Five Competitive Forces In The Biotechnology Industry And Its Economics Scenarios

1797 words - 8 pages

Five Competitive Forces in the Biotechnology Industry and Its Economics Scenarios

Table of Contents
Industry Analysis 3
About the Biotechnology Industry 3
The future of Biotech companies is bright 4
Porter's Five Forces 4
Threat of New Entrants 4
Power of Suppliers 4
Power of Buyers 5
Competitive Rivalry 5
Forecast Industry 5
Competitors 6
Economic Scenarios 7
Increased Demand for Money 7
Increase of Money Supply 8
Deflation 9
Price for Biotechnology Products 10
When to Build Inventory? 10

Industry Analysis
About the Biotechnology Industry
The biotechnology industry uses advances in genetics research to develop products for human diseases and ...view middle of the document...

The industry rivalry is under control. The biotech companies have the potential for entering the biosimilars segment, drawing on its wealth of expertise in manufacturing biological drug due to 1) Decades of proven biologics R&D experience 2) Strong biologics manufacturing heritage 3) High-quality and reliable supply.
Biotech industry usually has a robust pipeline aimed at unmet medical needs.
Porter's Five Forces
Threat of New Entrants
The industry has limited competition and a low threat of new entrants. Biotech firms require huge amounts of funding to finance their large R&D budgets. Not having ample cash is one of the biggest barriers. Specialization also creates barriers. For instance, knowledge about cancer and heart disease is quite high therefore a there are very few experts in this field. Last but not least it can take up to 10 years to bring a biologic drug to the market.
Power of Suppliers
Biotech companies are unique because most of their value is driven by intellectual property. Unlike in other industries, the nature of their business does not force them to rely on suppliers. Scientific tools, materials, computers, and testing equipment are highly specialized, but the likelihood of these companies invading on biotech companies’ line of business is not very high.
Power of Buyers
Biotech firms sell highly specialized products to governments and hospitals. Despite the power of these large organizations, the bargaining power of buyers is low. These drugs are usually innovative molecules for unmet needs; therefore, payers and patients are less sensitive to price.
Threat of New Entrants
The threat of substitutes in the biotechnology field is low, driven by patent protection. Even after the patents expire, only a few companies are capable of copying biologic products. Because these copied drugs will never be equal to the originator molecule, they are called biosimilars. Biosimilars are not identical and are not easy to reproduce and requires from 8 to10 years and $100M–$200M to develop.
Competitive Rivalry
The rivalry within the biotechnology industry is somewhat intense. Many small biotech companies are operating in the world, but only few make a majority of the revenue.
Forecast Industry
The future of biotechnology is bright. Given the nature of the industry’s products, generic competition has been a less pressing issue than for most traditional pharmaceutical companies. Biotech drugs are difficult and expensive to copy, thus limiting the number of entrants to the generic market. Regulatory procedures to approve biosimilars are relatively new, and only a few companies have the ability to execute them (Roche Holding AG, Merck KGaA, Pfizer, Amgen).
Biotech companies have the potential for entering the biosimilars segment, drawing on its wealth of expertise in manufacturing biological drugs because of decades of proven biologics R&D experience and a strong biologics manufacturing heritage. In addition, the...

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