Biotechnology is a commercial use of living organisms. The main field of biotechnology is medicine and related products, such as vaccines. Biotechnology is utilized in industries like agriculture, heavy industry and mining using products such as biopesticides. Many pharmaceutical companies have a separate division that deals with biotech-based medicines. Some of these products are derived from living organisms, while others have a chemical base. This distinction is important since these two industries have distinct risk profile.
In addition to the risk, a biotech company’s extensive research and development efforts can make it expensive to operate. A successful drug can yield significant financial returns. It can take a long time before a new drug is introduced to the market. The FDA approval process is complex and time-consuming, and requires preclinical testing and clinical trials as well as quality monitoring. According to Science Daily, only a small percentage of the compounds that are tested ultimately are released to the market.
Biotech companies can choose to focus on technology partnering or create their own pharmaceutical assets that they out-license to large pharma for manufacture and marketing. Most young biotechs take the former approach because it can accelerate revenue growth. However, it is not without risk since they must also cover the cost of clinical development and regulatory approval, as well as insurance reimbursement negotiations and sales promotion. To mitigate these risks, many biotechs rely on strategic alliances with major pharmaceutical companies and smaller biotechnology platform companies. Massachusetts biotech’s ecosystem for instance, includes leading teaching hospital, universities as well as venture capital and entrepreneur communities.