What is almost unique about biotechnology today is that competition to provide a particular product does not necessarily result in winners and losers, because the potential marketplace for a wide variety of biotech solutions is so huge, and both the technology and the underlying science are advancing at an ever-accelerating pace. ... Today, the ability to raise capital, the inventiveness of a company’s scientists, and the leadership capabilities of management are more likely to determine the success or failure of the company, rather than whether or not some other company develops a similar product first.It's a very interesting conclusion, in the sense that success of companies, specifically biotech companies, is dependent on people from three different disciplines - finance, science, and management. If one is lacking, the whole triangle collapses. This is in stark contrast to what a die-hard scientist will tell you: Science speaks on its own, which is an incomplete viewpoint at best and delusional at it's worst.
Around 70 years ago, Austrian economist Joseph Schumpeter coined the term, “creative destruction”. In essence, entrepreneurial innovations disrupt the status quo. Up-and-coming companies overtake the former leaders, which then fade away. As I noted in the January 15, 2011, issue of GEN, “When one considers the vibrant pattern of financings, internal growth, acquisitions, and yes, closings in the biotech industry, it clearly fits Schumpeter’s model of creative destruction.”Creative destruction isn't a new concept, but the idea of 'creative acquisition' is a natural one for biotech. The skill-sets at each step of research and development are extremely specialized and unique, and since an idea/invention needs to go through multiple steps to end up profitable, let alone used in the market to help people, development inevitably behaves like relay race instead of an all-versus-all competition.
However, that is not the whole story. While creative destruction certainly applies to the biotech industry, so does what one might call creative acquisition. In other words, successful firms do not necessarily lead to the failures of other firms but rather to their own acquisition by larger firms. Creative acquisition is a function of the ever-increasing growth potential of the biotech industry.