Biotech Business Models

Thinking of converting an academically funded discovery into a biotech startup? Several business models exist, such as the Platform, Product and Vertical models. How you structure your business likely depends on the type and availability of funding, venture capital being the most common for early-stage biotech companies. In all cases, patents and IP are at the core of the matter, whether your business plan is to generate revenue at all levels of product development, from early concept to the marketing stage (Vertical model), develop a technology platform and licence it out (Platform model) or focus on developing a product and either selling it yourself of licensing the rights (fully integrated pharmaceutical company (FIPCO) or Product model).

Since the biotech “bust” of 2001, the Platform business model has persevered, combined with contract research and services for the generation of revenue. However, the FIPCO model is making a comeback. This years Biotech Industry Growth Forcast by Ernst and Young (2007) seems to have largely restored investor confidence, allowing for greater expense to be taken in the development of drug candidates and enabling companies to expand their outlook when preparing a business plan to include the full spectrum of ownership, development and marketing.