How Big is Biotech?

A simple web search says biotech is really big. One estimate indicates that the industry will have $400 billion in sales in 2017 with growth to over $775 billion by 2024 [1]. Another report suggests there are over 77,000 employers [2]. That’s big, but is it real, and what you can do with this information?

Worldwide locations of biotechnology employers.  Source Biotech-Careers.org

At Biotech-Careers.org we're interested in helping students and graduates of biotech programs at community and four-year colleges learn about the multitude of opportunities available in the biotech industry. To be helpful we need to know more about the industry than the big numbers. After all, telling someone they have great opportunity because there is a trillion dollar industry with over 77,000 companies doesn’t help if we don't have context.  We need to know how good those numbers are, where the opportunities are located, and many other details.

One challenge companies face is to understand their real market opportunity in the context of a $400 billion market.  Students who are considering a biotech career, need to know about their long-term prospects as part of this industry.  These prospects are related to a company's opportunities for sustainability and growth.  These opportunities are a function of the company's addressable market.

As part of our consulting activities at Digital World Biology, we engage in market analyses for groups developing biotechnology businesses. Big numbers like $400 billion always shrink when specific addressable markets that are suitable for a given technology are considered. This is due to the fact that biotechnology is a “long tail” industry.  In fact, because of the long tail, Biotech-Careers.org uses nearly 400 keywords to characterize employers’ business activities in general and specific ways.

Biotech products and services are a part of a diverse continuum of enabling technologies (and reagents), diagnostic technologies and targets, therapeutic interventions, or biologic improvements. For example, DNA sequencing, protein purification, and mass spectrometry are enabling technologies that are used in specific applications and thus have their own addressable target market segments. As platform technologies they have larger addressable markets than services that employ these technologies for various applications, but compared to the entire biotechnology market, these segments represent a few percent of the total. Similarly diagnostics can be a platform technology, like genotyping, or be disease related – genotyping for certain conditions, detecting particular infectious agents, or be quality-control related as in food safety. Therapeutics, synthetic biology, and other areas considered biotechnology follow similar patterns. In all, the addressable markets for companies in these areas can be between $10's of millions to $10's of billions.

A harder problem is defining the number of potential employers. As noted, one estimate claims there are 77,000 employers [2]. This value is based on NAICS codes. NAICS (North American Industry Classification System) codes are used by federal agencies to classify businesses. Over 15 million companies are listed in the NAICS database [3]. When you start a business you need to tell the government what your business does by picking a NAICS code. Sounds simple, right? The challenge is that NAICS codes often do not exist for innovative companies - the very kind that are continually emerging in the biotechnology industry. So, a new biotechnology company does its best to pick a NAICS code, which leads to overestimates because many NAICS codes include a large number of unrelated businesses. For example, NAICS codes associated with agriculture, for which agri-biotech would fit also include traditional farming-based organizations. Other examples of over counting occur in NAICS codes for hospital suppliers, various kinds of medical wholesalers, medical laboratories, and many others.

How can we tell if NAICS codes overestimate the  number of biotechnology employers? One way is by looking at different directory resources. Such directories are compiled by individuals with experience in the field. Biotech-Careers.org presently lists over 5600 worldwide employers in over 8,000 locations. These data were compiled from several sources and are updated on a regular basis from industry specific news feeds and other sources. Other sites advertising publicly available directories have similar numbers. BIO.org (an industry lobbying group) directory lists approximately 1500 member organizations. This lower number is due the fact organizations have to self identify, but it is helpful in understanding what kinds of organizations consider them selves to be biotechnology related. Finally, one organization claims a fee-based directory of nearly 13,000 bioscience, life sciences, biotechnology, pharmaceutical, and medical supply organizations.

Clearly, the size of the biotechnology industry is related to how biotechnology is defined. The broadest definitions include multiple sub industries that span the gamut of human health, energy production, and agriculture. The overall dollar value of the market is likely reasonable, but an expert-based consensus of the overall size of the industry appears to be closer to 10,000 organizations, rather than 77,000.

References:

[1] https://www.gminsights.com/industry-analysis/biotechnology-market

[2] The Value of Bioscience Innovation in Growing Jobs and Improving Quality of Life, BIO.org

[3] http://naics.com