Biotechnology is the commercial use of living organisms. The main biotechnology field is medicine, as well as related products such as vaccines. Biotechnology is also used in agriculture and heavy industry mining, as well as other products such as biopesticides and ethanol. Many large pharmaceutical companies have separate divisions that deal with biotech-based drugs. Some of these products originate from living organisms while others are based on chemicals. This distinction is important because the two industries have different risk characteristics.
In addition to the dangers, a biotech firm’s vast research and development capabilities can cause it to be costly to operate. A successful drug could generate significant returns on investment. It can take years before a new product is released to the market. The FDA approval process is a complex and long-winded, requiring preclinical testing and clinical trials as well as quality monitoring. According to Science Daily only a small percentage of compounds tested make it to market.
Biotech companies may choose to focus on technology partnering or create their own pharmaceutical assets, which they out-license to big pharma for manufacture and marketing. Most biotech startups opt for the former approach because it can help increase revenue. It’s not without danger, however, because they also have to pay for the costs of developing clinical products and approval by regulators as well as insurance reimbursement negotiation and sales promotion. To mitigate these risks, biotechs often make strategic alliances with big pharmaceutical and smaller biotechnology platform companies. Massachusetts biotech’s ecosystem for instance, is comprised of a top teaching hospital, universities as well as entrepreneurs and venture capitalists.