Asteria Health Acquisition Will Improve Supply Chain Efficiency

Key Takeaways

• Vertical integration and strategic acquisitions enhance cost efficiencies and profit margins, improving Biote’s operational control.
  
• The phased launch of BioteRx and expansion efforts are key to driving revenue growth through better practitioner support and network expansion.
  
• Increased investment in sales aims to drive growth amid slow new customer acquisition, but reliance on few clinics and FDA uncertainties pose risks to revenue.

Catalysts

Operates in practice-building business within the hormone optimization space.

• Biote's acquisition of Asteria Health, leading to better control over the supply chain and vertical integration of manufacturing, is expected to generate cost efficiencies and improve gross profit margins.
  
• The phased launch of the BioteRx wellness platform is seen as a differentiator, likely aiding in expanding revenue through enhanced product ordering, inventory management, and support for Biote-certified practitioners.
  
• Improvements to the proprietary clinical decision support software and unique dosing algorithms can drive long-term revenue growth by attracting a broader range of practitioners and improving patient outcomes.
  
• Bret Christensen’s appointment as CEO, with his extensive experience in healthcare, is expected to enhance Biote's ability to innovate and scale efficiently, potentially positively impacting net margins and earnings.
  
• Expansion efforts, including training more practitioners and reinvigorating sales and marketing initiatives, aim to grow the practitioner network significantly, potentially increasing revenue through broader adoption of Biote's solutions.

biote Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming biote's revenue will grow by 8.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.6% today to 8.7% in 3 years time.
• Analysts expect earnings to reach $22.1 million (and earnings per share of $0.71) by about March 2028, up from $3.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.8x on those 2028 earnings, down from 40.6x today. This future PE is greater than the current PE for the US Pharmaceuticals industry at 16.3x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

biote Future Earnings Per Share Growth

Risks

• The company experienced a slowdown in new customer growth due to the transition to upgraded clinical decision support software, potentially impacting future procedure revenue growth as this slowdown will take time to recover.
  
• Biote has increased levels of investment in sales and marketing expenses to drive new customer growth, which may compress net margins in the near term as the company seeks to reignite growth in a challenging environment.
  
• The guidance for 2025 expects a moderate 2% to 4% increase in procedure revenue, which may indicate potential stagnation in revenue growth if new initiatives don't yield expected results quickly.
  
• The dependency on a few top-tier clinics for revenue growth and the focus on maintaining existing relationships might limit opportunities to expand the practitioner network significantly, affecting long-term earnings potential if not balanced well with new customer acquisition.
  
• There are uncertainties regarding the continuation of selling GLP-1 compounded products due to potential FDA regulations, which could impact a part of BioteRx revenue if these offerings are curtailed or discontinued.

Valuation

• The analysts have a consensus price target of $7.467 for biote based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $9.0, and the most bearish reporting a price target of just $6.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $254.6 million, earnings will come to $22.1 million, and it would be trading on a PE ratio of 17.8x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $4.07, the analyst price target of $7.47 is 45.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.