Here's a look at how the five largest companies in the biotech sector fared last month and how Covid-19 provided opportunities for some but severely hampered others.

1. CSL Limited (ASX: CSL)

CSL is the largest company in the biotech sector by market cap and is the largest company by market cap on the ASX. CSL experienced another year of strong demand for its products with the company reporting revenue of US$8.8 billion for FY20, up 7.2% on the pcp with NPAT of US$2.1 billion, an increase of 9.6% on FY19. The company did not experience a material revenue impact from the Covid-19 pandemic in FY20. The biggest impact of Covid-19 on the business has been a reduction in plasma collection as a result of government-imposed restrictions on movement. Plasma is an essential raw material in a number of the company’s products and the inability to collect sufficient levels of plasma may result in shortages. The company opened 40 new plasma collection centres in the US in FY20 and will seek to open a further 20-30 collection centres in FY21.

One of the key developments for the company in FY21 will be the progress of the Covid-19 vaccine that the company is developing in partnership with the University of Queensland. The vaccine candidate has commenced clinical trials and if successful the company believes the vaccine will be available for use in 2021.

The company provided NPAT guidance for FY21 of US$2.1 billion to US$2.27 billion (constant currency), representing growth of over 8% on FY20. CSL’s share price was up 18.7% over the 12 months to 31 August 2020.

2. Fisher & Paykel Healthcare Corp. Limited (ASX: FPH)

FPH designs, manufactures and markets products and systems for use in respiratory care, acute care, surgery and the treatment of obstructive sleep apnea (OSA). FPH has been the best performer of the big five from a share price perspective over the 12 months to 31 August 2020 with the share price rising 115.4%.

The company has a March year-end and therefore the company’s FY20 results do not include the June quarter. FPH announced a record result for its FY20 trading period, with revenue up 18% to NZ$1.26 billion and NPAT of NZ$287.3 million, an increase of 37% of FY19. The revenue increase was largely driven by growth in the use of the company’s Optiflow nasal high flow therapy, demand for products to treat Covid-19 patient, and strong hardware sales. The company stated that the company was on track to deliver strong growth for FY20 before the coronavirus pandemic and in January, the demand for FPH’s respiratory humidifiers accelerated in an unprecedented manner.

The company breaks its products down into two groups: (1) Hospital products; and (2) Homecare products. The hospital product group has experienced increased demand as a result of the Covid-19 pandemic, while the Homecare product group will likely be adversely impacted on the back of a lower OSA diagnosis rate and OSA mask resupply levels.

On 18 August, the company announced a trading update for FY21. For the first four months of FY21, the company has experienced strong demand for hospital respiratory care products, which continue to track the spread of Covid-19 around the world and reflects a changing trend in clinical practice to lead with nasal high flow therapy for the treatment of Covid-19 patients in hospital. Hospital hardware sales have increased over the first four months of FY21 with a revenue increase of 390% (constant currency) to July-end compared to the pcp. Overall hospital product group revenue has grown 91% in the first four months of trading on
the pcp. The company continues to see lower diagnosis rates of OSA globally, coupled with mildly elevated rates of mask resupply. However, growth in home respiratory support is more than offsetting a decline in OSA flow generators, resulting in homecare revenue growth of 5% to July-end compared to the pcp.

Based on a number of assumptions the company has provided forecast FY21 revenue of ~NZ$1.61 billion (+27.8% on FY20) and a NPAT range of ~NZ$365 million to NZ$385 million (+27%-34% on FY20).

3. Cochlear Limited (ASX: COH)

COH provides implantable hearing solutions globally and until the coronavrius pandemic had experienced year-on-year revenue and NPAT growth since FY2015 and a ROE of in excess of 40%. Covid-19 significantly impacted the company’s sales with revenue falling by almost 60% in April. The impact was felt as elective surgery across the globe was halted and hospital resources reallocated for the treatment of Covid-19 patients. There has been some recovery in sales since April with a significant level of variability across countries, with developed markets recovering more quickly than emerging markets.

To shore up its balance sheet, the company raised $1.1 billion in March and extended its debt facilities. The company also suspended its dividend until trading conditions improved.

The company reported that cochlear implant units declined 7% in FY20. 1H’FY20 units were up 13% while 2H’FY20 units were down 26% with a large impact experienced in 4Q’FY20. The company reported FY20 revenue of $1.35 billion, down 6% in the pcp and a net loss of $238.3 million, compared to a $276.7 million net profit in FY19. The loss included a one-off $416.3 million patient litigation expense.

The company will provide a trading update at its AGM in October however has not provided FY21 forecasts at this stage due to the high level of uncertainty around the resumption of surgeries and the continued impact of Covid-19 in operating markets.

COH’s share price has been the worst performer of the big five over the 12 months to 31 August 2020 with the company being the hardest hit by the Covid-19 pandemic. The share price declined 11.9% over the 12-month period. Although it has declined the share price has been surprisingly resilient given the environment.

4. Resmed Inc (ASX: RMD)

RMD develops, manufactures, distributes and markets medical devices and cloud based software applications that diagnose, treat, and manage respiratory disorders.

The company reported revenue of $2.96 billion in FY20, an increase of 13.4% on FY19, and NPAT of $621.7 million, a 53.7% increase on FY19.

Covid-19 has seen an increased demand for RMD’s ventilator devices and masks, which can be used to treat Covid-19. Manufacturing capacity was restrained due to the varying government restrictions, restricting the company’s ability to initially meet the demand for its products. The company believes the global demand for these devices has largely been met, however, this may change depending on the ability of regions to contain and control infection rates.

As was experienced by FPH, the company observed lower demand for sleep devices and masks during 4Q’FY20 and the company expects that Covid-19 will lead to a temporary decrease in demand from new patients for these products in FY21 with restrictions that have been placed on diagnostic pathways.

RMD’s share price has increased 19.6% over the 12 months to 31 August 2020. Despite the strength of the results, the share price has experienced weakness since it released its results to the market which we attribute to the lower demand expected for sleep devices in FY21, slower growth in SaaS products and the expectation that ventilator sales will decline in FY21 with the company of the view global ventilator demand has been met.

5. Ansell Limited (ASX: ANN)

ANN performed strongly in FY20 with the Covid-19 pandemic resulting in significant demand for the company’s products in 2H’FY20 with ANN being a leader the global PPE sector. This demand is expected to continue in FY21.

The company reported revenue of $1.6 billion, up 9.3% on FY19. Revenue growth was largely a result a result of demand in 2H’FY20 with 1H’FY20 revenue up 2.4% and 2H’FY20 revenue up 12.7%. NPAT was up 19% on FY19 adjusted for the one-off costs of the Transformation Program.

ANN has two business units: (1) Healthcare Global Business Unit (HGBU) which manufactures and markets solutions for hospitals, surgical centres, dental surgeries, veterinary clinics, first responders, manufacturers, auto repair shops, chemical plants, laboratories and pharmaceutical companies.; and (2) Industrial Global Business Unit (IGBU) which manufactures and markets high-performance hand and chemical protective clothing solutions for a wide range of industrial applications including automotive, chemical, metal fabrication, machinery and equipment, food, construction, mining, oil and gas and first responders.

FY20 revenue growth was driven by the HGBU with sales up 12.5% with Exam and Single Use products driving growth in this business unit. Revenue in the IGBU was up 2.2% with chemical protection performing strongly, up almost 8%, while mechanical sales were down 2% on the pcp.

ANN shares were the second-best performer of the five companies with the share price up 41.9% over the 12 months to 31 August 2020.