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  Investing in Biotech By Tony Hung The biotech industry has been hyped in the news a lot lately. With reports such as the sequencing of the human genome by Celera to the drug testing scandals of Imclone, it's hard not to get interested in this industry. Biotech start-ups have sprung up in handfuls over the 1990s and along with it came biotech investment funds, biotech bellwethers and its fair share of lemons. Anyone who watched the biotech market in the past few years have ridden a roller coaster of ups and downs from market bubbles to economic slumps. This is not to say that the investing in biotech is out of the question, investing in biotech companies just requires a fair share of homework and research into learning about this unique industry. Long term prospects for biotech look good as exponential advances in scientific discoveries coupled with an increasingly aging population provide a large prospect and demand for biotech products. At this point some of you may be wondering, "what exactly is the biotech industry?" In truth the term biotech is rather loosely defined as companies that either utilizes or deals with technologies coming from the fields of biochemistry, molecular biology, genetics, biophysics, and so forth. The biotech industry can be roughly divided up into about four or five different sections. Each is unique in its market size, commercial techniques and consequently financial structure. Before you start investing in a biotech company, it's helpful to first classify which section it resides in and evaluate its potential accordingly. The first
section of biotech companies deal with agricultural products. This
spans a wide array of companies from the established Monsanto which
provides genetically engineered crops to Prolinia, which is in the
business of cloning farm animals. Some other companies in this area
deal with manufacturing growth hormones for livestock or novel fertilizer
for plants. Agricultural biotechs typically have the advantage of
a large market without the restrictions and regulations behind human
drug companies. The second section of the biotech industry develops
and manufactures new drugs for human therapeutic purposes using
biotech methods. These companies are similar in model to pharmaceutical
companies, and indeed many drug start-ups have been absorbed into
the large pharmaceuticals. Most of the big name biotech companies
such as Amgen or Genentech are in this category. The third section
of biotech companies caters to the drug development process going
on in the pharmaceutical and biotech industry. These companies provide
either specific techniques or supplies to aid in the large process
of searching and developing a new drug. Some companies such as Affymetrix
provide gene chip arrays, technology to help speed up drug discovery.
The fourth section of biotech companies is fairly new and is involved
in cosmetic solutions using biotechnology. Wide use of botox in
face lifts point to just the start of this developing trend. Finally,
there is a psuedo-section of the biotech industry that is comprised
of companies that simply sit on ideas. These companies hold the
patents to some specific scientific technique or process and make
money by licensing out the rights to use these techniques to other
companies.
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