1 Blood Management Company for Red-Hot Returns
Revenue for the global blood processing products and consumables market is expected to grow at a compound annual growth rate of 8.9% over the next six years, reaching a market worth $49.16 billion in 2019. An increase in the aging population, the growing number of cancer therapies, and the rise in surgical operations are among a few of the reasons behind this growth.
Haemonetics , the market leader in the blood-collection equipment market with around 75% market share in the U.S., is best positioned to capitalize on this market growth. To continue registering growth in this expanding market, the company is focusing on developing innovative solutions for managing blood through an acquisition strategy.
Growth from plasma
Haemonetics expects growth opportunities from its plasma business, which is expected to grow significantly with long-term contracts. The company is betting on continued growth from its plasma and blood management segments, which increased its net revenue 24% year-over-year to $219.5 million in the first quarter of fiscal year 2014.
The plasma business currently accounts for around 30% of Haemonetics' total revenue and also provides equipment for plasma collection. Around 98% of its plasma business is under contract until the third quarter of fiscal year 2015. One such contract includes a deal with Haemonetics' major plasma customer, Grifols . Haemonetics will supply raw plasma to Grifols for processing, which is further used in plasma therapies.
Grifols acquired Talecris Holdings, the U.S.-based biotechnology company, two years back. The $3.4 billion acquisition made Grifols the world's leading provider of plasma therapies. Grifols increased its number of plasma therapies after the acquisition, which increased its demand for raw plasma. As its primary supplier, Haemonetics fulfills this demand.
The global plasma market is expected to grow at a CAGR of 10.31% between 2012 and 2016, with the major growth taking place in the developed U.S. market due to increasing demand to treat autoimmune and neurological conditions. Autoimmune diseases arise out of an inappropriate immune response in the patient's body against foreign substance or tissues present in the body.
Grifols' acquisition of Talecris will provide a long-term growth opportunity for the market leader. The cost synergies from the acquisition increased Grifols' net revenue 4.9% year-over-year in the first half of 2013 to $1.6 billion from its bioscience division. The price of plasma has been rising over the last two years and is expected to continue rising as the U.S. plasma market expands.
Whole blood market
Whole blood is obtained through blood donation when no constituent like red blood cells, white blood cells, plasma, or platelets is removed. Whole blood management has not seen much improvement since 90% of the blood collected globally uses a manual process that includes record keeping, handling, and transportation. This provides ample opportunity for Haemonetics, which is working toward the improvement of existing processes through acquisition.
Haemonetics acquired the blood-collection business of Pall for $550 million. Haemonetics' blood collection products use blood filtration equipment, and the Pall acquisition brought the filter in house to provide some level of vertical integration and reducing the manufacturing cost of producing filter equipment. Pall's existing and under-development products are expected to help Haemonetics launch its automated whole blood collection system in the next few years. This will provide growth opportunities in the manually handled whole blood market. The acquisition is expected to increase revenue 70% year-over-year to $48 million in the second quarter of fiscal year 2014.
Pall will deliver manufacturing assets to help launch Haemonetics' automated whole blood collection system in 2016. In the short term, the acquisition increased Pall's life sciences revenue from $318 million in the third quarter of 2012 to $326 million in the third quarter of 2013.
In addition to Pall's acquisition, Haemonetics accomplished the acquisition of Hemerus Medical, a whole blood collection company, in April for $24 million. This acquisition will provide Haemonetics with a unique capability in the whole blood market because of SOLX technology. Hemerus developed SOLX, a specialized red blood cell storage technology that extends the life of red blood cells. According to the FDA, red blood cells can be stored for up to 42 days, and SOLX can extend this storage period to 56 days. This extension of the storage period will make blood donations viable for a longer period, allow easier inventory management of red blood cells, and minimize wasting blood.
Haemonetics' whole blood segment will prove to be a long-term growth driver for the company because of its acquisition strategies. The plasma market is also a potential revenue generator for the company. I believe that the company's stock price will continue to rise in upcoming years because of these strategies.
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The article 1 Blood Management Company for Red-Hot Returns originally appeared on Fool.com.Madhukar Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!