Average Profit Jumps 61 Percent for Sector: GILEAD ASCENDS FROM NO. 42 TO NO. 31 IN SV150 SALES RANK
Posted on: Monday, 10 April 2006, 09:01 CDT
By Steve Johnson, San Jose Mercury News, Calif.
Apr. 10--Although biotechnology and medical device companies account for a relatively small share of Silicon Valley's total sales and profits, they made big economic gains in several key areas in 2005.
The biomedical sector's average profit rose 61 percent, to $931 million. By comparison, profits for all SV150 companies topped $37 billion, but increased by just 18 percent.
In fact, biomedical firms had the third-highest profit margin -- 16.7 percent -- among the 11 business sectors tracked by the index. Only companies selling tech instruments and Internet services did better, racking up profit margins of 26.7 percent and 26.2 percent respectively.
Moreover, biomedical sales were up 36 percent to nearly $5.6 billion. That was despite the SV150's exclusion of biotech industry giant Genentech, because it is based outside Silicon Valley in South San Francisco.
Biomedical sales grew more than three times faster than overall sales among the SV150 companies, which rose by only 11 percent.
Based on their total sales, 10 biomedical companies that made the SV150 last year improved their ranking on the list this year. Chief among them was Gilead Sciences of Foster City, which ranked 31 among the SV150 firms in 2005, up from 42 the previous year.
Gilead -- which sells drugs to treat infectious diseases -- earned about 70 percent of its revenue from its medicines for the AIDS virus, HIV. Michael King, director of research for investment bank Rodman & Renshaw, who owns no Gilead stock, worries that Gilead's newer HIV drugs may be taking sales away from its older ones.
But Shiv Kapoor of investment bank Montgomery & Co., who also owns no Gilead stock, said Gilead's HIV-drug sales should remain strong for the foreseeable future.
"Even though new products cannibalize older products," he said, "people continually miss how fast the HIV market is growing."
Contact Steve Johnson at sjohnson@mercurynews.com or (408) 920-5043.
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Copyright (c) 2006, San Jose Mercury News, Calif.
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Source: San Jose Mercury News
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