The market for blood plasma has shown unremitting growth in the past years growing at a compound annual growth rate of approximately 10% over the past decade, and is projected to expand steadily in the years to come. The blood plasma market represents a US$11.7 billion global industry of which an estimated US$1.7 billion is sold in Asia, including China and India. Not just the blood plasma, but even the blood collection is also anticipated to grow with a CAGR of 10.11% through 2016, an increase in the aging population, growing number of cancer therapies, and rise in surgical operations are among few reasons responsible for this growth of blood plasma and blood collection equipment market.
Haemonetics (NYSE:HAE), pioneers in the blood-collection equipment market with around 75% market share in the U.S., is poised to capitalize on this market growth. For the fiscal 2014, Haemonetics reported revenue of $938.5 million, up 5%. Base revenue, exclusive of the whole blood business, increased 1% on a constant currency basis. To continue registering growth in this expanding market, the company is focusing on developing innovative solutions for managing blood with its acquisition strategy.
- Warning! GuruFocus has detected 6 Warning Signs with HAE. Click here to check it out.
- HAE 15-Year Financial Data
- The intrinsic value of HAE
- Peter Lynch Chart of HAE
Growth from blood plasma
Haemonetics expects growth opportunities from its plasma business, which is expected to grow significantly with long-term contracts. For the fiscal 2015, the Company expects $40-$50 million of revenue growth from its identified growth drivers of Plasma, TEG and Emerging Markets. Plasma business currently accounts for around 30% of Haemonetics’ total revenue, and it provides equipment for plasma collection. 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 . Grifols is world's leading provider of plasma therapies and had acquired Talecris Holdings for $3.4 billion. Post-acquisition, Grifols increased its number of plasma therapies, which increased its demand for raw plasma. As its primary supplier, Haemonetics fulfills this demand resulting is revenue growth for Haemonetics.
The global plasma market is expected to grow at a CAGR of 10.31% over the period of 2012-2016, with the major growth 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.
The plasma business remains sturdy and the Company expects 7-9% growth in Plasma disposables in fiscal 2015.
Acquisitions that enables future growth
Whole blood is obtained through blood donation from which 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 blood collected globally uses a manual process that includes record keeping, handling, and transportation. This provides ample opportunity for Haemonetics, which is working towards the improvement of existing processes through acquisition.
In the past, Haemonetics acquired the blood-collection business of Pall Corporation for $550 million. Haemonetics blood collection products use blood filter equipment, and the Pall acquisition brought the filter in-house, providing some level of vertical integration and reducing 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. Pall will deliver manufacturing assets to help launch Haemonetics' automated whole blood collection system in 2016.This will provide growth opportunity in the above mentioned manually handled whole blood market.
In addition to Pall’s acquisition, Haemonetics also acquired Hemerus Medical, a whole blood collection company, 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 market will certainly provide a long-term growth driver for the company primarily based on its acquisition strategies. The plasma market is also a potential revenue generator for the company. I believe that the stock price will continue to rise in the upcoming years because of the above discussed strategies.