Title: Unit 16 Learning Module
Course: SAT 170 Introductory Biotechnology > Section: SAT 170 Introductory Biotechnology

Unit 16 Learning Module

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- Unit 16
- Table of Contents (Selected)
- Unit 16 Key Terms (Selected)

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The Business of Biotechnology

Often regarded as the first established biotechnology company, Genentech whose San Francisco head quarters are pictured here opened their doors for business in 1976.

Although the vast majority of biotechnology companies operate in North America, Europe and Japan, the industry of biotechnology has a global presence. Furthermore, the business of biotechnology is expanding continuously. Thanks to the innovations presented in previous units, biotechnology companies have introduced hundreds of products to the global market. Although more than half of these products are biological drugs, the business of biotechnology continues to expand to different arenas of our economy. As mentioned in unit 1, Genentech, which is a company based out of San Francisco, CA, is often cited as the first established biotechnology company. Genentech received, at least initially, its fame from offering human insulin for the treatment of diabetes. This treatment is possible because of the bacteria that have been transformed to carry and express the human insulin gene. Since the establishment of Genentech in 1976, thousands more biotechnology companies have emerged. In this unit, we will explore the typical structure and organization of a biotechnology company and we will also introduce the many career opportunities available to someone interested in entering the field of biotechnology.

There are a few different models which dictate the basic structure and organization of a biotechnology company based on that specific company’s goals and objectives. The most popular of these models include technology-platform models and disease-focused models.

So called technology-platform models focus on developing the technologies involved in discovering and producing new compounds, especially pharmaceutical drugs. These biotechnology companies often relied heavily on partnerships with pharmaceutical companies. Two of the largest biotechnology companies of this nature here in the United States are Gilead Sciences and Amgen which focus on the discovery, development, manufacture and delivery of new therapeutic drugs. In response to the demand for a way to store, process and analyze large amounts of sequencing data, another version of the technology-platform model of biotechnology companies soon emerged. The focus of these companies was to design the instrumentation and software needed for the processing of such large amounts of biological data. Individuals in these companies were entrepreneurs in the field of bioinformatics. We will discuss this field in more detail later in this unit.

The other major model for emerging biotechnology companies is often referred to as the disease-focused model. The reason for this is the focus of these companies which tends to be on diseases that have unmet needs in the current scope of medical treatments that are available. The customer base for such companies is patients with very specific needs such as those with cancer and neurodegenerative diseases. Examples of successful companies in this arena include Amylin, which focuses on treatments for diseases such as diabetes and obesity. Another example is MedImmune which focuses on the development and manufacture of immunizations.

Because there are so many different areas of biotechnology, there are many different examples of biotechnology companies. Although the structure and organization of each biotechnology company may vary, most share some basic features. We will discuss some of those features in this unit.

One factor that can vary widely amongst biotechnology companies is their size. Often a biotechnology company will begin as a small startup company which typically consists of a team of scientists who have one or more ideas for making a new product. Another necessary component for getting the startup company off the ground is funding. Funding may come from a variety of sources such as venture capital (VC) funds and angel investors. Venture capital funds are contributed by individuals, financial institutions and other companies. As a trade off for this investment, those that contributed the VC funds will own equity in the company which, if it is successful, can lead to a significant return of investment. Angel investors are typically very affluent individuals who will provide VC funds. In exchange for their investment, an angel investor will be given ownership of the company. Investment in a new biotechnology company is not done without risks, as a large portion of startup companies are never successful. The fate of such companies is that they close their doors. A successful startup company will often times be bought by a larger, well-established company or it may be able to sale stock shares of the company to the public. The latter option would necessitate that the company file to be eligible for an initial public offering (IPO).

Figure 1 - As the flow chart here indicates, venture capital funds represent investments from a variety of sources including wealthy individuals, businesses and organizations. Those contributing these funds do so in order to gain ownership in the company.
Figure 1
Figure 2
Prior to the establishment of an alliance with a fledgling biotechnology company, an investor must heavily weigh the cost to potential benefits of such an alliance. Since a large majority of biotechnology companies focus on drug production one factor that an investor needs to consider is the fact that only 1 in 1000 new drugs will actually make it to market. Furthermore, the drug development process is lengthy and costly; in most cases it takes over 10 years to get a drug to market and can cost several hundred million dollars. One reason that the development of new drugs is so time consuming and expensive is the extensive drug approval process which consists of many phases. Many researchers will approach investors having already completed the discovery phase where a new drug has been isolated or identified. A preclinical phase will often follow which focuses on testing the drugs on animals to identify any adverse side effects or unintentional health impacts. If a drug passes through preclinical trials, a company can file for an investigational new drug (IND) application. The purpose of the IND application is to assess that the drug has shown to be therapeutically effective and to evaluate the results of the preclinical trials as well as the manufacturing process. An IND application must also include a description of the protocols that will be used during clinical testing. The clinical testing is done in a few stages, known as Phase I clinical trials, Phase II clinical trials, Phase III clinical trials. During these steps of the drug approval process the drug will be tested on select groups of individuals. The results of the clinical trials will determine whether or not a product is eligible for the market. If the drug meets the standards set forth for the human clinical trials, a company may file for a new drug application (NDA) and begin to market the drug if the NDA receives approval. Even once a drug is approved, a postapproval, or Phase IV clinical trial must be conducted to ensure safety and efficacy of the new drug. Typically, the further a drug gets in the process, the more likely it is to succeed and make it to market. Thus, the later in the process an investor becomes involved, the less of a risk is the investment. However, this can also be true of the payoff, as an originator of an idea tends to keep more royalties the later and investor comes on board.

Figure 2 - A large focus of many biotechnology companies is in the identification, development and manufacture of new pharmaceutical drugs such as the one shown here. Before such a drug can make it to market, however, it must go through extensive testing and evaluation as is outlined in the new drug approval process.