Biotechnology is the application of technology and science to provide solutions to social issues like climate change mitigation, access to and sustainability of natural resources and food security. Biotechnology companies can be classified into various categories depending on the solutions they plan to offer.
The most well-known biotech firms are pharmaceutical companies that create medicines for animals and humans. Typically, drug development takes a long time and is highly risky endeavor, with 90% of prospective drugs failing to be able to make it from the research lab to the shelf of a pharmacy.
However, biotech is not limited to developing pharmaceuticals; numerous other industries can utilize the technology. This includes cosmetics, agriculture and food technology. Nutraceuticals, industrial biotechnology and veterinary products are included.
Other areas of research include mRNA vaccines, which were used in the COVID-19 Pandemic, and monoclonal antibodies, which are currently being evaluated for HIV treatment. The industry is characterized by high operating costs and requires significant funding for R&D.
Most biotech companies do not achieve profitability until the very early stages. The ones that are profitable have pipelines that are strong and can generate non-organic revenue. Biotech investments can be rewarding, but you must also consider the risks. For instance, it’s not uncommon for a biotech stock to experience an explosive run on the news that one of its new therapies has been successful, and these spikes are often difficult for investors of a smaller size to bear.