The health of the nation is largely depending on the medicine. The people's quality of life has been improved due to the effective use of drugs, its discovery and development which also reduced the need for surgical intervention and saved the time of many spending in hospital and saved many lives. Our consumption of drugs is vast and is increasing. Medicines cost the NHS in England over £7 billion every year, in which 80% is observed to be spent on branded (patented) products (House of commons Health committee, 2005). Pharmaceutical have been moved to the very centre of healthcare. Pharmaceuticals long with public health initiatives have and have been contributing to improve the quality of life and to increase the life span of humans. Global Pharma Companies are experiencing an ever changing landscape ripe with challenges and opportunities. In this challenging environment BTG is enhancing its reach leveraging its competitive advantages to become a top global player.
Corporate Profile:
Fact Sheet:
Type : Public (LSE: BGC)
Founded : 1991 as British Technology Group Ltd
Headquarters : London, United Kingdom
Key people : John Brown (Chairman of the board), Louise Makin (CEO)
Industry : Pharmaceuticals
Products : Development and licensing of critical care, cancer, neurological and other treatments
Revenue : £75.0 million (yr - Mar 2008)
Operating income : â-² £8.5 million (yr - Mar 08)
Profit : â-² £8.8 million (yr - Mar 08)
Website : www.btgplc.com
BTG is an international pharmaceuticals company that develops and commercialise products targeting critical care, cancer, neurological and other disorders to meet the needs of patients and physicians. The company is also seeking to acquire new medicines and treatments to develop and market to hospital specialists, and is building a sustainable business financed by revenues from sales of its critical care products and from royalties and milestone payments on partnered products. They focus on partnering with other biotech and pharmaceutical companies to complete the development of new products and market them. The company has 290 employees in Europe, North America, Australia and Japan. The company has a growing revenue stream and royalties from out-licensed products. BTG operates from offices in London, Philadelphia and Osaka.
Major Shareholders of the company are INVESCO Asset Management Ltd, M&G Investment Management Ltd, Schroder Investment Management (UK) Ltd, Aviva Investors, Legal & General Investment Management Ltd, and Standard Life Investments Ltd.
Concateno is a global provider of drug and alcohol testing products and services. It also manufactures and distributes a wide range of pathology and immunology products to forensic and clinical laboratories.
Products of BTG:
Products
Partner
BeneFIX®
Wyeth
CroFabâ„¢
Nycomed in the US until Oct. 2010; Swedish Orphan International AB for Nordic countries; BTG for other EU countries and the rest of the world
Two-Part Hip Cup
All major orthopaedic companies, including Zimmer Holdings Inc, Stryker Corporation, Smith &Nephew Inc and Biomet Inc
Campath®
Genzyme Corporation
DigiFabâ„¢
Nycomed for the US until Oct. 2010; Beacon Pharmaceuticals in the EU (excluding Nordic countries); local partners and BTG for the rest of the world
Three-Part Knee
Biomet Merck Ltd and Corin Ltd
(http://www.btgplc.com/Products/199/MarketedProducts.html)
DEVELOPMENT PIPELINE
Developments at the company:
The clinical pipeline is showing a significant progress towards the development of the company:
Positive results from clinical proof of concept study of BGC20-0166 in sleep apnoea
BGC20-1531 for migraine headaches and BGC20-0134 for multiple sclerosis both commenced phase I clinical studies.
BGC20-1259 progressing towards a European phase IIa study in patients with Alzheimer's disease starting in H2 08
Two phase III trials of Campath® initiated in multiple sclerosis
Tolerx signed agreement with GlaxoSmithKline to develop TRX4 in type 1 diabetes and other inflammatory conditions: initial milestone paid to BTG of $10m
BIG PICTURE OF THE COMPANY (as at Feb 5 2010)
BTG Share price
Last price : 174.90
Today's change : Change (p) change (%) Cur Bid Offer High Low Open
-1.20 0.68% 174.9 175.4 175.9 181.0 173.0 180.4
Shares traded : 243.79k
52 week range : 112.75-203.00
(Source: London stock exchange)
Market Cap : 450.47m
Revenue (TTM) : 102.50m
Net income (TTM) : 12.20m
Revenues per share (TTM) : 0.4322
Book value per share (MRQ) : 0.7921
Asset Turnover (TTM) : 0.5105
Inventory Turnover (TTM) : 7.16
Receivables Turnover (TTM) : 5.27
Revenue per employee (TTM) : 640.63k
Return on investment (5 year average) : -8.97
Return on average asset (5 year avg) : -6.46
Gross Margin (TTM) : 62.63
Gross Margin (5 yr avg) : 57.62
Quick ratio (MRQ) : 1.97
Net profit Margin (TTM) : -11.90
Net Profit Margin (5 yr avg) : -12.07
Interest Cover (TTM) : -23.60
Total Dept to Capital (MRQ) : 0.0083
Growth Rate
Revenue (change %) : 13.07
Revenue (5 yr growth rate) : 11.70
Net Income (change %) : -248.86
Capital Expenditure (5 yr GR) : -24.97
(Source: www.markets.ft.com- Financial times)
BTG Balance sheet
Institutional Shareholders
Holder
Shares Held
% of Shares Held
INVESCO Asset Management Ltd.
64.39m
25.00%
as of 26 Nov 2009
M&G Investment Management Ltd.
25.85m
10.04%
as of 05 Jan 2010
Aviva Investors Global Services Ltd.
13.79m
5.36%
as of 13 May 2009
Schroder Investment Management Ltd.
12.75m
4.95%
as of 05 Jan 2010
AXA Investment Managers UK Ltd.
10.37m
4.03%
as of 03 Jun 2009
Source: FactSet Research Systems In
Value traded:
Mergers & Acquisitions
There are no recent mergers or acquisitions for BTG
RESEARCH METHODOLOGY
Method of data collection
The data required for the study have been obtained from the annual reports of the company records. The study is entirely based on the secondary data through the company records. Director's reports and annual report has been the Main source of secondary data. For the purpose of carrying out the analysis, the data available in the financial statement have been regrouped and rearranged suitably.
Period of the study
The period of study is for the financial year 2006-2007 and 2007- 2008, March.
DATA ANALYSIS & INTERPRETATION
To measure the performance of BTG, the financial data of the company is compared with the financial performance of Concateno and is analysed based on the performance ratio, liquidity and solvency ratio and working capital days. In financial analysis, a ratio is used as an index or yardstick for evaluating the financial position and performance of a firm. The absolute accounting figures provided a meaningful understanding of performance of a firm. The ratios indicate the trend or progress or downfall of the firm.
1. Liquidity Ratios
2. Long term solvency and Leverage ratios (measure the long-term solvency position of the firm) - indicate a firm's ability to meet the fixed interest and costs and repayment schedules associated with its long-term borrowings.
3. Performance Ratios (to measure effectiveness of the assets management)
4. Profitability Ratios (the end result of business activities by which along the overall efficiency of a business unit can be judged)
Liquidity:
Liquidity ratios portray the capacity of the business unit to meet its short-term Obligations from its short-term recourses. Current ratio and Acid test Ratio are widely used to calculate liquidity.
Current Assets 72.2
Current Ratio = --------------------------- =
Current Liabilities 24.2
Ratio
BTG
Concateno
2.98
1.10
Interpretation
The ratio shows that BTG has current ratio of 3:1 and therefore holds more liquid than Concateno, which gives 1.1:1 for the particular period. The higher the ratio, the more liquid the business is considered to be. As liquidity is vital to the survival of a business, a higher current ratio might be thought to be preferable to a lower one.
QUICK RATIO
Current assets - (stock & prepaid expenses)
Quick ratio = --------------------------------------------------------
Current Liabilities
Ratio
BTG
Concateno
2.98
0.886
Interpretation
An acid test ratio of 1:1 is considered satisfactory as a firm can easily meet all current claims. The acid test ratio for BTG for the given period is 2.98 as there are no inventories for the particular period. The ratio indicates that BTG is effectively maintaining its liquidity in the business for the period. As there are no problems in covering current liabilities the company doesn't have problems with liquidity.
Interest Cover
Interest cover is measured to know the available profit amount to cover the interest payable by the company.
Profit before interest and tax
Interest Cover = ----------------------------------------
Interest payable
Ratio
BTG
Concateno
NA
1.56
Interpretation
Since BTG does not have a bank borrowing and neither the interest, the interest cover of the company is NIL. While Concateno ratio indicates that the company has 1.56 times amount from the profit to meet the interest payable or the profit covered interest by 1.56 times for the year. The ratio declined from 2006 for Concateno where the interest cover in 2006 was 5.5 times. This may be due to the increase in bank borrowings by the company even though the company showed profit from the previous year.
Operating Efficiency:
Efficiency ratios are to examine the ways in which various resources of the business are managed.
Stock days:
This is also known as stock velocity. This ratio is calculated to consider the adequacy of the quantum of capital and its justification for investing in inventory. It is the ratio of cost of sales and coverage inventory. This ratio reveals the number of times finished stock is turned over during a given accounting period.
Inventory
Stock Turnover Ratio = ----------------------------- Ã- 365
Cost of Sales
Ratio
BTG
Concateno
NA
132.5
Interpretation
The inventories turnover period for BTG for the year ended march 2008 is 0 as there are no stocks held by the company as there is no manufacturing for the year 2008. While Concateno shows 132.5 days and the ratio indicates that the company stock movement is slow. It takes 132 days for the company to turn over the stock and some cash is held in the inventories which mean it cannot be used for other purposes.
DEBTORS TURNOVER RATIO:
Debtor turnover ratio is calculated to see the time taken for the customers to pay the amount they owe to the company. Generally the company needs the customers to pay the amount in short duration to make the effective cash flow for the period. This ratio is helpful in determining the operational efficiency of a business concern and the effectiveness of its credit policy.
Trade receivables
Debtors turnover ratio = ---------------------------------- Ã- 365
Sales (turnover)
Ratio
BTG
Concateno
NA
134
Interpretation
There are no trade receivables for the company as on March 2008 while Concateno's customers take 134 days to pay the amount they owe for the company. The debtor's days is preferred to be low as the companies funds will be tied up in the inventories and it cannot be used.
CREDITORS TURNOVER RATIO:
The creditor ratio gives the days the company takes to pay the payables.
Trade payables
Creditors turnover ratio = ------------------------ Ã- 365
Cost of purchase
Ratio
BTG
Concateno
NIL
137
Interpretation
BTG as on March 2008 has no purchase of inventories and no product cost, but has operating expenses. With reference to the annual report 2008, the creditor days are NIL but the company generally takes 22 days to pay the payables. Concateno on the other hand takes 137 days to pay the payables. The ratio is higher for Concateno while compared to BTG which pays earlier to the suppliers. This higher ratio may be either beneficial or disadvantage. It is beneficial since the company is using free finance from the suppliers but the company has to take care not to lose its supplier goodwill. The creditor turnover ratio indicates that BTG is maintaining its supplier goodwill.
Sales per Employee
Sales per employee is calculated to measure how effective and efficient the company is utilizing the employees i.e. productivity of the workforce.
Revenue 75000000
Sales per Employee = --------------------------------- = ---------------------
Number of employees 67
Ratio
BTG
Concateno
£1,119,402.99
£129,029.7
Interpretation
The high value shows that BTG is utilizing the employees in proper way and each employee of the company has made a sale of £1m. Even though the employee number has decreased from 74 to 67 in 2008 there has been an increase in the ratio which indicates the company's profitability also the productivity. Concateno's ratio has also increased from the previous year but the number of employees was 15 in 2006 and 202 in 2007. There has been a gradual increase in sales from the previous year and the company is utilizing its employees productively.
Profitability
The efficiency with which the assets used would be reflected in the speed and rapidity with which the assets are converted into sales. The greater the rate of turnover, the more efficient the management would be.
Return on net Assets:
The return on net asset express relationship between the net profit generated and the average long-term capital invested in the business. It is the basic measure of business performance.
Profit before interest and tax 10.7
RONA = -------------------------------------- = -------------
Net asset 62.1
Ratio
BTG
Concateno
17.23%
1.32%
Interpretation
The comparison of input with output showed that the company has produced 17% of the amount invested for the year 2008. The value is preferred to be higher as the company to be profitable. BTG showed has significant increase from 2007 as the value was only 4%. While Concateno's ratio shows that the company has to pay most to the borrowed funds.
ASSETS TURNOVER RATIO
The ratio indicates the extent to which the investment in fixed assets contributes towards sales. Shows the number of times the capital turns over in a year. The ratio is calculated as follows.
Sales (turnover) 75
Assets turnover ratio = -------------------- = ----------
Net Assets 62.10
Ratio
BTG
Concateno
1.21
0.18
Interpretation
The ratio indicates that BTG is able to sell £1.21 for every £1 and the sale is adequate. On the other hand, Concateno ratio shows that the company is able to sell only £0.18 for every £1.
Gross Margin
This ratio is used to compare departmental profitability or product profitability. It is calculated from the gross profit of business to the sales revenue for the particular period.
Operating Profit
Gross Margin = ------------------------------ x 100
Sales
Ratio
BTG
Concateno
11.33%
7.58%
Interpretation
The gross profit margin of BTG has increased from 1.97% in 2007 to 11.33% in 2008 which shows that the gross profit was higher relative to the sales revenue and this may have significant effect on the bottom line or the profitability of the company. The ratio shows that the company has been generating profitable income for the year.
Sales Margin
The value is measured to see how many pence in each £ of sales is profit.
Profit before interest and tax 10.7
Sales Margin = ---------------------------------------- x 100 = ----------- x 100
Sales (turnover) 75.0
Ratio
BTG
Concateno
14.27%
1.24%
Interpretation
BTG's sales margin indicates that the company has a good profit for every £1 of sales. It has an average 14pence left as profit for every £1 of sales revenue while Concateno has 1.2p left as profit for every £1 of sales. The ratio differs according to the external factors which affects the net profit of a business.
Profit per Employee
Profit before interest and tax
Profit per Employee = ---------------------------------
Number of employees
Ratio
BTG
Concateno
£159,701.5
£9777.2
Interpretation
The return obtained from the average employee of BTG is £159,701.5 for the given year which again shows the effective utilization of employees and company's productivity.
INVESTMENT RATIOS
Return on shareholders' investment
Return on shareholders' investment popularly known as ROI or return on shareholders' / proprietors funds is the relationship between net profit (after interest& tax) and the proprietor's funds.
Profit after interest and tax
Return on investment = ------------------------------------ x 100
Ordinary shares and reserves
Ratio
BTG
Concateno
15.94%
0.645%
Interpretation
The value indicates that BTG is paying 15% of the profit to the shareholders, which shows that the company is managing its share capital successfully retaining the other profit for the company. Concateno, in contrast paying its most of the profit to the shareholders or shareholders are taking more money from the company's profit.
EARNINGS PER SHARE
This is calculated by dividing the net profit after tax and preference dividend available to the shareholders by the number of equity shares. This ratio helps in the assessment of the profitability of a firm from the point of view of shareholders. It indicates the profit available to the equity shareholders on a per share basis.
Profit after interest and tax
Earning per share = -----------------------------------
Number of issued shares
Ratio
BTG
Concateno
5.9p
1.05p
The ratio shows that profit available to the shareholders on per share basis is 5.9p while that for Concateno it is 1.05p.
BTG CONCATENO
2008
2007
2007
2006
Performance
Return on net assets
17.23%
4.81%
1.32%
-2.19%
Gross margin
11.33%
1.97%
7.58%
-53.52%
Sales margin
14.27%
5.69%
1.24%
-55.88%
Asset Turnover
1.21
0.845
0.176
0.022
Sales per Employee
£1,119,402.99
£617,567.57
£129,029.7
£90.67
Profit per Employee
£159,701.5
£35,135.1
£9777.2
£50.6
Working Capital
Stock days
NA
NA
132.5
43.54
Debtor days
NA
NA
134
369.3
Creditor days
NA
NA
137
566.5
Liquidity and Solvency
Current Ratio
2.98
2.44
1.10
13.4
Acid test
2.98
2.44
0.89
13.35
Interest Cover
NA
260
1.56
5.51
Gearing
NA
NA
0.38
0.40
Shareholder's view
Return on Equity
15.94%
5.07%
0.645%
3.01%
Earnings per share (p)
5.9
1.60
1.05
-6.99
Dividend Cover
NA
NA
NA
NA
MICHAEL PORTER'S FIVE FORCE MODEL:
Michael Porter has identified five forces that determine the intrinsic long-run attractiveness of a market (Source: Porter (1980))
INDUSTRY COMPETITORS:
The three major competitors of BTG are Baxter International Inc, Roche Holding Ltd, and Zimmer Holdings, Inc who also produce drugs and medicine equipments and sell in more than 150 countries around the world. Industries where BTG plc Competes are Biopharmaceuticals & Biotherapeutics, Financial Services, Investment Firms, Venture Capital, Health Care Products, Medical Devices.
THREAT OF NEW ENTRANTS:
New pharmaceutical companies are emerging in the field day by day which will consequently increase the competition in the industry. The key barriers of BTG that may increase the level of risk are the distribution channel and customer switching costs.
THREAT OF SUBSTITUTE PRODUCTS:
BTG is developing drugs for migraine, sclerosis, diabetes, etc which has substitute products from other companies as well. For example, Caraco Pharmaceutical Laboratories, Munich-Harlaching Clinic in Germany, Thomas Jefferson University in Philadelphia (Cephalalgia 2002; 22(2): 137-4) are doing research on reducing migraine attacks and they have also come up with new strategies which can be a threat to the company reducing its cost of sales.
THREAT OF BUYER'S GROWING BARGAINING POWER:
The threat from buyers is that they will switch over easily to some other brand. BTG must continuously market and differentiate their brands.
THREAT OF SELLER'S GROWING BARGAINING POWER:
Firms are able to switch between suppliers quickly and cheaply, due to the globalised networks of cheap labour. BTG have a definite advantage and power over their suppliers since the bargaining power of suppliers is low over the company.
SWOT Analysis:
STRENGTHS:
A firm's strengths are on its resources and capabilities with the intention of developing a competitive advantage.
BTG is earning revenue from sales and royalties from marketed products.
Additional milestones and royalties from partnered programmes
Strong cash position
Polyclonal manufacturing ability
The brand name of the company is widely reached and very familiar among the people
They use experts from different fields by partnering with other companies
Due to the same, they are able to supply products continuously.
Strong Presence in Emerging Markets
WEAKNESS:
There are certain strengths that a company lacks which becomes the company's weakness. Product failures have been reported which resulted in increased competition. Expiration of patents like BeneFix will affect the revenue if not recurred.
OPPORTUNITIES:
By analysing the external environmental factors, there found to be certain opportunities for the company's growth and profit. BTG has the opportunity to create a sustainably profitable specialty pharmaceuticals business. They can acquire further products targeting hospital specialists. By creating value from the development pipeline and partnered programmes will give the company more revenues. Sales and marketing infrastructure can be broadened.
THREATS:
A change in the external environmental factors sometimes becomes threat to the company. Development of new drugs and medicines often turns to be a threat due to the uncertainty, timeliness and the costs to get the approval. Alterations to the government regulations may result in the non-approval of the product. This will result in the loss of revenues.
Audit's opinion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.
(www.btgplc.com)
Summary/ Conclusion:
After analysing the financial data and overall performance BTG is found to have good progress in the clinical pipeline and the partnered programmes. It has also made a strong start to the second half of the year by licensing BGC945, a novel anticancer compound, to Onyx Pharmaceuticals in a deal that has generated a $13m upfront payment and has the potential to generate up to $307m in additional development and commercial milestones, together with a royalty on worldwide sales.
The ratios indicate that the company is effectively managing its resources and funds. As of March 2008 the company don't have any bank overdrafts or bank borrowings. The net revenue has increased from £26.8m, 2007 to £42.9m in 2008 with the gross revenue of £75.0m. The profit before tax was £10.7m and the profit after tax was £8.8m which has increased significantly from the previous year where profit before and after tax is £2.6m and £2.4m respectively. The tax charge of £1.9m arose primarily as a result of £1.8m of withholding taxes on the semi-conductor technology licensing deal. Total equity has increased during the year (as at March 2008) by £7.9m to £55.2m. The benefit pension plan scheme investments for the year were £1.9m and acquisition costs were £1.7m on patents and fixed assets.
The overall performance of BTG is good when compared with the data of Concateno. BTG has high revenue from the marketed products and it has strong cash position as on March 2008. BTG has no debts for the period which shows the strong cash position of the company. BTG uses very little debt and the debt/capital ratio is 0.01%. The efficiency, investment, liquidity and profitability ratios indicate that the company is managing its assets and liabilities effectively and the investment on development and research were generating good profit for the company. There are no concerns raised about the company.
Appendices:
Balance sheet and Income Statement of BTG (as at March, 2008)
Balance sheet and income statement of Concateno for the year 2007
Consolidated balance sheet as at December 2007
Consolidated Cash Flow statement for the year ended December 2007
BTG Key Figures
(at previous day's close) as on Feb,5 2010
Market Cap.
450.47
m
Shares In Issue
257.56
m
Prev. Close
176.10
PE Ratio
-
Dividend Yield
-
%
EPS - basic
-7.10
p
Dividend PS
0.92
p
Dividend Cover
-
Cash Flow PS
-0.70
p
Return On Equity (ROE)
-6.16
%
Operating Margin
-15.83
%
PEG Factor
-
EPS Growth Rate
-543.75
%
Dividends PS Growth Rate
-
%
Net Debt
38.60
m
Gross Gearing
35.46
%
Quick Assets
107.80
m
Net Working Capital
48.60
m
Intangibles / Fixed Assets
92.75
%
Turnover PS
27.72
p
Pre-Tax Profit PS
-4.39
p
Retained Profit PS
-5.09
p
Cash PS
30.36
p
Net Cash PS
3.30
p
Net Tangible Asset Value PS *
6.52
p
Net Asset Value PS
82.54
p
Spread
0.50 (0.28%)
BTG Share price (5 years)
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BTG Value and Price chart
