Right time, right place
BTG's (LONDON:BTG) FY15 results demonstrate the strength of its strategy and growth prospects. It is becoming a leader in the growing interventional medicine (IM) market, with a portfolio spanning oncology, vascular and pulmonary products, targeting sales of >$1.25bn in 2021. The investment in the IM franchise is being supported by the strong cash flow from specialty pharmaceutical sales and licensing revenues. We have increased our valuation from £3.31bn to £3.52bn (923p/share).
Strong growth in FY15, with more to come
BTG delivered revenue growth of 27% in FY15. This was boosted by the full year of revenues from last year’s acquisitions of Ekos and TheraSphere, but the underlying growth rate was still 21%. This reflects the favourable market dynamics of the IM market and strong execution by BTG. The company has successfully integrated recent acquisitions and continues to penetrate and expand the IM market.
Interventional medicine: A fast-growing niche
Interventional medicine combines medical device and drug technologies to deliver targeted therapies. The markets are relatively small, but fast-growing and with limited competition as they are yet to attract the attention of major pharmaceutical companies. This means that BTG is well placed to benefit from the trend towards more targeted and less invasive therapies.
Investing for the future
BTG's underlying operating margin fell to 18% in FY15 from 23%, even with the benefits of the high-margin specialty pharma division (65%) and royalty streams from its licensed products (30% margin after central costs). This is because BTG is investing heavily in its IM franchises, with a focus on maximising the long-term value of its product lines, rather than short-term considerations. This is illustrated by the careful launch of Varithena for varicose veins, with BTG ensuring patients and physicians have a good experience with the product.
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