🧬 Why is Biotech Different?
By BlueSky Bio - Malcolm Eaton, Thalia Katsademas, and Connor Anderson
Despite headlines intertwining biotechnology (’biotech’) with broader tech sectors (especially in Alberta), biotech is a distinct industry. Its longer development pathways, stringent regulatory requirements, specialized infrastructure needs, and significant capital demands define it. Yet, despite these hurdles, biotech holds immense promise—both financially and in terms of human impact. This piece highlights fundamental differences in biotech, providing a baseline for those interested in pursuing a career in the industry or those supporting emerging ecosystems.
If biotech is so hard, why do we care about it? For our team, the answer revolved around three core themes:
Biotech requires you to connect ideas across multiple domains, leading to unpredictable pathways of discovery and learning.
Biotechnology has an outsized impact on the world around us and can be applied to nearly all fundamental problems that face society today.
Biotech is inherently personal, intertwining in the food we eat, with the products we use, and the health outcomes we seek.
Biological systems are arguably the most complex systems we know of, providing seemingly endless ways to harness and refine the limits of human ingenuity.
The Unique Challenges of Biotech
Biotech is different because of the interplay between biological complexity and practical business considerations. Below, we explore six interrelated themes that define the industry and solutions that point towards a more informed view towards this complex industry.
Biological Complexity
⏳ Biological Constraints
Unlike traditional tech, where iteration cycles can be rapid, biotech operates under biological constraints. These barriers fundamentally limit how quickly iteration cycles can be shortened, making it more difficult to rapidly modify to improve products.
Biological systems follow natural lifecycles. Plants take seasons to grow, clinical trials span years, and microbial systems operate on their own timelines.
Iteration cycles are constrained by the time required for experiments, clinical trials, and approvals.
🧠 Complexity & Knowledge
Biotech requires deep expertise across multiple disciplines, from biology and chemistry to regulatory affairs and business strategy. The field operates at the intersection of foundational science and commercialization, demanding both technical proficiency and business acumen.
Scientific expertise is paramount. Biotech founders often come from PhD or research backgrounds.
Hypothesis building in research is fundamentally different than it is in business. Knowledge in both domains is key to secure early wins. Many ventures face unique scientific and business challenges, all of which may be "first-in-kind" for any given technology.
With deep specialization comes limited attempts. Most biotech founders only have 2-5 chances to get it right, raising the stakes and necessitating creative paths.
⚠️ Uncertainty x Risk
The bio in biotech introduces a high level of uncertainty. The number of failure points in biotech development is staggering compared to other verticals.
The inherent unpredictability of biology leads to long development cycles and high failure rates. This means even well-funded projects can fail due to unforeseen biological interactions.
Biology responds differently depending on the scale. This means that biomanufacturing or scaling efforts have to be carefully built from the ground up for most new processes.
There are acknowledged “unknown unknowns”. For example, we’ve only recently sequenced the wheat genome (5X bigger than humans), and contains “jumping genes” that create nearly infinite complexity for gene regulation.
Solutions:
AI can write your emails, but can it do science?
Recent advances in computation are focused on mapping the immense biological knowledge we already have, with a focus on allowing a complete understanding of biological systems. This increases our ability to perform “in silico” experiments—on a computer, quickly, and with rapid iteration before moving into a biological system. While we cannot account for all unknown unknowns, the progression of these systems that integrate the results of thousands of experiments allows us to better approximate the biological results when we move into in vitro and in vivo experiments—those that take place in cells and organisms, respectively. These technologies are rapidly being developed and deployed to support biotech innovations. A few examples include:
BenchSci: ASCEND is BenchSci’s generative AI platform focused on providing a holistic view of disease biology. By making connections on disease biology across fields as they integrate disease biology publications and results. With an option to securely integrate pharma companies’ unstructured proprietary data, their AI platform can help scientists make data-backed hypotheses faster.
AlphaFold : This system predicts a protein’s 3D structure from its sequence and is built on the model by modelling enzymes behaving differently in biochemical pathways. Predicting protein structure is critical to our understanding of function and for the rational design of therapeutics.
Evo: Trained on billions of genetic sequences (not including those that cause human disease), Evo has designed some functional proteins from scratch that work as well as commercially available proteins with the same functions.
Lila Sciences: Can AI complete the entire scientific workflow, generating hypotheses, testing, including hardware integration and experimental interpretation? Lila is working on designing autonomous labs, where scientists ask the questions and allow their models to hypothesize, test and interpret results.
Science and business can work together but not as easily as we think.
Scientific expertise is essential in ideation, understanding and designing products within these highly complex biological systems. Often, ideas come about as by-products of highly specific research, which demonstrates an opportunity to add value, whether upon discovery or after years of developmental work in academic laboratories. As a result, founders of biotech companies are often highly skilled in research, with comparatively little experience in business. Building strong partnerships with an experienced team and clear plans for the groundwork of commercialization can support technical founders as they commercialize their work. Key gaps identified include specific commercialization plans, IP, high-level executive expertise and financial support. Focused support organizations, accelerators, and funding can help move science from bench to market. A few of the many examples:
Creative Destruction Lab - A pressure cooker for ideas that brings experts to the table and eliminates innovations as the weeks progress. No point in wasting time 😎
adMare Bioinnovations - Canada’s most developed institute for Biotech scale up is located in Montreal; adMare works across building companies through an internal portfolio, therapeutics-focused accelerator and seed investment, as well as ecosystem support and bio-innovation training.
Business Complexity
🏗️ Infrastructure Challenges
Biotech companies require specialized lab spaces, costly equipment, and compliance with stringent regulatory standards. Unlike software companies that can be built from a laptop, most biotech startups need dedicated facilities.
High barriers to entry. The need for lab space, equipment, and biosafety compliance increases startup costs.
The importance of geographic clusters. Biotech often thrives in regions with strong ecosystems of universities, hospitals, and research institutions. Proximity to talent and infrastructure is critically important in this sector.
Must be purpose-built. Very difficult to retrofit existing infrastructure to accommodate biological experimentation or manufacturing.
💰 Capital Intensity/Business Models
Biotech companies often operate with massive burn rates and extended timelines before generating revenue.
Leveraging alternative funding models. Biotech companies often leverage licensing deals, offer platform/discovery services, or partner with larger pharmaceutical firms to secure funding before market entry.
Non-liquid capital requirements. It can take $1 billion+ (on average) to bring a single drug to market, and it averages 10-15 years to realize a return on investment. How can funds entice investors to take these bets?
Runway management is critical. Companies must secure capital that sustains them through long development timelines before reaching market viability.
🌍 Perception x Reputation
Public trust and regulatory approval are crucial for biotech success. Biotech products must undergo rigorous regulatory checkpoints before reaching patients/consumers.
Regulatory scrutiny ensures safety but slows market entry. Even after approval, about 1/3 of drugs have adverse events, which, despite being rare, typically result in high levels of scrutiny.
Value-based care models now emphasize real-world patient outcomes over simple efficacy metrics. This adds a layer of social and economic complexity to the process when modeling impact.
Public perception shapes market success. Consumer trust in biotech innovations (e.g., gene editing, mRNA vaccines) plays a pivotal role in adoption.
Solutions:
The COVID-19 pandemic was a test case for what biotech can achieve when capital constraints are removed. Under normal circumstances, luck plays a big role, but many companies are learning to institutionalize biotech business models to achieve more consistent success.
Drugs are expensive, ideas are cheap.
Amplitude Ventures, for example, is a Canadian venture capital firm that invests in biotech. Their Pre-Amp fellowship takes entrepreneurial scientists and exposes them to early-stage venture creation. Since its inception, the program has spun out three companies in 5 years. The relatively low capital constraints of early-stage idea generation can funnel people and ideas into the right mindset for scaling novel biotech solutions.
It only takes one, but more is always better.
AbCellera had the largest IPO in Canadian Biotech history. They have since built a 400,000-square-foot facility in mid-town Vancouver and recently expanded their collaboration with AbbVie to develop novel therapeutic antibodies for cancer. Along with Abdera Therapeutics and Aspect Biosystems, they have become an anchor for Canadian biotech on the West Coast.
Pharma is outsourcing more work.
Multi-national pharma is dedicating more resources to external research programs and focusing efforts on advancing late-stage assets. Sourcing early-stage science is risky but represents an R&D pipeline that is funded outside the walls of pharma. Love it or hate it, research dollars flowing is usually a good thing for both sides of the industry. This is just one example of the many diversified funding sources and strategic partnerships that bring innovations to life.
Shared infrastructure solutions.
Many biotech hubs provide shared access to equipment and wet-lab spaces. Coordinating these facilities that maximize equipment use is a job on its own, but a necessity to increase efficiency. The centralization of services for early-stage biotech start-ups can provide access to resources, including community expertise.
🔬 Conclusion
Biotech is one of the most challenging industries but also one of the most impactful. The shift towards value-based healthcare, the increasing complexity of diseases, and the demand for sustainable solutions underscore the necessity of biotech innovation. While the barriers to entry are high, the potential for transformative breakthroughs—both in human health and industry—makes overcoming these challenges worthwhile.
This post serves as an introduction to the distinct nature of biotech. In future pieces, we will explore each of these themes in greater detail, highlighting innovative solutions and strategies that can help navigate the industry's unique constraints.
For now, we'll leave you with a quote from a legendary Canadian Biotech founder that proves that maybe a “can do” attitude is enough to get started:
"I saw what they were doing in California at Genentech and thought, hey, I think my research is kind of similar." - Peter Cullis, founder of Acuitas Therapeutics.
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