P/S multiplied by S/A reveals outstanding performance among our 12 stealths. It's difficult to excel in more than one key
metric; Celgene and Genzyme, for example, are great on profit to sales but poor on sales to assets; Watson is strong on S/A,
but leaves something to be desired on Profit to Sales. A company that puts it together to become a double threat ... well,
that's a thing of beauty.
In 2007, four stealth pharmas hit their marks, demonstrating that they know there are two ways to make money, not just one.
They also succeeded in doing more with fewer assets while improving asset productivity. Gilead and Novo Nordisk are in a blue-ribbon
call all their own; honorable mentions go to King and Endo. Even though King's sales growth for 2007 was flat, the company
did a good job of margin management by reducing SGA spend; the same goes for Endo, whose sales growth was up 19 percent, but
whose SGA spend growth was far less.
Finally, Sales to Employees, a measure of employee productivity, is the metric most resistant to manipulation. You get what you see with this blue collar,
lunch pail measurement. Gilead was the big winner with an outsized $1.4 million in S/E, followed by King. Endo comes in third,
outpacing the big three biotechs in Big Pharma (in 2006 numbers).
SALES PER EMPLOYEE
Perhaps the best kept secret in the industry is Gilead. The San Francisco–based biotech and market leader in HIV drugs is
operating on all cylinders. The market is impressed with its performance (HIV, hepatitis) and its potential (hypertension,
cystic fibrosis). Its soaring growth rate of 40 percent qualifies it as a bona fide portfolio superstar, and its 83 percent
markup reflects what the Sage of Omaha, Warren Buffet, calls moat protection—very little price competition. In addition, Gilead
excels at both margin and asset management, and its employee productivity runs away from the best of Big Pharma. Without quantifying
and ranking metrics, we can confidently conclude that 2007 was Gilead's year.
Bill Trombetta is a professor of pharmaceutical marketing at St. Joseph's University. He can be reached at firstname.lastname@example.org