Investing in the Biotech Industry

Biotechnology is the application of science and technology in order to address social problems like climate change mitigation and access to natural resources. Biotechnology businesses are classified into different categories depending on the solutions they provide.

The majority of biotech companies are pharmaceutical companies which produce medicines for humans and animals. Drug development is a risky and lengthy process that takes years. 90% of the potential drugs don’t make it onto the pharmacy shelves.

Biotech is not only limited to pharmaceuticals. It can be used in a myriad of industries. These include agriculture, cosmetics and food technology. Nutraceuticals, industrial biotechnology and veterinary products are included.

Other areas of research are mRNA vaccine development, which has been used in the COVID-19 pandemic, and monoclonal antibody development, which is currently being tested as an option for treating HIV. The industry is characterized as having high operating costs, and requires significant funds to support R&D.

Most biotech companies don’t succeed in the beginning stages. Companies that are profitable typically have a strong pipeline and the capacity to generate revenue from non-organic sources. Biotech investing is rewarding but you need to be aware of the risks. For example, it is not common for biotech stocks to experience an explosive run due to the news that one of its newest therapies has proved successful, and these spikes are often difficult for investors with small budgets to endure.