What Is Biotechnology?

Biotechnology is a science-driven industry sector that uses living organisms and

molecular biology to produce healthcare-related products. Biotechnology companies also
develop therapeutics or processes (such as DNA fingerprinting). Biotechnology is best
known for its role in medicine and pharmaceuticals, but the science is also applied in
other areas such as genomics, food production, and the production of biofuels.

KEY TAKEAWAYS

 Biotechnology is the branch of applied science that uses living organisms and their
derivatives to produce products and processes.
 These products and processes feature in healthcare, medicine, biofuels, and
environmental safety.
 Biotech stocks are risky investments since biotech firms often spend massive
amounts of time and money developing drugs that might never get to the market.
 The top U.S.-based biotechnology firms in terms of market capitalization are
Johnson & Johnson ($457.2 billion), Roche ($346.3 billion), Pfizer ($262.2
billion), and Novartis ($205 billion)—as of September 1, 2021.
 A valuation of a biotech firm should consider the size and development stage of
the asset pipeline.
Understanding Biotechnology
Biotechnology involves understanding how living organisms function at the molecular
level, so it combines a number of disciplines including biology, physics, chemistry,
mathematics, science, and technology.

Modern biotechnology continues to make significant contributions to extending the

human lifespan and improving quality of life, including providing products and therapies
to combat diseases, generating higher crop yields, and using biofuels to reduce
greenhouse gas emissions. Hungarian engineer Karl Ereky reportedly coined the term
“biotechnology,” which is often referred to as “biotech,” in 1919.

Companies in the biotech space tend to face significant barriers to success. One critical
reason for this is that research and development costs for biotechs tend to be incredibly
high. While a company is focusing its time and money in these areas, there's usually
little revenue. It's not uncommon, therefore, for biotech companies to work together with
larger, more established firms to achieve their research and development goals.