Role of Business Models in Funding the Biotech Industry: Global Trends and Challenges for Cuban Biotechnology

Abstract

Forty-three years after it was founded, with billions of dollars invested, the global biotech industry is still not positioned as a mature low-risk sector for the international investor community. Despite the clear commercial success of a number of leading companies and overall growth of the industry’s revenues, most biotech companies are not profitable and many fail to overcome the formidable barrier constituted by the high cost of the sector’s research and development. However, over the last four years, visible signs of change have appeared, which could be harbingers of an approaching turning point in this trend. This article analyzes the historic background of the biotech industry’s business models and corporate structures, as well as their impact on the industry’s financial framework. It examines recent changes implemented by the sector’s main actors—including young startups, venture capital funds and big pharma companies—to mitigate financial risk associated with development of new biotechnology products. Finally, it discusses the challenges and opportunities that these tendencies entail for Cuban biotechnology development and proposes adoption of business policies more tolerant of the financial risk inherent in this sector, as a condition for attracting venture capital.