CSL, Australia’s biggest healthcare company by market capitalization, sells a range of biopharmaceutical products globally. CSL’s Behring segment, which develops plasma therapies for rare conditions, is the major revenue contributor, nearly 90%, and accounts for almost all of its operating profits.
In contrast, its Seqirus division, which sells non-plasma biotherapeutic products, has found it hard to take-off. The division’s growing revenue has hardly trickled down to net profits; thus, no value-creation for shareholders – it recorded a $336 million operating loss in FY’16.
But overall, CSL has maintained a high single-digit revenue growth since 2012 and a net income margin of over 20%. The company expects strong double digit EBITDA growth this year on the back of more than 10% revenue growth. In contrast, shares are down nearly 20% from the 52-week high recorded in July. Probably, that’s the reason behind the analysts’ consensus ‘outperform’ rating on the stock.
Ramsay Health Care Ltd (ASX:RHC)
The second largest Australian healthcare company has also received a consensus ‘outperform’ rating from sell-side analysts. Ramsay operates more than 220 hospitals in Australia and internationally. RHC shares are flat for the year and currently trade nearly 20% below the 52-week high made in September this year.
Analysts are most likely seeing the recent pullback as the opportunity for investors to buy an outperforming high quality company. RHC exceeded market expectations for the full-year to June 30 with 18.1% revenue growth and 17.7% jump in core EPS. The company saw strong volume growth across geographies.
Two factors which make RHC attractive are increasing revenue contribution from outside Australia and the company’s willingness to take bold steps to fuel growth — RHC announced that it will open a number of strategically located community pharmacies across Australia as an extension of its vast hospital pharmacies network.
Mayne Pharma Group Ltd (ASX:MYX)
The pharmaceutical company manufactures a range of branded and generic products apart from providing contract manufacturing services. Revenue growth has been impressive, nearly fivefold in five years. Mayne recently acquired a portfolio of Teva Pharmaceuticals’ generic drugs, which is expected to double its revenue this year.
The latest crackdown by the US Department of Justice on price collusion among generic-drug-manufacturers had already spooked the investors of companies such as Mayne, which generate most of their revenue in the US. And the acquisition has scared its shareholders further due to increased exposure to the US going forward, resulting in a nearly 25% drop in the shares over the past few months.