Biotech vs. Pharmaceuticals: What's the Difference?

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Biotechnology and pharmaceutical companies some nutrient medicines, but the medicines made by biotechnology companies are derived from surviving organisms portion those made by pharmaceutical companies generally person a chemic basis.

The coining of the word biopharma further complicates matters. The word describes companies that are utilizing some biotechnology and chemic sources successful their aesculapian research and development (R&D) efforts.

Key Takeaways

  • Biotechnology (biotech) companies deduce their products from the extraction oregon manipulation of surviving organisms.
  • Pharmaceutical companies make medicines from chemicals and synthetic processes.
  • In the satellite of investing, these some are important manufacture sectors with precise antithetic hazard profiles contempt their overarching similarities.


Common products specified arsenic brew and wine, laundry detergent, and thing made of integrative are each biotechnology products. Humans person employed biotechnology since past times to breed animals and amended their crops.

However, successful the modern fiscal world, biotechnology companies comprise an manufacture assemblage collectively known arsenic the biotech. They research, develop, and nutrient a wide assortment of commercialized products, though astir of them absorption connected aesculapian oregon cultivation applications.

Biotechnology firms usage the processes of surviving organisms arsenic they manufacture products oregon lick problems. The recognition and sourcing of DNA person helped the manufacture marque large leaps. Companies successful this assemblage person developed pest-resistant crops, created biofuels similar ethanol, and developed cistron cloning.

There besides person been large merchandise introductions successful biopharma drugs. Some of the astir often utilized biotechnology aesculapian products precocious introduced see the following:

  • AbbVie's Humira is utilized to dainty arthritis, psoriasis, and Crohn's disease, among different ailments.
  • Roche's Rituxan is utilized to dilatory the maturation of tumors successful respective types of cancer.
  • Amgen/Pfizer's Enbrel is utilized to dainty respective autoimmune diseases.

The apical U.S.-based biotechnology firms successful presumption of marketplace capitalization arsenic of August 2021 are Johnson & Johnson, Pfizer, Eli Lilly, and Thermo Fisher Scientific.

In caller years, biotechnology startups person sprouted alongside machine exertion companies successful Silicon Valley. The purpose of astir is to usage biotechnology processes to make breakthrough drugs.

According to immoderate projections, by 2026, aesculapian biotechnology unsocial volition deed $500 billion.


As an industry, pharmaceutical companies research, develop, and marketplace medicines made chiefly from artificial sources.

Some modern pharmaceutical companies person a agelong history, specified arsenic Bayer AG, the German institution whose laminitis trademarked aspirin successful 1899. As of 2021, the world's apical pharmaceutical institution was Johnson & Johnson, followed by Roche and Pfizer.

Pharmaceutical products tin instrumentality galore years to process done the probe and improvement phases earlier yet making it to market. Part of the lengthy R&D process includes gaining the support of the Food and Drug Administration (FDA).

The largest companies successful this assemblage supply unchangeable results, but the tract continues to turn with caller companies opening regularly.

The Businesses of Biotech and Pharmaceuticals

Purely from the investor's perspective, biotech and pharmaceuticals are precise antithetic propositions. An expert volition look astatine the magnitude a steadfast spends connected probe and improvement (R&D) arsenic a percent of income to comparison 1 institution to another.

Biotechnology companies mostly person precise precocious operating costs arsenic they are progressive successful research, development, and investigating that takes years to complete. The effect could beryllium a historical breakthrough oregon utter failure. Investors successful their stocks are on for the ride, up oregon down.

Also, this manufacture whitethorn find roadblocks to the improvement of caller products if the probe oregon extremity merchandise is seen arsenic harmful. As an example, respective countries prohibition genetically modified plants and products.

Biotech has been fixed 1 advantage, to marque up for its outgo disadvantage. While pharmaceuticals mostly clasp exclusive rights to manufacture and administer their drugs for 5 years, biotech tin get patent extortion for 12 years.

The large pharmaceutical companies, by comparison, person a dependable travel of income from existent products portion maintaining a probe and improvement effort aimed astatine improving upon existing products oregon creating caller ones.

Pharma companies effort to support a dependable pipeline of caller products successful assorted stages of development. The process to make a caller cause whitethorn instrumentality up to 15 years to complete. The FDA requires astir caller drugs to spell done respective phases of investigating which, successful itself, tin instrumentality up to astir 8 years. Also, adjacent if a institution brings a caller medicine to the market, it does not mean it volition summation wide doc support and use.

The Bottom Line

Both pharmaceutical and biotech stocks look a costly process that, erstwhile successful, tin nutrient highly profitable products. However, the process is highly unpredictable, which for a tiny biotech steadfast tin beryllium each excessively detrimental and unrecoverable. Pharmaceutical companies, owed to their larger size and diversified gross base, are typically capable to withstand setbacks and failures. Competition is much applicable and costly to pharmaceutical companies, creating a request for beardown pipelines and non-organic revenues (such arsenic done M&A oregon alliances). Consideration of these cardinal themes tin supply the ground for making a prudent investment.

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