How do you define a biotech company?

David Cooney|6th October 2017

In the coming weeks we will be releasing a report that looks in detail at the commercial challenges and opportunities that a modern day biotech company faces. But before then, we wanted to define the playing field – what actually is a modern-day biotech company?

If biotechnology is the use of living cells and molecules to make biological products, does this mean that all companies with biological products or solutions are classified as a biotech?

Investopedia defines a biotech company in this way; a company that uses live organisms or their products, such as bacteria or enzymes, to manufacture drugs. Whereas pharmaceutical companies use only chemical – and generally artificial – materials to create drugs. Johnson & Johnson and Pfizer are two of the largest pharma companies in the world by revenue but both have numerous biological therapies. Clearly differentiating based on a company’s assets or services is no longer valid.

Another financial website thestreet.com defines biotech as a development-stage company in the life science space. Roche define themselves as the “largest biotech in the world” and sit nestled between Johnson & Johnson and Pfizer in revenue ranking. It is clear that Roche has gone beyond ‘development-stage’. As we’ll demonstrate, neither of these definitions are fit for purpose in today’s market, and we need a better way to define what a biotech is, and specifically what it means in healthcare today.

Three factors shaping biotech

To clarify this question, we spoke to three industry leaders currently working in the field to understand their perspectives and build a modern definition of what a biotech company is in 2017, focusing on three key factors:

  1. The technology it is developing to solve complex human challenges with biology
  2. The operational model deployed to build a business around this technology, the patient and the people who support them (carers, HCPs etc)
  3. The core values and culture driving the business and the people within it.

Technology

“Biotechs will start with one scientist and some technology – that is your DNA as an organisation. Then we ask are we adding value here? Are we better placed to do this than anyone else? If the answer is no then it’s probably not the right thing for us.” This is the starting point for a biotech in the mind of Olav Hellebo, CEO of ReNeuron, a leading, clinical-stage stem cell business. Two words in this statement are worth highlighting – technology and value.

In pharma there is a tendency for certain technologies to become the focus of intense development efforts, due to the scale of the opportunity they present in relation to their therapeutic benefit (eg: statins, PD-1s or TNFs).

In biotech, the focus is often on the science and how it can be used to solve complex healthcare issues. In this setting the value of the technology is defined by its ability to solve these problems. This of course comes with a much higher risk on the side of biotech companies, but considering value so early in the process and building a company around the ethos of solving challenging problems is key to understanding what makes a biotech.

Nancy Hunter, Marketing Director for a leading pharmaceutical company, explains: “Biotech is a conduit to solve worldwide health problems at an overarching level. What I like about the industry is its ability to always push the boundaries, whether it’s developing new science, looking at issues from a pioneering angle or bringing innovation into play. It’s a good model for what human life is in a way.”

This approach is particularly apparent in some of the recent examples of technology pioneered by biotech organisations, such as CAR-T technology (Novartis, Juno and Kite Pharma) and RNAi (Alnylam) where they persevered with a perceived high-risk technology when many divested. However, we can’t say that this is a trait exclusive to biotech. There are numerous examples of long-term dedication to drug development in pharma – take Lilly’s 30-year dedication to Alzheimer’s research for instance.

Also, many biopharma companies are setting up independent units to mimic the biotech model operationally and allocate resources for longer-term research initiatives. Putting a high emphasis on science and how technology can add value to patients’ lives is an important factor in defining a biotech, but this is not the only thing differentiating a biotech organisation.

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