Risk management for the biotechnology industry: A Canadian perspective

Abstract

In order to break down industry barriers and decrease failure rates, biotechnology companies require a sophisticated risk management plan. Biotechnology is an industry sector where a high failure rate for companies is considered the norm. The opportunity for high-profit levels is what currently drives the industry and sustains investment even in the backdrop of the elevated risk. A recent survey of senior management of Canadian biotechnology companies identified the industry's key risk and growth factors and allowed for the development of models of the changing profiles over the product lifecycle. The model for company growth reinforces that a company's dependence on funding decreases during product development as product distribution and generated profits support company growth. The model for company risk exemplifies that risk is higher earlier in development and decreases with expanding market exposure. These models provide a framework to build an infrastructure to position companies in the knowledge-based economy. In order for biotechnology companies to mitigate risk, they need solid corporate governance with adequate resources to develop a risk management plan. Making the risk management plan part of the strategic plan and the strategic planning process improves a company's ability to manage growth and to compete in the local and global economy. This paper investigates what the industry growth and factors are from a Canadian perspective, how risk factors can be managed by developing a risk mitigation plan and how risk impacts the industry's success as a whole.