Health Check: EBOS Group’s earnings surge – or plunge – but bottom line is, pharmacies are in rude health

With underlying earnings growth of 7%, chemist owner and supplier EBOS Group is tapping healthy conditions in the sector.

EBOS Group's numbers might be open to interpretation, but the health of the chemist sector is more clear cut. Pic via Getty Images

• EBOS has the prescription for growth, despite the loss of its Chemist Warehouse supply contract

• Thanks to vapes and medicinal cannabis, chemist supplier PharmX is on a high

• Optiscan does the Big Reveal on its pathology imaging device

Trans-Tasman chemist and drug wholesaler EBOS Group (ASX:EBO) has reported a 9% slide in underlying half-year earnings to $291 million – or a healthy 7% bounce.

Take your pick.

Similarly, revenue plunged 9% to $5.99 billion – or soared 9.5%.

The difference is explained by the company’s previous loss of a contract to supply Chemist Warehouse, which last week back-door listed via Sigma Healthcare (ASX:SIG).

The positive, unofficial figures exclude the impact of the contract in the previous corresponding half; the official reported numbers do not.

Either way, net profits declined. Officially, they fell 19% to $110 million; on an underlying basis they dropped 14% to $131 million.

It’s always a moot point whether normal business events such as the loss of a contract should be brushed aside.

But that’s the way most investors – and analysts – like to look at things.

EBOS shares today were around 5% lower in a tariff-spooked broader market.

This was despite the fact management has reiterated expectations of underlying earnings of $575-600 million for the full year (up 5-10%).

The 7% first half increment is “supportive of this guidance”, management says.

EBOS owns the Terry White Chemmart chain, which it has grown to 616 outlets (up 52 stores on the half).

Management is positive about conditions in pharmacy land.

With dispensary sales up 13%, there’s no sign of the doom predicted by the Pharmacy Guild after the government changed the rules to enable patients to buy their meds stock for up to 60 days, rather than one month.

EBOS generated $100 million from new wholesaling contracts, equating to $450 million annualised.

In December the federal government signed off on an updated $4.21 billion agreement, to subsidise distributors so that prescription drug can be accessed anywhere in Australia.

EBOS says the compact will provide “modest” funding increases from the current half.

With some analysts opining that Sigma shares are overvalued post-merger, EBOS is an alternative exposure to the pharmacy sector that looks to be in rude health.

Pharmx also rides the pharmacy boom

Still on apothecary-related matters, chemist intermediary PharmX Technologies (ASX:PHX) sees upside in the recent decision to enable chemists to sell nicotine vapes.

The $46 million market cap minnow is intriguing, in that it provides services to 99% of the nation’s chemists.

This is by way of more than 80,000 front-of-store products from various suppliers, or software portals to streamline the pharmacies’ ordering.

In all, Pharmx clips the ticket on around $20 billion of transactions annually.

Pharmx reported half-year revenue of $3.77 million, up 17%.

“Year-on-year performance remains strong with uplifts in revenue and activity across all key metrics,” the company says.

“This is supported by continued positive trends in beauty, vapes and medicinal cannabis.”

Underlying ebitda slipped 3% to $1.04 million.

The company also reported a net profit of $155,000, a turnaround on a previous $1.73 million loss. But as with EBOS, there was noise in that statutory number.

Pharmx CEO Tom Culver recently said pharmacies were benefiting from both the ageing population and an influx of younger customers who buy over-the-counter stuff rather than just a prescription.

“Pharmacists are increasingly important as a healthcare access point,” Culver says.

“They are increasingly taking on the role of GPs and providing services you might not immediately think of, such as vaccines and sleep apnoea tests.”

The company sees an opportunity because on average, Australia’s 19,000 chemists use seven suppliers (and as many as 25).

Many still order via facsimile machine.

'Zoomers' – look that one up.

Optiscan reveals its pathology imaging device

Optiscan (ASX:OIL) has revealed a new microscopic imaging device that extends its product reach to pathology clinics.

Optiscan’s confocal laser endomicroscopy platform enables real-time imaging of tissue, avoiding the need for painful biopsies and analysing samples under an old-fashioned microscope.

Known as In Form – we’ll call it Inform – the tool promises to improve the “efficiency and accuracy of analysis and diagnosis across all pathology workflows”.

Inform will enable pathologists to make on-the-spot decisions, rather than wait for perhaps weeks for a lab report.

Optiscan chief Dr Camile Farah says pathology has lagged radiology and diagnostic imaging in adopting modern, end-to-end digital workflows.

That sounds a bit like those chemists with their faxes.

“Inform is designed to enhance the entire pathology workflow across a range of settings, enabling efficiencies and on-the-spot digital decision making for pathologists to improve diagnostic capabilities.”

Optiscan’s initial commercialisation plans centred on a tool called Invivage, for use by dentists.

The company submitted an approval application to the US Food & Drug Administration (FDA) in August 2022.

But the agency advised that because of the novel nature of the device, the process would take too long.

The company is prioritising development of a variant device, Invue, for real-time surgical guidance (surgeons don’t have to rely on their eyesight or fingers).

Invue’s development centres on a 50-patient breast cancer validation trial at the Royal Melbourne Hospital and Frances Perry House.

Clarity in the fast lane

Radiopharmaceuticals developer Clarity Pharmaceuticals (ASX:CU6) has won FDA ‘fast track’ approval for its third product candidate.

The status applies to Clarity’s copper-isotope based Cu-67 SAR-bisPSMA, to treat adult metastatic castration-resistant prostate cancer patients.

Sector giant Telix won its first FDA approval for prostate cancer imaging, in 2023.

Clarity already has fast-track status for two prostate cancer imaging variants – patients eligible for radical prostatectomy, or with biochemical recurrence following surgery.

Phase III trials are underway.

As its name suggests, fast track allows for an expedited review by the agency. But it does not imply lower approval hurdles.

At Stockhead, we tell it as it is. While Optiscan is a Stockhead advertiser, the company did not sponsor this article.

Originally published as Health Check: EBOS Group’s earnings surge – or plunge – but bottom line is, pharmacies are in rude health