Biotechnology Industries

Biotechnology uses of biological processes in the development or manufacture of a product or in the technological solution to a problem. Since the discovery of DNA in 1953, and the identification of DNA as the genetic material in all life, there have been tremendous advances in the vast area of biotechnology. Biotech has a wide range of uses including food alterations, genetic research and cloning, human and animal health care, pharmaceuticals and the environment.

The biotech arena has not been without controversy. In the 1970s, researchers were forced to stop doing certain types of DNA experiments, and other countries banned the use of genetically modified agricultural products. More recently, we've seen the controversy over cloning as well as stem-cell research. Perhaps the biggest development in the biotechnology field (as far as investors go) occurred when, in the 1980s, the U.S. Supreme Court ruled to allow for patenting of genetically modified life forms. This means that intellectual property will always be at the forefront of biotechnology - some argue that the scope of patent protection actually defines the industry.

Because of extremely high research and development costs coupled with very little revenue in the years of development, many biotechnology companies must partner with larger firms to complete product development. Over the past decade, the biotech industry, along with the hundreds of smaller companies operating in it, has been dominated by a small handful of big companies; however, any one of these smaller companies have the potential to produce a product that sends them soaring to the top.


Common Applications of Biotechnology
Agriculture
Improved foods, pest control, plant and animal disease control, improved food production.
Industry
Oil/mineral recovery, environmental protection, waste reduction. Improved detergents, chemicals, stronger textiles.
Health Care
Drugs, vaccines, gene therapy, tissue replacements.
Research
Understanding the human genome and better detection of diseases.

There are still a lot of unknowns in biotechnology, but high-profile analysts, politicians and CEOs have all been quoted as stating that biotechnology is the future of health sciences.

Key Ratios/Terms

Research and Development (R&D) as a percentage of Sales = R&D Expenditures
Revenue

Generally speaking, the higher the percentage spent on R&D, the more is being spent developing new products. Thus, the lower this is, the better. This ratio is useful when comparing one company to another or to the industry in general. (To learn more, read .)

Medicare/Medicaid: This national health insurance program is responsible for reimbursing individuals for certain health related costs. Any sudden changes in funding and reimbursement rates can have profound effects on the biotech industry. (For more insight, read )

Orphan Drugs: These are drugs designed to treat people with rare diseases and infections (occurring in less than 200, 000 individuals). Once the drugs are marketed to the public, orphan drug makers might not benefit from huge demand, but governments will usually subsidize many of the costs of producing these drugs.

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