Biotechnology is the commercialization of living organisms. The principal area of biotechnology is medicine, and related products like vaccines. Biotechnology is utilized in agriculture, heavy industry and mining with products like biopesticides. A lot of large pharmaceutical companies have a separate division for biotech-based medicines. Some of these products are derived from living organisms while others have a chemical base. This distinction is important because the risk profile of these two industries are different.
A biotech company can be expensive to operate due to its extensive research and development. A successful drug could generate an impressive return on investment. It could take years before a new drug is introduced to the market. The FDA approval process is extremely complex and time-consuming, requiring preclinical testing clinical trials, as well as quality monitoring. According to Science Daily, only a small fraction of compounds that are tested get approved for sale.
Biotech companies may choose to focus on technology partnerships or create their own pharmaceutical assets which they license to big pharmaceutical companies for manufacturing and marketing. Most young biotechs take the former approach because it can help increase revenue. However, it’s not without risk, as they have to also pay for the costs of developing clinical products, regulatory approval, insurance reimbursement negotiations and sales promotion. To reduce these risks, many biotechs rely on strategic alliances with big pharmaceutical and smaller biotechnology platforms companies. Massachusetts biotech’s ecosystem for instance, is comprised of a top teaching hospital, universities, entrepreneurs and venture capitalists.