Knowledge Base: Biotech

“Biotech” refers to a range of companies that all operate in the biotechnology, pharmaceuticals, or biopharma space.

Typically, these companies research, develop, and produce “branded” drugs that are granted time-limited monopolies by patents, but there are also generics firms that produce lower-cost versions. However, such firms operate more like “normal companies” and are valued via different methods.

The main categories of firms in the traditional biotech category include:

1) Pre-Revenue Biotech Startups – These firms are highly speculative and have a low chance of succeeding – but if they do, the payoff could be massive.

2) Revenue-Generating Biotech Firms – These firms are further along and already have 1 or more products in the commercial phase (i.e., they are selling and generating revenue). But they are not quite big or diversified enough to be “platforms.”

3) Platform Biotech Companies – These companies normally have multiple drugs in the market and generate billions of dollars (or more) in annual revenue. They consistently develop and acquire new drugs as well.

We focus on categories #1 and #3 in our Biotech Valuation course.