Biotechnology companies definitely need a business plan to convey the winning idea while being coherent, comprehensive, rational and defensible. Many new biotechnology companies have learnt the importance of business models and sophisticated business plans the hard way. A typical business model consists of three components – value proposition, value chain structure and revenue generation. These components are used to give a general description of a business. The biotechnology industry is not really characterized by specific business models and neither is there one single model for success. The sector is not only characterized by an enormous diversity, but is also driven by innovations, which makes the prediction of future development rather difficult. The enormous flexibility of biotechnology companies is a strength that has helped them survive in times of economic difficulties. In years of crisis, companies have managed to reorient themselves, change their business plans or even switch market. Business models have to be continuously adapted to internal and external conditions. This means in practice, companies occasionally follow one particular business model in preference to others in order to adapt to prevailing financing mechanisms as well as to changing market demands.
On the road to success, many biotechnology companies have adopted several different business models in order to be able to successfully operate under national and international conditions. Although business models in the biotechnology sector are not homogeneous, they are roughly divided into the Platform, Product, Vertical, and Hybrid models based on the value chain structure of the biotechnology industry. Typically, the Platform-based companies develop a set of tools or integrated technologies and provide these for use in different applications. One advantage of this business model is that revenue is generated relatively quickly. In addition, cost and time-savings are made in relation to product approval. The Product or drug developing companies offer products manufactured with new, own or already known technologies. This includes classical items like drugs and diagnostic products, but also new groups such as tissue engineering products. In FIPCO (fully integrated pharmaceutical company) or Vertical business model, the drugs are developed up to end of clinical studies or up to approval, meaning that the creation of value is pursued as far as possible. On the other hand, VIPCOs (virtually integrated pharmaceutical companies) only have a small number of employees that are focused on a specific area; other business areas are outsourced to external partners. It is simply an office-based company, dealing exclusively with project management and outsourcing all steps along the practical value creation work, from ADME tests (absorption, disposition, metabolism and elimination) to animal experiments and clinical studies.
