Trends in biotechnology

Biotech industry business models have been evolving to product-centered strategies with shorter periods to return on invested capital. "We're seeing a shift from technology-based to product-based companies. Specifically, we're seeing a shift toward drugs as the driver of value, i.e., clinical compounds as opposed to technologies which focused on the upstream processes of drug discovery.

The time from the use of these technologies to getting a drug on the market is so long and that protracted time frame -- 10+ years -- limits what pharmaceutical companies and investors are willing to pay for them," a senior-level VC points out. "The focus instead is on nearer term profits. Money invested in technologies has slowed down." This more pragmatic model is being implemented largely by creating a network of alliances between specialty biotech companies and larger pharmaceutical companies with established sales and marketing infrastructures.

The trend toward globalization has created a need to harmonize the global regulatory environment, as lack of consistency in patent and intellectual property protection has hampered the entry of Western companies and kept valuable biopharmaceuticals from reaching needed markets.

International investment in biotech has been and is expected to increase sharply throughout the decade, according to an industry report by Ernst & Young. In the next five years, biotech investments in India are expected to generate $5 billion in revenues and create 1 million jobs.

Within the context of these global trends, several additional forces are shaping the industry. The biotech industry is expected to grow at a rate in the high teens for the remainder of the decade, according to the Standard & Poor Industry Surveys. This anticipated growth is great news for young people considering a career in biotech or for more experienced professionals, who will find more opportunities. Growth will likely come from the major, more established biotech companies, since they have product sales, full pipelines, and stable fundamentals. In contrast, the smaller, emerging companies are likely to continue to struggle. S&P has identified several broad industry trends, which are fueling this expected growth in revenues, including:

* Development of new biologic therapies
* Favorable demographics
* Analytical tools companies struggling
* Emerging integration tool in bioinformatics

The over-65 year old population is expected to more than double between 2001 and 2030, which will represent 13 percent to over 21 percent of the overall population. Since senior citizens now account for approximately 33 percent of pharmaceutical consumption, their growing numbers can only bode well for the prospective demand for the industry's products.

Thus, by focusing its research on the four leading causes of death in the US -- heart disease, cancer, cerebrovascular disease, and chronic lower respiratory disease - the biotech industry is set to bring to market biopharmaceuticals for which there is an expanding base of demand.

A new field, bioinformatics, stands out as particularly promising in managing and interpreting the masses of data generated by genomic and proteomic research. Bioinformatics refers to the use of advanced databases and computer analysis tools to perform queries and simulations, cross-reference and compare data, archive test results, and collaborate. This new field has spawned academic programs and is one of the promising new career paths created by the industry.