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Research Outline

Prepared for Jeffrey F. | Delivered February 12, 2020

BioTech Markup Benchmarking

Goals

To provide at least 3 case studies/examples that show the retail/wholesale markup of good in the health-tech vertical (especially biotech goods). Retail markup is the difference between the price of a product and the cost of that product; markup is the ratio of gross profit to sales price.

Early Findings

  • According to Todd Staples, Account Representative at Medtronic, the average markup that a distributor adds to the cost of a medical consumable is about 20-30% for consumables that fall into FDA Class 1 (i.e. consumables that are not commodities).
  • "Distributor markup is generally 20%, but depending on the industry, the markup could be as low as 5% or as high as 40%."
  • Fast moving consumer goods generally have a distributor markup of 3-10%, while retailers of these products have a markup of 8-40%; meanwhile the average markup rates for electronics are 3-7% (for both distributors and retailers).
  • "The average net profit margin for drug companies, including pharmaceuticals and biotech, was about 12.5 percent to 14 percent, according to a January 2018 study by New York University’s Stern School of Business."
  • According to McKinsey & Company, in the medical device industry the average cost of goods sold is equivalent to 41% of total industry revenue.
  • According to CSI Market, the average operating margin for medical equipment and supply companies is about 2.87%, while the average gross profit margin is around 12.1%.

Gross Profit Margins of Leading BioTech Companies

  • "Gross profit margin is a metric used to assess a company's financial health and business model by revealing the amount of money left over from sales after deducting the cost of goods sold."
  • Amgen, Gilead Sciences, and Celgene Corporation are key players in the U.S. biotech industry.
  • Amgen has a gross profit margin around 80%.
  • Gilead Sciences has a gross profit margin around 78%.
  • Celgene Corporation has a gross profit margin around 96.31%.

Results of Early Findings

  • The initial leg of this research failed to produce any results which showcase examples of markup rates for specific med tech/bio tech companies and products.
  • It appears that only industry averages are publicly available which address this topic. This could likely be due to the fact that many companies do not make the costs of their individual products publicly available due to competitive and reputational purposes.