AbbVie, Bristol-Myers Squibb Getting the Most From Workers
Among large pharmaceutical companies, AbbVie (ABBV) and Bristol-Myers Squibb (BMY) are "getting the most out of their workers." At the other end of the spectrum are Sanofi SA (SNY) and AstraZeneca (AZN), according to a June article in Evaluate.
AbbVie is the clear leader of the pack, as measured by sales per full-time employee. Last year, the company became the first member of Big Pharma to surpass more than $1 million in the category. The company has substantially outpaced its peers every year since it went out on its own in 2011.
Bristol-Myers Squibb, meanwhile, is approaching the $1 million mark and should get a boost once the Celgene (CELG) acquisition is completed. Job cuts after the merger could push Bristol-Myers to the top of the pack. That may alleviate concerns some had about the impact of the combination.
When the patent for a big-selling drug expires, it can affect a company's position. For example, in 2011 Bristol-Myers sales were adversely impacted by the loss of exclusivity for its blockbuster drug Plavix. Fortunately, the blow was softened by the success of its immunology business.
While income is still arguably the most important metric for companies, revenue per employee (RPE) is gaining popularity as a way to get a handle on the overall health of a firm's operations, according to marketMOGUL; some think the measure is often overlooked.
A high RPE seems to indicate that a company, regardless of size, is doing a good job at boosting productivity by making the most out of its available resources. This could indicate a brighter future.
In terms of RPE, AstraZeneca is at the bottom of the pharma list. The company has been unable to make up for the revenue loss of Seroquel, Crestor and Nexium.
Astra and the other laggard, Sanofi, can also attribute their bottom-rung positions to weak pipelines and the absence of blockbusters.
Being at the top of the RPE is nice, but how does it correlate with the performance of a company's shares? In the case of Bristol-Myers, not well at all. The company's stock trades at about $51.50, off 13% from where it was five years ago. AbbVie has done better during the same period, but still no great shakes. At $73.76, its priced at a little more than $4 from where it was in October 2014. It traded as high as nearly $116 in February 2018.
At least the two did better than the overall industry. The SPDR S&P Pharmaceuticals ETF (NYSE: XPH) has sunk by more than 22% during the same period.
Sanofi has also outperformed the overall industry. At just under $45, its shares are off only 7% from 5 years earlier. AstraZeneca has bucked the trend. Its shares trade at $43, up more than 15% from October 2014.
In summary, it appears that RPE is something investors ought to look at, though it's just one measure among many to consider when evaluating an investment.
Disclosure: The author holds a position in BMY.
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This article first appeared on GuruFocus.
