Friday, April 20, 2012

Revenues And Profits, There is a Difference

Healthcare markets are big.  Billion-dollar market sizes are not uncommon for markets that cater to millions.  Those large numbers can confuse those outside the industry, especially those who are critical of the industry.  

As the leading estimator of the market for vaccines, some of the heaviest traffic we get is from those who do not agree with the progress of the vaccine market in recent years, the anti-vaccine community. We are happy to be cited in these blogs, and we note that as business information experts we have reviewed at different times nutraceuticals, wellness programs and holistic businesses these websites might favor.

I cite one article here:
"According to market research firm Kalorama Information, vaccine sales should double, from $19 billion in 2009 to $39 billion in 2013 – five times the $8 billion in vaccine sales in 2004......soon we’ll be asked to roll up our sleeves for vaccines thought to prevent, “Alzheimer’s disease, AIDS, pandemic flu, genital herpes, malaria, tuberculosis, urinary tract infections, grass allergies, traveler’s diarrhea, addiction and relapse – you name it, the pharmaceutical industry is working on a vaccine to supposedly prevent it."

That is an accurate quote of our report. Now we'll stay out of debate of personal decisions to accept a vaccine or not. I'll leave it to these websites to argue the merits of vaccination or whether parents should decide to vaccinate. Though we are experts in healthcare business opportunities, science and personal liberty are best for others to argue.

In most of these articles, revenues and profit are confused. An article will say 'Look at the profit the vaccine industry is making' and then cite our revenue number.   But revenues are very different from profits.  It is not uncommon for a company to make big revenues but lose money in the process.

Kalorama estimates revenue rather than profit generally, as revenue can broadly define the opportunity for an entire industry, where as profit is better left to analysts tracking individual companies about how well they are performing.

Profits are somewhat smaller in vaccines, though there are less marketing costs than in traditional sales. CSL Biotherapies, a good model as they are mostly a vaccine company. They made 4.1 billion in 2011 but most of that money went to materials, facilities or employees. Only 21% or revenues went to profit.