observed the papers of existing researchers that wrote on topics, connected not to Brexit itself, but to its main characteristic - uncertainty. We, furthermore, looked at government analytical reports and reports of by consulting firms on impact of Brexit on the operations of pharmaceutical companies.

After that we continued our research with two case studies of GloaxoSmithKline and AstraZeneсa, where we have studied impact of Brexit on operations of global companies in the pharmaceutical industry at these examples.

Matching the theoretical information on Brexit and practical cases, we understood, that though literature overview suggests that changes in regulation and weakening of British currency forces companies to relocate their manufacture to the EU, in practice neither GSK, nor AstraZeneca moved their manufacturing process, and what is more, GSK actually, invested more in UK manufacturing. As a consequence, Hypothesis 1 is rejected.

Continuing to overlap theoretical part, where it was explained that global pharmaceutical companies research and development facilities suffer due to regulatory barriers brought by Brexit, with practical one, where GSK confirmed that it has already prepared additional budget to finance regulatory approvals and AsrtraZeneca announced, that it has started to duplicate all the clinical trials in EU countries. On the basis said above, the Hypothesis 2 is partly proven, as the researched company did not move its R&D from the UK, but decided to expand and duplicate it in European countries.

Additionally, we compared what was said on labour in the first and second part of our research, both theoretical basis and case studies, showed that uncertainty brought by Brexit makes EU employees hesitant to work in the UK, therefore, Hypothesis 3 is also proven.

Our recommendations to leading companies in pharmaceutical industry is not to look at Brexit as an unknown phenomenon, but to understand particular influences of it, that will be different from company to company. The main feature of Brexit, we understood, was increase in costs to overcome several barriers to enter the EU pharmaceutical market that is why our main recommendation was to calculate additional costs and secure budgets to be able to continue operations after Brexit. Among other things, since labour is an important factor for operations that is proved to be influenced by the uncertainty of Brexit, we recommend to companies keep their employees informed on this issue and prepare budget to be ready to secure working permits of EU employees and make this process as smooth as possible.

To conclude, we recommend future researchers to revise the term Brexit to analyze it not as a one phenomenon, but as separate pieces of an external environment that has an impact on operation of global pharmaceutical companies.

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