Biotechnology Industry Overview

As defined by the U.S. Department of Commerce and the Biotechnology Industry Association (BIO), biotechnology is the application of molecular and cellular processes to  solve problems, conduct research, and create goods and services.

The biotechnology industry has registered a fast growth since the early 1990s. For instance, the revenues  increased from $8 billion in 1992 to $39.2 billion in 2003. Considering the growth it was projected that the industry would employ  814,900 people in the US by 2007. Also, given the specialized nature of the field, quality workers right from the technician level to doctoral‐level scientists are needed by it. The job market forecast of biological technicians, is expected to grow by 28.2 percent between 2004 and 2014, and that of biological scientists is projected to grow by 17.0 percent.

The Nature of the Industry

The biotechnology and biotechnology products industry of the US can be thought of as comprising many different layers of vendors and suppliers.  It is large and complex and is engaged in  about 38 areas of sub‐sector elements, from plant and animal life sciences to drug discovery and information technology. Further, each sector of the industry has its own science, processes, competency & skills requirements, and outcomes.

The life cycle of biotechnology products entailing research, review, and approval is different based on the products viz. medical devices, pharmaceutical drugs, etc. By-and-large before a biotechnology product reaches the markets, millions of dollars would have been spent on it.

Despite the wide ranging applications of biotechnology, innovations and developments pertaining to new drugs for cancer, heart disease, etc, are highlighted more in the media as compared to chemicals, agriculture, medical instruments, devices and equipment, nanotechnology, information technology, infrastructure, etc.

Industry Size and Economic Impact

The  U.S. Biotechnology industry by 2001 was composed of 339 public companies. The total number of companies was close to 1,379, with their total sales amounting to $18.1 billion, and a total market  capitalization of about $330 billion.
According to more recent estimates the U.S. biotechnology industry comprises about 1,500 companies, and these companies spent about  $17.9 billion on research and development in 2003.

Based on the data collected around mid‐March 2004, the biotechnology Industry Association (BIO) put the the market capitalization, or the total value of 
publicly traded biotechnology companies (U.S) at market prices,  at $311 billion.

By 2005, 329 companies were publicly held that earned $47.8 billion in combined revenue, with market capitalizations of $410 billion.

However, it's the small companies that dominate the U.S. biotech  industry. About two thirds of the biotech companies employ 50 workers or less. In 2005, the 1,086 private U.S. biotech firms earned revenues of to the tune of $2.9 billion.

Furthermore, given the rate of biotechnological discoveries, development and applications, the US is considered the global leader in biotechnology. At the same time it faces stiff competition from other countries, which are infusing billions of dollars in research and development and in creating workforce programs.

Trends & Current State
 
Since biotech companies have realized that size and expertise in many fields  is critical to succeed, the biotech-to-biotech mergers and strategic alliances are on the rise.
 
The earlier deals between biotech and pharmaceutical companies were late stage agreements, whereby the biotech companies took on the R&D costs. The more recent tie-ups, however, are more equitable in terms of risk taking, development costs, and profit sharing.

By the year 2000, financing of biotech companies attained record levels. During the same year many biotech companies had about over $1 billion in cash in the bank.

However, the 2009 global financial crisis and economic downturn has made things difficult for all industries including the biotechnology industry. Many companies across industries are seeking government intervention to bail them out.

Though hit hard, the U.S. biotech and small pharmaceutical companies haven't  got under the government's umbrella yet.

Further, the capital to fund biotech companies has either already dried up or is disappearing fast, with estimates revealing that about one-third of publicly traded companies have less than 6 months of cash on hand.

Nonetheless, when properly funded the biotech industry of the United States has all the potential to promote long-term economic growth and improve living standards, contributing in a big way towards the sustainable growth of the country.