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Biotechnology is the application of science and technology in order to solve societal problems such as climate mitigation and access to natural resources. Biotechnology companies can be classified into different categories according to the solutions they seek to provide.

The majority of biotech companies are pharmaceutical companies that make medicines for animals and humans. Drug development is a lengthy and risky process that can take many years. 90% of the potential drugs never make it to the pharmacy shelves.

Biotech isn’t limited to pharmaceuticals. It can be used in a wide range of industries. Some of them include agriculture, cosmetics, environmental and food technology and industrial biotechnology. There are also nutraceuticals and products for veterinary use.

Other areas of research include mRNA vaccines that were utilized in the COVID-19 pandemic, and monoclonal antibodies, that are currently being evaluated for HIV treatment. The industry is characterized by high operating costs and substantial funds for R&D.

Therefore, the majority of biotech companies fail to make money at an early stage. Profitable companies have pipelines that are strong and can generate non-organic revenue. Biotech investment can be lucrative but you need to be aware of the dangers. For example, it is not uncommon for biotech stocks to experience an explosive run on the news that one of its new therapies has been successful, and these spikes can be very difficult for investors with small budgets to endure.