Biotech Businesses: Pros and Cons

Biotech Businesses: Pros and Cons

Introduction

Biotechnology is defined as the study and manipulation of living things or their cells, tissues, organs or component molecules. In other words, it the technological application of biological systems, living organisms or derivatives, to modify process and products for specific use (Cbd.int, 2013). Biotech business can be described as the process of selling biotech expertise to make a profit. There are five types of biotech companies; Big biotech company, a company with full product lines and significant revenues. One trick ponies, this is the company with single primary product and adequate revenues to support operations with, or without profit. Prolific pipelines, a company with high technologies, with sound science premise with preclinical and phase II clinical data. Too little, too late, these companies have science premises, deliver positive clinical results and even achieve FDA approval, but lacks capital investment. Promises, Promises, are companies that developing products based on misinterpreted laboratory results. But such companies lack hope for clinical and commercial success (Wokasch, 2013). The top 5 biotech companies are; 1. Novo Nordisk 2. Amgen 3. Gilead Sciences 4. Celgene 5. Biogen Idec

Discussion

Vertical integration in a biotech company

Vertical integration can be described as the kind of business organization in which all phases from the production of goods, acquiring of raw materials to selling or retailing of the final products are controlled by the company itself. It is primarily done by the company to maximize profits.

Firstly, it is vital for a biotech company to cut its cost. If a biotech company has some financial investment with suppliers and integrates upstream, it would help to ensure that, the company is provided with reliable and consistent supply of raw materials. This eliminates the cost of switching to other suppliers. This also a biotech company to reduce its transportation cost as a result of coordination. The company would no longer need to transport from the supplier or to your client since the company becomes both. Another aspect that helps in reducing the cost is that the company will capture profit margin that previous suppliers and clients were earning.Secondly, it will also help the biotech company the advantage of increased control. This is explained more clearly with the help of an example, for instance if the company is dependent on its suppliers for raw materials and due to some reason the required raw material is higher than the usual requirements of the company. There is a chance that the supplier would want to raise the price at which he would want to provide the raw materials. Now, if the company is handling production itself, all it needs to do is to increase the production. The dependency on the supplier is eliminated. Vertical integration would also give the company to gain competitive advantage. As the majority of the cost that a company would incur is cut down, the company would be able to invest in highly specialized assets, which would help to achieve advantage over suppliers, ...