Taking on Johnson & Johnson
Immucor aims to lead world in blood testing
Roni B. Robbins - Staff Writer
July 12, 1999 - Atlanta Business Chronicle
Immucor Inc. seems to believe in the old adage, "If you can't beat them, join them."
The Norcross-based company, which makes automated equipment for testing blood before its use in transfusions, has during the past nine years acquired six competing companies that specialized in blood-testing products.
The deals have helped Immucor (Nasdaq/NM: BLUD) capture more than half of the North American market, boosting Immucor ahead of its rival, the Ortho-Clinical Diagnostics Inc. division of medical products giant Johnson & Johnson (NYSE:JNJ), based in New Brunswick, N.J.
Worldwide, Immucor has 23 percent of the market share for its products, while its biggest competitor, Johnson & Johnson, has 47 percent.
"We are going to be the leader in two and a half to three years," said CEO Edward Gallup.
In North America, Immucor already is the leader with 54 percent of the market, compared with Johnson & Johnson's 46 percent share.
Immucor now is turning its attention to sales of its main blood-testing instrument and to foreign expansion, Gallup said.
Immucor's revenues for 1998 were $39.8 million, and its net income, $2.1 million.
He predicted that by the end of fiscal 1999, revenues would increase by 46 percent to $58 million and earnings per share would increase by 64 percent, from 25 cents to 41 cents. Immucor's stock price has been on an upswing in recent months after remaining fairly stable for the past few years. The stock closed at $14.13 on July 6.
"We think we're only scratching the surface" as far as financial growth is concerned, Gallup said.
Gamma deal
Recent Immucor acquisitions include last year's $25 million purchase of Houston-based Gamma Biologicals Inc. and the $4.5 million acquisition in May of the blood-bank division of Biopool International Inc. (Nasdaq/NM: BIPL). The Gamma acquisition -- Immucor's largest -- boosted its work force from 250 employees to 367.
"I've been in this business since 1964. It's the only business in the world in which the prices have gone down every year," Gallup said. Prices go down because of all the competition, he said. But by buying up its competition and consolidating the marketplace into two key players, Immucor can raise its prices, he said.
Immucor also was able to expand its business in Europe, where previously it was weak and Gamma was strong, he said. Half of Immucor's business is conducted in Europe. It has operations in Germany, Italy, Spain, Portugal, France, Belgium and the Netherlands.
On the other side of the world, Immucor last month expanded its agreement with its Japanese distributor, Sanko Janyaku Co. Ltd., for that company to spend about $4 million over the next five years for 50 of Immucor's automated blood-testing instruments.
Immucor also is pumping up its sales in Indonesia and Hong Kong and has started new business in China, Singapore, Malaysia and Taiwan, Gallup said.
Immucor's local customers include Promina Health System, which has 13 Atlanta-area hospitals, and Tenet Healthcare Corp., which owns two hospitals here. In addition to hospitals, Immucor's target market is donor centers and reference laboratories.
Founded in 1982 by a group of blood-bank professionals, Immucor originally made and sold blood-bank reagents (biological substances used for analysis) and related products. Now, Immucor has a built-in sales channel for its reagents. Customers that buy the company's blood-testing instruments agree to use Immucor's reagents for five years.
The company introduced its first testing instrument, the Dias Plus, in 1997.
To expand its market potential, the company came out with equipment in June 1998 called Rosys Plato, for medium to large customers. A month later, Immucor began selling its premier instrument, the fully automated ABS2000 blood-bank system.
Full automation increases accuracy and allows health-care customers to save money by reducing technical staff needed to read test results.
Gallup said nothing like the ABS2000 is on the market, as evidenced by the time it took for the U.S. Food and Drug Administration (FDA) to approve the equipment for sale. The company expected FDA approval in six months, but it took more than two years, Gallup said.
But there are some benefits to a long wait. Immucor's ABS2000 probably will not face any competition for two to three years because no other companies are in clinical trials on a similar product and because of the long approval process, he said.
Last month, Immucor also began selling its ReAct equipment, which screens for antibodies in blood. The instrument was launched despite a pending patent infringement lawsuit involving the equipment filed last year against Gamma Biologicals, the previous seller of ReAct. Immucor doesn't believe the suit has merit and has a high degree of confidence in the product, Gallup said. He predicted ReAct would bring in at least $1 million in its first year and $20 million in five years.
Analysts' predictions
Health-care analysts who watch the company are bullish about its future.
Moving from partially to fully automated equipment will allow Immucor to attract an increased share of the market in the United States and abroad, said David Rogers, vice president and director of strategic and technical research for Marion Bass Securities Corp. in Charlotte, N.C.
Stephanie Haggerty, a health-care consultant for Register & Akers Investments Inc. in Atlanta, predicted the company would soon see 40 percent to 50 percent growth.
Having a head start over other players in the automation market gives Immucor an edge, Haggerty added. "It's a pretty good position to be in. To me, in the near-term forward, their progress is pretty well solidified."
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