The Five Types of Biotechnology Companies
Type One: Big Biotech
Biotech companies with full product lines and significant revenues that rival those of Big Pharma. They have sufficient cash from operations (profitable) to support healthy, well-funded research pipelines and to acquire technologies that fit their business strategy.
Type Two: One Trick Ponies
Companies with a single major marketed product and sufficient revenues to support some operations with or without profit. These companies are often acquisition targets for Big Pharma. With no follow-on products or pipeline, company executives and investors are counting on the company being acquired before they run out of money, lose investor interest, or their product becomes obsolete.
Type Three: Prolific Pipelines
Biotech companies with pipelines of high probability technologies. Their compounds have a sound basic science premise supported by encouraging preclinical and perhaps even Phase II clinical data. These biotechs focus on developing a strong regulatory package of clinically relevant “proof of concept” data to support optimism for FDA approval and commercial success. Single product companies might be acquired outright while multiple product companies may sell individual compounds (or technologies) while leaving the discovery research and early clinical development infrastructure in place. These companies have recently been the source of compounds for Big Pharma looking to replenish and bolster their depleted pipelines.
Type Four: Too Little, Too Late
These companies have compounds that will probably work, deliver positive clinical results, and even achieve FDA approval. Unfortunately, their product will provide no meaningful clinical benefit over currently marketed products (some of which might even be generic drugs). The commercial potential for these products is limited. These companies, nevertheless, continue to persuade investors with slick presentations espousing large market size numbers and an insistence that with “a new treatment” even a small percentage of that large market will result in significant revenues for the company.
Type Five: “Promises, Promises”
Biotechs that are developing products based on extrapolation of flawed or misinterpreted laboratory-derived conclusions. This is different from bonafide discovery research based on progressively revealing evidence of potential safety and efficacy. Unfortunately, while their story may sound plausible, there is little or no evidence to support hope for clinical or commercial success. These companies thrive on finding investors who are looking for lottery size payouts from picking a winner where nobody else seems to appreciate or understand the medical and scientific techno babble. These companies require eloquent CEOs who can tell a story and preach the promise of a promising technology. Unfortunately, the only winners for this type biotech company are the executive teams who continue to be paid Big Pharma salaries and bonuses for prolonging the unfulfillable promise.
So what’s the point?
There are probably in excess of 4000 companies (private or public) worldwide that consider themselves “biotech” companies.
Think about the large number of Type Four and Five companies masquerading as Type Three companies.
Think about the venture capital, investment, and research grant money that Type Four and Five companies wastefully divert from Type One, Two, and Three Biotech companies.
Think about investor confidence in Biotechnology when Type Four and Five companies fail to deliver.