Both biotechnology and pharmaceutical companies are engaged in the production of drugs. The difference is that while biotech companies use living organisms to make drugs, pharmaceutical companies use chemicals. However, the use of the term biopharmaceutical companies complicates the situation. This term is used to refer to companies that use biotechnologies as well as chemicals in their medical research and development efforts.
Biotechnology companies
Common products, such as beer or wine, detergents and anything made of plastic, are essentially biotechnological products. Since ancient times, people have used biotechnology in animal husbandry, but also in improving cultivated crops. In the modern financial world, however, biotech companies make up an industry also known as biotechnology. These companies research, develop and produce a wide variety of commercial products. Most of them focus on the medical or agricultural use of products.
Biotech companies use living organisms to make products or solve various problems. DNA identification and acquisition have helped the industry make great strides. Companies operating in this sector have developed pest-resistant crops, created biofuels such as ethanol, but have also figured out how to clone genes. They have also made great progress in the biotechnology market. The most commonly used biotechnological medical products that were launched only recently include the following: AbbVie’s Humira, which is used, among other things, to treat arthritis, psoriasis or Crohn’s disease. Roche’s Rituxan is used to slow tumor growth in some types of cancer. Amgen and Pfizer’s Enbrel is used to treat several autoimmune diseases.
In terms of market capitalization, top biotechnology companies based in the United States include companies such as Johnson & Johnson. Johnson, Pfizer, Eli Lilly and Thermo Fisher Scientific. Many companies do business in both the biotech and pharmaceutical sectors. Johnson & Johnson Johnson, Pfizer and Eli Lilly are important players in both industries. In recent years, several biotech startups have been formed that work with Silicon Valley computer companies. Most of them aim to use biotechnology to make breakthrough drugs. The biotech sector is volatile and growing rapidly. According to Grand View Research, the global biotechnology market is expected to reach $2.44 trillion by 2028..
Pharmaceutical companies
As an industry, pharmaceutical companies work to investigate, develop and sell drugs derived from artificial substances. Some pharmaceutical companies have an extremely long history. The founder of the German company Bayer AG received a trademark for aspirin as early as 1899. In 2021, it is the best pharmaceutical company in the world company Johnson & Johnson. It is followed by Roche and Pfizer. Pharmaceutical products can take several years to market. It is preceded by several stages of research and development. This long process also includes obtaining the approval of the Food and Drug Administration in the United States and the European Medical Agency in the European Union. The largest pharmaceutical companies in the sector are delivering stable results, but the sector continues to grow and there are still new and new companies in the market dedicated to the development of pharmaceutical medicines.
Special point of view
Purely from an investment point of view, we can conclude that pharmaceutical and biotechnology companies are very different. When analyzing these companies, look at the amount of money that individual companies spend on research and development as a percentage of sales. This will allow you to compare them better with each other. Biotechnology companies generally have very high operating costs. This is mainly due to the fact that they participate in the research, development and testing of drugs, the completion of which takes years. However, the result may also be a historic breakthrough or a complete failure. Another problem is the fact that these companies may encounter obstacles in the development of new products if research or its final product is controversial. For example, the use of genetically modified plants or products is prohibited in some countries. However, biotech companies have one big advantage that offsets their high costs. While pharmaceutical companies generally have exclusive rights to manufacture and distribute their medicines for 5 years, biotech companies can obtain a trademark for up to 12 years. By comparison, large pharmaceutical companies have a steady stream of revenue that comes from current products while continuing to refine their existing products or to develop new ones.
Pharmaceutical companies generally strive to maintain a stable range of new products at various stages of development. The process of developing a new drug can take up to 15 years. For example, the U.S. Food and Drug Administration insists that most new drugs go through several stages of testing, which in themselves can take up to eight years. However, the fact that a company will bring a new medicine to the market still does not mean that it will be used extensively, but it can certainly also happen.
Investment aspect
Both pharmaceutical and biotechnology companies face an expensive process whose ultimate goal is to bring high-yielding successful products to market. However, this process is inherently extremely unpredictable, which can be harmful to a small biotech company in the first place and may never come together in the end. Pharmaceutical companies are generally able to withstand setbacks and failures due to their larger market capitalization and diversified income base. Competition is more relevant and costly for pharmaceutical companies. This creates the need for strong revenue and non-organic revenue, which are generated, for example, through mergers and acquisitions or alliances. Before investing in these two sectors, it is necessary to take into account a lot of facts and answer basic questions that will give you at least some basis before making a reasonable investment. Of course, our company can advise you on this.
