American Blood Gives Boost to Asia’s Most Valuable Drugmaker
(Bloomberg) -- Twice a week, thousands of people across the U.S. roll up their sleeves and give almost a liter of their blood plasma -- which will eventually be made into dozens of pharmaceutical products.
Receiving about $50 for close to an hour of their time, they’re helping Australia’s CSL Ltd., which runs 150 U.S. collection centers that gather the straw-colored liquid, extracted from blood by machines hooked up to the person. Powered at least partly by such collection facilities, CSL has become the largest pharmaceutical company by market value in Asia Pacific, and one of the world’s biggest makers of plasma-based therapies.
After doubling its collection locations across the U.S. over the past six years, the company is looking to secure its dominance in the industry by adding as many as 30 more centers there, Chief Executive Officer Paul Perreault said in an interview at CSL’s Melbourne headquarters. That’s a 20 percent increase in the country where CSL collects the bulk of its "raw materials." CSL has more than 1 million registered donors in the U.S., and also has a few centers in Germany and Hungary.
Opening new collection centers is key to growing profits because the added supply would allow CSL to make more of the plasma-based products used in surgeries, and by patients who have autoimmune disorders or problems with blood clotting. The U.S. is particularly important because it is one of the only countries in the world where donors can be compensated for their time. (The U.S. also doesn’t have a history of blood-borne mad cow disease, another reason supply is limited from many other countries.)
While most pharma companies are racing to replenish drug pipelines, CSL has a different challenge: it needs a steady stream of donors willing to keep feeding its stock. With $6.1 billion in annual revenue, 80 percent of which comes from blood plasma products, the Australian company competes with companies like Dublin-based Shire Plc, which entered the business through its $32 billion acquisition of Baxalta in June.
“People are fighting over blood supply which is a key step in the process," said Chris Kallos, health-care equities analyst at Morningstar Australasia Pty Ltd. If CSL is "taking steps to ensure that supply is more stable and that the extraction of the plasma is more efficient, that reinforces our confidence in their margins as they are already the lowest cost manufacturers of plasma in this space," Kallos said.
With a market capitalization of about $32.7 billion, CSL was the biggest pharmaceutical company in the Asia Pacific region by value as of Dec. 15, according to data compiled by Bloomberg. The shares closed at A$96.82 on Thursday.
Plasma is the liquid in which red and white blood cells are suspended inside the body. At CSL collection centers the blood is extracted and the red blood cells and certain other biological materials are separated from the plasma, and then inserted back into the donor’s body. This enables donors to come back as often as twice a week -- because plasma is replenished more often in humans than red blood cells. Donors go through physical tests and samples are also monitored.
Plasma collection accounts for about 50 percent of CSL’s cost of sales, and Perreault said the company has made investments in automation to make the collection process more efficient than competitors.
Donors check in with biometric prints, they line up and go through the queue just like at "Disney World," he said. "Go through the turnstiles, you stop at each station, you get out on the floor, you donate and we charge your debit card and you’re out the door. There’s no big lines, there’s no waiting for charts."
Shire has 87 collection centers in the U.S. and plans to open at least five more in 2017, the company said in an e-mail. It also has seven centers in Austria. “On a key efficiency metric like average collections per center, BioLife is very competitive," Shire said, referring to its collection subsidiary.
Some countries, including Australia, Hong Kong and Malaysia, don’t allow for their citizen’s plasma to be converted and sold. Instead, the governments pay CSL and others to process the plasma into products and then ship them back to their hospitals for use.
CSL is working on building the new U.S. collection centers because it can take as many as three years for one to be fully up and running after regulatory checks and a process to build the donor base.
The collected plasma goes through an initial phase of processing in company’s U.S. facilities before an intermediate product is shipped to Australia or Switzerland for final processing, arriving there in what look like giant slabs of milky popsicles. Its facility in Broadmeadows, Australia, makes Privigen, a blockbuster immune disorder treatment that had more than $1 billion in sales last year.
Founded by the Australian government, for most of its 100-year history, CSL was known as Commonwealth Serum Laboratories, the country’s guardian against major crises in health care. It made vaccines in 1919 when the the Spanish Flu pandemic hit its shores. The company went public in 1994, and went on to collaborate on the development of an HPV, or human papillomavirus, vaccine that Merck and Co. now sells as Gardasil.
To expand, Perreault, who is American, has also been investing more in research and development. One experimental product called CSL 112 is part of the company’s plans to get more out of their blood plasma and is intended to help prevent recurrences in patients who have just had a heart attack.
Perreault also says he’s “very open to acquisitions if it makes sense." He’d be interested in biotech assets in the company’s areas of expertise and smart devices, such as those that can help patients who administer their own medicine. China is another potential area of growth. In China, many plasma-ingredient products are banned from importation except for albumin, a concentrate of plasma proteins from human blood.
CSL is, however, selling biotechnology products which do not contain plasma in China while looking to form a joint venture with a local partner or make acquisitions to gain a further foothold in the market.