A business need not be profitable all the time

This must be one of the most wiered statements you must have ever read about fundamentals of business.After all every text book says the same stereotypical things like the business should have great margins, should have great return on invested capital, should have low fixed costs...bla bla bla....But there is one industry that is totally different and none of these rules apply to them. Yeah I mean it and I have some solid data to prove it.

The Industry is BIOTECH industry.Its one of the few industries which are heavily dependent on R&D and the success of the company in growing its research is the main factor that counts. Let us consider the following example.

ILLUMINA (ILMN)- Following is its 5 year stock performance.

As we can see that the stock has just been on tear for last 5 years. The company was founded in 1998. The best way to get the snapshot of the company's progress since its inception is looking at its stockholder's equity.

Additional paid in capital            : $1,566 mn
Accumulated deficit                 : ($309 mn)
Treasury stock at cost               : ($322 mn)
TOTAL BOOK VALUE          : $939 mn

Following has been the company's revenues and earnings last 8 years

YEAR               REVENUES               INCOME
2008                   $573 mn                       $50 mn
2007                   $366 mn                     ($278 mn)
2006                   $184 mn                     $39 mn
2005                   $73 mn                       ($20 mn)
2004                   $50 mn                       ($6 mn)
2003                   $28 mn                       ($27 mn)
2002                   $10 mn                       ($40 mn)
2001                   $2 mn                         ($24mn)

Its interesting to see that the company has nade losses in 7 out of last 8 years. But the stock is a 10 bagger. But this does not mean that the intrinsic value of the company has not increased. Because such sustained long term growth in stock does not come from mere speculation.

Usually in other businesses the growth in intrinsic value is reflected in the growth in earnings but not in case of most of Biotech companies. So what are the factors we need to measure while analyzing a biotech business???