Biotechnology - Genomic and Proteomics/Competitive advantages in BGP

Answer the questions:

Competitive Advantage in Biotech
- Only the top firms make money through sales (Rosen), so the standard aspects of competitive advantage (cost leadership, differentiation, product focus, lead time, etc) do not apply to the field as a whole
- Most firms therefore make their money through VC's or IPO's. For these firms, competitive advantage can be defined along the following lines:
  - Success in initial clinical trials
  - Licensing early-stage drugs for fast cash (a typical pharmaceutical company will pay US$65m for a Phase I drug. Compare with US$220m for a Phase III drug) (Hall)
  - Multiple points of potential monetization in the drug development process
  - Proof-of-concept demonstrations
  - More generally, investor confidence in the possibility of bringing a drug to market
Barriers to Entry (Christoffersen)
- High development costs (US$100-500m per drug)
- Long development times (10-12 years)
- Low probability of success (10%) makes investment less likely
- Need for highly skilled workers (Celgene, a typical large-scale Biotech firm, employs 1,287 people, 725 of whom are engaged in research)