Biosensors continue to outpace industry growth

Fair value S$1.69


• 2QFY13 core PATMI +36% YoY
• Continued market share gains
• Revenue guidance maintained

2QFY13 core PATMI in line but revenue misses
Biosensors International Group (BIG) reported a 28.3% YoY increase in its revenue to US$79.8m and a 35.6% surge in its core PATMI to US$29.2m for its 2QFY13 results. Revenue missed our forecast by 10.7% but core PATMI matched our S$29.3m estimate, largely due to better-than-expected operating margin and lower effective tax rate. BIG’s strong 56.2% YoY product revenue growth was driven by a solid 140% increase in units sold for its drug-eluting stents (DES). However, this was partially offset by weaker licensing revenues (-29.4% YoY) from Terumo Corp (Terumo), which can be attributed to market share loss for its Nobori® DES due to new product launches by three competitors and a downward revision (~15%) in reimbursement prices in Japan. For 1HFY13, revenue and core PATMI jumped 39.3% and 25.7% YoY to US$166.1m and US$57.5m, respectively.

Licensing revenues likely to improve HoH in 2H

Terumo would increase its focus on regaining its Nobori® market share in Japan in 2HFY13. The absence of major new product launches in 2HFY13, coupled with more aggressive marketing activities, would likely enable its sales to return to normalised levels as hospitals typically stock up on new product launches.

Maintain BUY
BIG highlighted that it continues to see robust growth in the EMEA and Asia-Pacific regions, which we believe was underpinned by its strong clinical evidence. Although the European DES market was flat or even declining for certain countries, BIG still managed to deliver higher YoY sales growth there, which implies market share gains from competitors. Management maintained its revenue growth guidance of 20-30% for FY13. We now expect sales to come in at the lower end of BIG’s guidance after trimming our FY13 forecast by 3.2% (FY14 by 2.6%). Our PATMI estimate is only slightly lowered by 0.3% for FY13 and 0.6% for FY14 as we raise our margin assumptions. Our DCF-derived fair value estimate inches down from S$1.70 to S$1.69. BIG’s share price has rebounded 6.5% since we highlighted in our 2 Nov 2012 report that its recent sell down was likely overdone. Maintain BUY.

Stent tenders delayed in China
Management updated us during the analyst teleconference call that competitive pressures were strong in China, but growth was still achieved there. In addition, the stent tenders in China have been delayed and hence we believe that the ASP erosion in China would likely only impact BIG’s 4QFY13 results at the earliest. For its growth strategy in China, BIG would focus on developing and launching its next generation Excel stent, while it would also file for the State Food and Drug Administration (SFDA) approval for its polymer-free BioFreedom™ drug-coated stent once it obtains the CE Mark.