Biotechnology is the application of technology and science to address social problems like climate change and access to natural resources. Biotechnology companies are classified in different categories based on the solutions they provide.

The most well-known biotech firms are pharmaceutical companies that create drugs for humans and animals. Drug development is a risky and lengthy process that can take years. 90% of the potential drugs never make it to the shelves of pharmacies.

However, biotech isn’t limited to developing pharmaceuticals; a wide range of other industries can benefit from the technology. This includes cosmetics, agriculture and food technology. Nutraceuticals, industrial biotechnology and veterinary medicines are also included.

Other research areas include mRNA vaccines which were utilized in the COVID-19 Pandemic and monoclonal antibodies, that are currently being evaluated for HIV treatment. The industry is described as having high operating costs and requires significant funding to fund R&D.

The majority of biotech companies fail to make money in the initial stages. They typically have strong pipelines and an capability to generate non-organic revenues. Biotech investing is rewarding, but you must also be aware of the risks. For example, it is not common for biotech stocks to see a rout after the announcement that one of its newest therapies has been successful, and these spikes are often difficult for investors with small budgets to endure.