SIC 8731
SIC 8731
NAICS 541710
Biotechnology firms harness living organisms and biological components at the molecular, subcellular, and cellular levels to create marketable products. Such products include bacterial and viral vaccines; serums, plasmas, and various microbiological substances; and genetically engineered plants and animals. The industry also encompasses firms that perform related research services, such as genetic coding and forensic testing. Biotechnology is closely aligned with the pharmaceutical segment within the broader chemical industry. More information about the broader drug industry is provided under the heading Pharmaceuticals.
After enduring difficult times during the early 2000s, when industry players struggled to keep research initiatives alive despite falling investment levels, the biotechnology industry is showing signs of improvement. According to research by Ernst & Young (E&Y) the global revenues of public companies in the biotech field were US$41.4 billion, net losses were US$12.5 billion, and the industry employed 194,000 people. Although biotechnology industries were emerging in countries like China, Singapore, Russia, Japan, and India, the United States continues to lead the global biotech industry on a single-country basis. In 2002, the total number of global players was more than 4,300, with 1,466 of these in the U.S., 1,878 in Europe, 601 in the Asia/Pacific region and 417 in Canada. U.S. industry revenues were US$39.2 billion in 2003, according to the Biotechnology Industry Organization (BIO), an association of companies, educational institutions, and state biotechnology centers. Industry analysts at E&Y predicted the U.S. industry would achieve profitability for the very first time in 2008.
Europe continues to be the second leading biotechnology market. According to the BioIndustry Association (BIA) of the United Kingdom, at the end of 2003, the European biotech industry employed 82,400 people and was generating more than US$21 billion in annual revenues. The United Kingdom accounted for US$9.4 billion in revenue, followed closely by Denmark (US$8.8 billion), then Germany (US$5.7 billion), France (US$3.6 billion) and Ireland (US$1.8 billion). However, some industry analysts were concerned that the European industry was in jeopardy of losing its luster as competition increased from emerging countries. Continued investment and the development of breakthrough biotechnology products were key to the region's survival.
Biotech's emergence has been controversial. As the industry introduces new break-throughs such as cloning, stem cell research, and genetically modified foods, various social and political entities have responded with boycotts and bans, and in some extreme cases, violence. The Unites States is the world's largest producer and promoter of genetically modified crops, but most countries have been hesitant to accept even test fields of the products, with Thailand a notable exception. Despite the concerns of activists, many other countries were expected to follow, as large countries search for ways to more efficiently feed their populations and others try to compete for trade dollars.
Biotechnology-related debates continue to occur in other areas. For example, The British Broadcasting Corporation (BBC) reported that top British scientists were backing an international campaign to stop the U.S. in its attempts to have the United Nations impose a global ban on any form of human cloning. The United Kingdom is one of a number of nations that supports the use of cloning and stem cell research for all but reproductive purposes. With the industry continuing to suggest the numerous cures potentially available through continued research, the debate should continue to take on interesting dimensions outside of the purely economic ones.
As private industry, at the urging and, in some cases, the financial support of the government, moved away from traditional projects to put laboratories to work combating germ warfare with new vaccines, the industry's public profile changed dramatically for the better, particularly in the United States. In 2002, the National Institutes of Health (NIH) appropriated more than US$1.7 billionfor research to respond to bioterrorism. "This is the largest increase in NIH (funding)—much larger than the war on cancer a few years ago," James Meegan, program officer for the division of microbiology and infectious diseases and the National Institute of Allergy and Infectious Disease, a division of the NIH, informed the Toronto Star.
Although still in the early stages of its development, the biotechnology industry continues to globalize. In 2003, the United States alone was home to 1,473 companies with 198,300 employees, according to BIO. This was an increase from 1,466 companies with 194,600 employees in 2002.
A significant share of breakthrough biotech products originate in the United States. According to BIO, some 250 million people globally have benefited from the 117 biotechnology prescription drugs and vaccines that earned U.S. Food and Drug Administration (FDA) approval. Of those 117 drugs, three-quarters gained FDA approval between 1996 and 2002.
A relatively advanced biotech sector also exists in Europe. By 2002 1,878 companies were active in Europe, the bulk of which were headquartered in the United Kingdom, Germany, and France. In other areas of the world, the number of biotechnology firms continues to grow as governments provide the funding necessary for their establishment. By 2002, 601 firms were doing research in in the Asia/Pacific region and 417 in Canada—a significant presence considering the country's population size.
Generally, biotech companies start out with an idea for a promising new technology, such as a cure for acquired immune deficiency syndrome (AIDS) or a better method of testing DNA. The risk of failure is high, but success leads to potentially huge profits, status for the developing company and researchers, and important benefits to society. A company that is developing a treatment for arthritis, for example, commonly spends its first two to four years identifying the biology of the disease and the potential therapeutic impact of a compound. It may spend another one to two years isolating a compound and figuring out how to get the substance to specific points in the human body. Then another year or two is often spent designing a system to manufacture, modify, and purify the compound on a commercial scale. By that time, the company may have been laboring and investing for three to eight years with virtually no product sales. By 2005, there were more than 370 clinical trials in progress for vaccines and drugs connected with more than 200 human diseases including Alzheimer's, multiple sclerosis, and AIDS, according to BIO.
Biotech companies, which often begin with a few individuals, are typically funded using seed money contributed by venture capitalists. At some point in the first few years, if early research and development efforts are encouraging, additional capital may be contributed by private investors. If a firm can come up with what appears to be a promising new product, a well-heeled partner will inevitably step in. That partner is usually a large drug company that can support the start-up biotech firm with hefty research expenses, as well as testing, government approval, and production. In return for its support, the drug company may receive compensation in the form of marketing and distribution rights to the new product. Some companies garner additional funds by going public with their stocks.
An increasing number of companies are obtaining government support for their research, particularly in Asia. Governments are seeing the potential social, economic, and political benefits that could be received if their countries hold the secrets to particularly useful biotechnological processes.
Broadly defined, biotechnology has been applied commercially since at least 7000 B.C., when people began using fermentation to produce drinks, food, and fuel. A sort of "second generation" biotechnology, which involved processes not completely understood by researchers of the time, emerged in the first half of the twentieth century. Scientists of that period began using microbiology and biochemistry to process waste and to produce pharmaceuticals, chemicals, fuels, and food. In the 1930s humans began using beef insulin, a protein, to treat diabetes. But that protein was one of only a few that humans were able to exploit until decades later because researchers were limited by their ability to extract a single protein from the hundreds of proteins that might be manufactured by a group of cells.
The pivotal breakthrough that opened the door to the realm of modern biotechnology occurred in 1953, when British scientists James Watson and Francis Crick discovered the structure of DNA. That understanding led to a realization of the process by which proteins are produced by cells, and then to the creation of the biotechnology industry. DNA research reached another milestone in 1973. In that year, U.S. scientists Stanley Cohen and Herbert Boyer succeeded in snipping an individual piece of DNA...
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