This was published 2 years ago
The billionaire who won’t bid for Australian government health work
By Emma Koehn
The spectre of rising interest rates, inflation and the geopolitical shockwave of war in the Ukraine, is haunting corporate Australia, but the billionaire boss of medical imaging software business Pro Medicus is unfazed.
Dr Sam Hupert, who began his career as a GP, has seen all sorts of market conditions since co-founding the company with Anthony Hall in 1983. He said the company would be protected from global post-pandemic economic turbulence because of the essential nature of its products, and the company’s cautious approach to debt.
“We’re a little bit of a hybrid because we’re a growth company but we make money; we don’t have debt, and we pay dividends,” said the Pro Medicus chief executive. “We are financially conservative, that’s in our DNA.”
“We are financially conservative, that’s in our DNA,” said billionaire Sam Hupert, the co-founder of medical software imaging company Pro Medicus. Credit: Simon Schluter
Much of the company’s growth has come amid the COVID-19 pandemic of the past two years. The business, which sells imaging software to hospitals and radiology groups, has secured a footing in the US market and inked several long-term hospital partnerships for its products.
Pro Medicus software, which has been developed by co-founder Anthony Hall, is centred around a platform called Visage, which lets radiologists and doctors organise, access and store medical scans, including allowing them to access high-quality imaging remotely. The company is also working on integrating a variety of artificial intelligence tools into its offering, including an algorithm that has been approved in the US, Europe and Australia, which reads mammograms and aids radiologists in assessing breast tissue composition for signs of potential cancers.
Among its clients are the two largest Australian radiology providers, Primary Healthcare and I-Med, the University of California and Novant Health. Pro Medicus has contracts with seven US hospitals but only has a small slice of the $US2.4 billion ($3.3 billion) US software radiology market. It has also expanded into Europe with a German government contract.
“No other competitor we are aware of has made large-scale cloud medical viewer deployments to large hospital networks,” Royal Bank of Canada analyst Garry Sherriff wrote after the company’s half-year results last month.
In February, Pro Medicus reported a half-year net profit of $20.7 million, up 53 per cent. The business is capitalised at just under $5 billion on the sharemarket, with Hupert and Hall each controlling 26 per cent of the stock, worth more than a $1 billion apiece.
“We don’t tender for Australian government work. It’s just not worth the effort.”
Sam Hupert, Pro Medicus chief executive
The two men funded the development of the company prior to its float in October 2000, when it listed at $1.25 a share. They remain the top two shareholders, with the stock trading recently at $46.17.
Hupert said implementing Pro Medicus technology into a hospital operator could be as complex as the software’s development. “It’s very demanding. You have got 400 or 500 radiologists, all geographically dispersed, all going from one system to the other. It’s a big bang.”
As Pro Medicus expands in the US, Hupert said the company would fund growth from its balance sheet, with it having at least $57 million in cash reserves. For now, the company intends to remain debt free. “In these times, it’s important. It may assist us in terms of other [companies’] valuations getting squeezed a bit.”
Fund managers, such as Victor Windeyer, the portfolio manager of Australian Unity’s $200 million healthcare fund, has been impressed by the company’s growth and quality. In the most recent half-year results, Pro Medicus’ revenue grew 40 per cent to $44.3 million. The company’s Australian revenues are a small slice of its potential – Pro Medicus generated $7 million in software sales in the half in Australia– while the bulk of revenues, $33 million, was from the United States.
Global market insights firm Statista has forecast that the digital health tools market will be worth $US417 billion ($567 billion) worldwide by the end of next year.
Pro Medicus is the eighth largest ASX health stock, and joins a cohort of homegrown companies that have significant operations outside of Australia, including ResMed, CSL and Fisher & Paykel Healthcare, and Ramsay Health Care.
The pandemic of the past two years has renewed the focus on Australian medical equipment manufacturing and the value of fostering local healthcare innovation.
Asked how federal and state governments could create a better environment for the sector, Hupert said an overhaul of local procurement processes would be a good start, such as streamlining the process for healthcare tenders, which have “too many gates and hoops”. He said contracts were often decided by those not working on the frontline.
The Australian founded Pro Medicus, which operates in the US and Europe, doesn’t tender for domestic government work because it’s not worth the effort.Credit: Jessica Shapiro
“It’s telling that we don’t tender for Australian government work. We think it’s just not worth the effort,” he says.
“It is led by bureaucrats, with clinicians very much in the background. How would a bureaucrat know what makes a good clinical desktop for a radiologist?”
As the company expands its reach into Europe in coming years, Hupert says it’s natural for homegrown medical technology businesses to think outside of Australia. “In my mind, you make it overseas like we’ve done, or you don’t make it.”