Biotechs report $11.7bn revenue and $1.9bn profit
Health & Biotech
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For the reporting season just closed, total revenue in the biotech sector was $11.7 billion with profit of $1.9 billion, writes David Langsam, editor of Biotech Daily
For readers old enough to remember the Global Financial Crisis when world stock markets rose and fell up to 10 percent a day, the gloomiest in the biotech sector said at the time: “We’ll all be ruined – without urgent Government assistance”.
The doomsayers were doomsaying just as Biotech Daily was covering the 2008-09 financial reporting season. So we kept a list of revenue and profits, which showed a total revenue to the ASX-listed biotechnology sector of $7.3 billion with a total net profit after tax of $1.54 billion.
(What Biotech Daily calls the biotechnology sector is not the same as what the ASX calls the ‘Health’ sector. We do innovation for human health. We don’t do hospital beds, agriculture, veterinary and cosmetics – with the exception that some of the human health stocks we cover have interests in some of those areas.)
In 2009-10, recoiling from the horrors of the GFC, total revenue for the sector was slashed 3 per cent ($217 million) to $7.1 billion, while total profit fell $6.4 million to $1.5 billion.
For the reporting season just closed, total revenue was $11.7 billion — up 39.4 percent compared to 2009-10. Total profit was up 24.4 percent at $1.9 billion.
While the revenue figure is strong – again skewed by the three Big Caps – the profit figure includes the losses of the smaller companies.
In 2008-09, Biotech Daily covered 21 companies with revenue of more than $1 million for the year.
In 2009-10 the number rose to 27, and for the reporting season just concluded we have 56 companies reporting revenue of more than $1 million. Many of them still have product in development with wildly changing profit and loss statements.
For example, Mesoblast receives licensing revenue, milestone payments and last year claimed $US22.5 million ($29.9 million) in revenue which was an accounting procedure of non-cash recognition of Teva Pharmaceutical’s return of the cardiac program.
So the dramatic fall in revenue of 94.3 per cent to $3 million and consequent leap in loss of 1761 per cent to $96.1 million is more accountancy related than actual changes.
Small Cap biotech revenue and profit
Stripping out the three Big Caps of Cochlear, CSL and Resmed, in 2008-09 the other 18 companies in the sector with revenue of more than $1 million posted a collective revenue of $464.3 million and a cumulative profit of $68.2 million.
In 2009-10, the now 24 companies recorded collective revenue up 9.5 percent to $508.3 million with profit up 42.4 percent to $97.2 million.
For the 2016-17 financial year the 53 companies with more than $1 million in revenue announced total revenue up 168.7 percent over seven years to $1.4 billion, but overall profit down 16.9 per cent to $83.2 million.
Excluding the loss-makers, the cumulative profit this year was $198.8 million, most of it thanks to Mayne Pharma, Sirtex, Nanosonics and Pro Medicus. But, hey it’s biotech, so losses are part of the game.
As the number of innovation companies earning their first revenues increase, they bring with them their investment in research and development and consequent losses.
As they mature, the revenues (hopefully) increase and the losses turn to profits. For some companies it can be very lumpy with the first few years of solid revenue coinciding with turnaround maiden profits, followed by the loss of a single contract returning them to losses.
But the eight-year pattern is unmistakable. We have nearly three times the number of companies earning revenues and many of them are learning how to manage their businesses accounts.
Companies like Ellex, Compumedics, Medical Developments, ITL, Acrux, Cyclopharm, Admedus and Uscom are selling product world-wide and earning highly significant export income and all are on the verge of moving from losses to sustainable profits.
The overall eight-year cumulative revenue and profit figures for the ASX200 would make an interesting comparison.