Category Archives: Trends

Biotechnology Heals then Burns Business Models

Many companies have started focusing on biotechnology and incorporating it into their business model. After Genentech emerged with the first compound produced from bacteria (insulin) pharmaceutical companies started partnering with biotech companies. You could call this the first wave of biotech adoption. The reason for this was that the return on resources spend to develop new drugs was declining. Pharmaceutical companies are spending more to develop less drugs. There are many reasons for this including: easy drug targets already developed, drugs have to be more profitable than the cost of going through approval, and drug companies want drugs that everyone can take (Blockbuster drugs). Pharmaceutical companies couldn’t develop drugs that would make a lot of money while still using the same technology, so in the 1990’s they turned to biotechnology companies to help them make drugs. This healed the business model of the pharmaceutical companies, however now it is threatening their existence like never before.

Photo from: NTNU, Faculty of Natural Sciences and Technology (

Before the existence of biotechnology companies (companies that focus on new technology), pharmaceutical companies only competed against themselves to make drugs. When Genentech created a drug without being a pharmaceutical company. It licensed it’s ability to create insulin to other companies so Genentech didn’t need to have the capacity to produce it. Biotech companies can now compete with pharmaceutical companies, then why are pharmaceutical companies still around? They will probably turn into what record and network television companies are today. These companies are still around because they have three things: access to an audience, networks, and resources. Record companies have relationships with radio stations and can encourage them to listen to and play a song. Television companies can have millions of people watching a new show. Both can gather resources such as writers, producers, and talent to make new products. And both have more resources than a kid with a youtube channel; recording studios, sets, props, and cash. Pharmaceutical companies will probably change their business model to be more like this.

Just like record and television companies, pharmaceutical companies have all three things: access to audience, network, and resources. Pharmaceutical companies have relationships with doctors that biotech companies do not have. They can introduce drugs to these doctors and so that them prescribe them to patients. They are fluent in navigating the governmental regulation and have cash on hand. Currently pharmaceutical companies are buying biotech companies when they discover a promising drug or drug target, but as pharmaceutical companies become more averse they will want to buy part or all of the licensing rights from these companies. This will push the risk onto the biotech companies and require them to adapt and implement new technology just like they always have.