Biotechnology and Pharmaceuticals

Today healthcare sector is considered as one of the most important investment sectors, because health is the most valuable asset that we own in our lives. Since the early years of the evolution of biology and modern medicine, tremendous research efforts are dedicated to health sciences to pave the way for innovation in healthcare sector. Financial and business community is clearly aware of the potential future benefits of biotechnology and pharmaceutical industries in our lives. For this reason tremendous amount of investments are allocated for these two sectors. Although biotechnology and pharmaceutical sectors seem to be similar in nature, it is quite important for investors to make a distinction between them.

In its simplest form, biotechnology is the technology that deals with living organisms whereas pharmaceutical industry is primarily limited to chemical substances and formulas. Clearly, both sectors serve human life, but their core production methods are different. From production point of view, biotechnology is the technology that utilizes biological production methods. And pharmaceutical technology is primarily chemical production.

All kinds of animals (both living on land and in water), plants growing in nature can be considered as raw materials of biotechnology. Also smaller living organisms such as cell, cell culture, stem cell, bacteria can also be considered as part of the living universe. Genetic engineering also deals with living organisms. Another big difference of biotechnology is that, the aim of biotech research is not limited to only modern medicine. Certain food products, industrial components and unfortunately certain mass destruction weapons are also produced by biotechnology.

For biotechnology and pharmaceutical sectors, it might take quite some time before investors start to see the first signs of profits and their new value added products and procedures. In fact, new investments may not seem to be profitable in the early stages of development at all. Especially, in biotechnology sector an average research period that is spent to develop a new product takes quite a long time from Phase I trials to Phase III trials. And unfortunately this is the part of the investment that possibly very limited or almost no revenue is expected. So, eventually it is quite hard and unpredictable for biotechnology investors to make a “go-ahead” decision. In addition, during this long journey towards the final products, there may be a number other negative factors such as the usual slow down of the economy where many investment and research efforts are not given priority. During this research period, certain biotechnology companies may be financially supported by other subsidiaries or organizations.

Some of the major biotechnology activities can be listed as follows:

• Developing and researching DNA chips which can be used to improve the diagnosis and treatment of diseases,
• Developing antibody therapeutic products for the treatment of a variety of diseases and conditions,
• Analyzing genetic information in order to improve the diagnosis, monitoring, and treatment of diseases,
• Discovering and designing novel small-molecule pharmaceuticals using structure-based drug design,
• Genomics  (Gene nomenclature),
• Molecular biology and genetic engineering techniques,
• DNA sequencing systems,

The pharmaceutical companies producing a variety of drugs may continue to survive on their own using the revenue of their existing products. And they can continue to finance their research activities until their new products come out of the pipeline. However, this is not the case for certain biotechnology firms which concentrate only on one single technique or product. Investors may not always be patient enough to support those companies until their miracle products are ready to use. As many investors notice, biotechnology and pharmaceutical research studies are getting more integrated into each other. Biochemistry is also another common term that we encounter in both sectors. Clearly after defining certain functions of both sciences it may still be challenging to make a clear distinction between the two sectors.

The main criteria to differentiate a  pharmaceutical company from a biotech company is the fact that, pharmaceutical companies concentrate primarily on chemistry and biochemistry as their conventional scientific production methods and they develop new chemical compounds and pharmaceutical substances. Obviously they will continue to contribute to healthcare sector by deriving new chemical formulas and pharmaceutical substances. Biotechnology on the other hand, will continue to support the pharmaceutical research activities and more importantly it will continue to be the driving force behind the new treatment methods for human life. The current revenues of biotech and pharmaceutical companies may not clearly reflect the real profitability of future years. Investment community will be able to allocate its resources better if the final products are understood better by the investors. 

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