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Industrial Biotechnology

Aira Marie Belasario and John Karl Bautista

Industrial biotechnology is one of the most promising new approaches to

pollution prevention, resource conservation, and cost reduction. It is often referred to as

the third wave in biotechnology. If developed to its full potential, industrial

biotechnology may have a larger impact on the world than health care and agricultural

biotechnology. It offers businesses a way to reduce costs and create new markets while

protecting the environment. Also, since many of its products do not require the lengthy

review times that drug products must undergo, it's a quicker, easier pathway to the

market. Today, new industrial processes can be taken from lab study to commercial

application in two to five years, compared to up to a decade for drugs.

The application of biotechnology to industrial processes is not only transforming

how we manufacture products but is also providing us with new products that could not

even be imagined a few years ago. Because industrial biotechnology is so new, its

benefits are still not well known or understood by industry, policymakers, or consumers.

From the beginning, industrial biotechnology has integrated product improvements with

pollution prevention. Nothing illustrates this better than the way industrial biotechnology

solved the phosphate water pollution problems in the 1970s caused by the use of

phosphates in laundry detergent. Biotechnology companies developed enzymes that

removed stains from clothing better than phosphates, thus enabling replacement of a

polluting material with a non-polluting biobased additive while improving the

performance of the end product. This innovation dramatically reduced phosphate-related


algal blooms in surface waters around the globe, and simultaneously enabled consumers

to get their clothes cleaner with lower wash water temperatures and concomitant energy

savings.

Rudimentary industrial biotechnology actually dates back to at least 6000 B.C.

when Neolithic cultures fermented grapes to make wine, and Babylonians used microbial

yeasts to make beer. Over time, mankind's knowledge of fermentation increased,

enabling the production of cheese, yogurt, vinegar, and other food products. In the 1800s,

Louis Pasteur proved that fermentation was the result of microbial activity. Then in 1928,

Sir Alexander Fleming extracted penicillin from mold. In the 1940s, large-scale

fermentation techniques were developed to make industrial quantities of this wonder

drug. Not until after World War II, however, did the biotechnology revolution begin,

giving rise to modern industrial biotechnology.

Since that time, industrial biotechnology has produced enzymes for use in our

daily lives and for the manufacturing sector. For instance, meat tenderizer is an enzyme

and some contact lens cleaning fluids contain enzymes to remove sticky protein deposits.

In the main, industrial biotechnology involves the microbial production of enzymes,

which are specialized proteins. These enzymes have evolved in nature to be super-

performing biocatalysts that facilitate and speed-up complex biochemical reactions.

These amazing enzyme catalysts are what make industrial biotechnology such a powerful

new technology.

Industrial biotechnology involves working with nature to maximize and optimize

existing biochemical pathways that can be used in manufacturing. The industrial


biotechnology revolution rides on a series of related developments in three fields of study

of detailed information derived from the cell: genomics, proteomics, and bioinformatics.

As a result, scientists can apply new techniques to a large number of microorganisms

ranging from bacteria, yeasts, and fungi to marine diatoms and protozoa.

Industrial biotechnology companies use many specialized techniques to find and

improve nature's enzymes. Information from genomic studies on microorganisms is

helping researchers capitalize on the wealth of genetic diversity in microbial populations.

Researchers first search for enzyme-producing microorganisms in the natural

environment and then use DNA probes to search at the molecular level for genes that

produce enzymes with specific biocatalytic capabilities. Once isolated, such enzymes can

be identified and characterized for their ability to function in specific industrial processes.

If necessary, they can be improved with biotechnology techniques.

Many biocatalytic tools are rapidly becoming available for industrial applications

because of the recent and dramatic advances in biotechnology techniques. In many cases,

the biocatalysts or whole-cell processes are so new that many chemical engineers and

product development specialists in the private sector are not yet aware that they are

available for deployment. This is a good example of a "technology gap" where there is a

lag between availability and widespread use of a new technology. This gap must be

overcome to accelerate progress in developing more economic and sustainable

manufacturing processes through the integration of biotechnology. "New Biotech Tools

for a Cleaner Environment" provides dramatic illustrations of what these powerful new

tools can do. The report aims to spark more interest in this powerful technology, to help

close this technology gap, and facilitate progress toward a more sustainable future.
On the medical front, the endeavor to improve people's health is fulfilled through

the creation of recombinant DNA (deoxyribonucleic acid), which is done by combining

DNA sequences that do not naturally intermingle. With these DNA alterations, biotech

companies have discovered treatments and therapies for a range of diseases, such as

various forms of cancer, AIDS (acquired immune deficiency syndrome), Alzheimer's,

and diabetes.

Established companies typically fund their growth ventures with cash flow, but

debt and equity markets are sometimes tapped. Since many biotech companies are small,

and cash is often scarce, external funding can be important. Patrons are typically big

pharmaceutical companies or investment entities that stand to reap significant rewards

from taking a stake in a drug that is commercialized. During difficult economic times,

outside funding often dries up, as lenders become budget-constrained and more cautious

about investments.

Growth Contingencies

New discoveries for the treatment of diseases provide opportunities for growth

and gains in stockholder value. Investors must, however, be willing to tolerate volatile or

weak results in the short term. In many instances, a biotech firm may have to endure a

lengthy period of sometimes-heavy losses before a drug comes on the market and yields

operating benefits. The sales and earnings potential of a newly introduced commercial

drug or treatment can be immense and remain positive for years. Indeed, patented biotech

drugs enjoy a 12-year period of protection from generic competition, allowing a sustained

period of favorable returns.


Biotech drugs are expensive, however, and there is pressure from insurers,

governments, and consumers to rein in healthcare costs. Some legislators regularly

attempt to increase industry competition. If the period of market exclusivity is ever

reduced, research-funding sources likely would be curtailed, and there would be a

material, negative impact on long-term sales and profitability. So far, the companies have

held on to the prohibition period by successfully arguing that biotech drugs are

scientifically complex, not easy to duplicate, and costly to develop. In fact, most

prospective drugs never complete clinical trials and reach commercialization, since

conclusive scientific evidence of efficacy, in many instances, proves elusive.

Regulatory Considerations

The U.S. Food and Drug Administration (FDA) is the primary regulator of the

Biotech Industry. Before a drug makes it to market, it must traverse a strict clearance

process set forth by the FDA. Statistically, there are significant odds against a drug

progressing through all the required clinical trial stages. For every 5,000 compounds

discovered in pre-clinical studies, only about five make it to FDA approved status. There

are four stages in the FDA trial process; in the final step, drugs are placed on the market.

Even after approved for use, drugs are subject to ongoing studies, in which patients are

monitored for negative side effects. Recalls due to injuries and/or fatalities are not

uncommon. Patents are nullified in the event of a recall. Companies invest considerable

time and resources to ensure a product's success. Recalls not only hurt sales and net

income, but they may severely tarnish the reputation of a firm.


In addition to the FDA, other agencies have authority over the industry. Notably,

the Environmental Protection Agency and Department of Agriculture hold sway,

regarding the marketing of biotech offerings that might have a big effect on the areas

under their respective control.

Uses of Cash

Like the majority of companies under our review, biotech firms must determine

the best use of cash sourced from operations, as well as from equity and debt issues. First

and foremost, the goal is to achieve out-sized growth, and managements work to ensure

fully funded research and development budgets. Substantial capital is also spent on

gaining approval of new drugs and bringing them to full production. Marketing and

distribution require sizablel funds, as well. Acquisitions are more common among large

industry players, which, at times, seek to bolster their lineups. In descending order, debt

retirements, stock repurchases, and dividends are the least desirable uses of cash.

The nature of the operations of firms in the Biotech Industry makes these equities

more suited to aggressive, risk-tolerant investors. Stock prices here can fluctuate

dramatically, particularly in response to news developments concerning the success or

failure of a particular drug. Investors must carefully consider a stock's risk/reward

relationship. Often, investors must be patient and willing to endure years of losses before

the benefits of a drug pipeline, in the form of long-term share-price appreciation, are

realized.

The Biotechnology Industry is a highly volatile and unpredictable sector due to

the scientifically intensive operations of companies that reside here. Markets served
include medical, agricultural, environmental, and industrial. This industry emerged in the

1970s, with the main goal of enhancing the quality of human life. Biotech firms differ

from conventional drug makers in that they utilize natural ingredients, as opposed to

synthetic ones. Drugs are manufactured in a living system, i.e., a microorganism, plant or

cell.

References:

Website

Belasario, A. and Bautista, J. (2017). What is Industrial Biotechnology? - BIO. [online]

BIO. Available at: https://www.bio.org/articles/what-industrial-biotechnology [Accessed

23 Oct. 2017].

Belasario, A. and Bautista, J. (2017). Industry Overview: Biotechnology. [online]

Valueline.com. Available at:

http://www.valueline.com/Stocks/Industry_Report.aspx?id=10573#.We6hHP-nFkg

[Accessed 23 Oct. 2017].