Grifols & The Plasma Market - Part II
Former Northwest Division Medical Director at Grifols and former Associate Corporate Medical Director at BPL Plasma
inpractise.com/articles/grifols-and-the-plasma-market-part-ii
Grifols SA
Why is this company interesting?
Founded in 1940, Grifols (GRF) is a family-operated, vertically integrated leader in the high BTE, USD$30bn+ global blood plasma oligopoly (along with CSL, Takeda, Octapharma which together control ~75% of the market).
Plasma (the raw material for plasma protein therapy products) has been at historically under-supplied levels following COVID-induced collection challenges. Such has curtailed production of end plasma protein products and therefore sales. However, the COVID raw material shortages have further entrenched the favourable demand-pull dynamics of this volume-driven industry with pricing offsets then supporting predictable unit economics for the major plasma proteins (Ig, Albumin).
GRF’s advantaged business model comprises an integrated discovery, development, collection, testing, value-added manufacturing (plasma protein products), direct marketing and distribution process using a captive commodity (plasma raw material). Given a large percentage of production costs are fixed, scale is essential for access to this captive commodity. These scale benefits, together with supply-chain efficiencies and process know-how crucial to manufacturing yields, drive margins. R&D then further reinforces incumbent advantages while aiding in driving incremental growth through novel use discoveries.
The plasma industry differs in its margin structure vs. conventional pharmaceutical businesses given the use of organic raw material and the costs of collecting such (~50% COGS vs <20%-30% COGS for pharma). However, given the unique sole-source nature of plasma proteins, an absence of competition from generic drugs or substitute products differentiates the plasma industry from other pharmaceutical businesses. Plasma prices have also meaningfully lagged wider pharmacy-industry pricing and are therefore not targets for regulatory/government pricing actions (many plasma products also have orphan drug status).
Competitive advantages of Grifols' business stem from a combination of regulatory BTE, niche sub-market dynamics, customer affinity borne of stellar reputation and cost v. utility, and intangible assets in the form of best-in-class industry process knowledge and R&D. GRF also has impeccable safety and quality record.
Former Northwest Division Medical Director at Grifols and former Associate Corporate Medical Director at BPL Plasma
Interview Transcript
This is a snippet of the transcript, sign up to read more.
Copyright Notice
This document may not be reproduced, distributed, or transmitted in any form or by any means including resale of any part, unauthorised distribution to a third party or other electronic methods, without the prior written permission of IP 1 Ltd.
IP 1 Ltd, trading as In Practise (herein referred to as "IP") is a company registered in England and Wales and is not a registered investment advisor or broker-dealer, and is not licensed nor qualified to provide investment advice.
In Practise reserves all copyright, intellectual and other property rights in the Content. The information published in this transcript (“Content”) is for information purposes only and should not be used as the sole basis for making any investment decision. Information provided by IP is to be used as an educational tool and nothing in this Content shall be construed as an offer, recommendation or solicitation regarding any financial product, service or management of investments or securities. The views of the executive expressed in the Content are those of the expert and they are not endorsed by, nor do they represent the opinion of In Practise. In Practise makes no representations and accepts no liability for the Content or for any errors, omissions, or inaccuracies will in no way be held liable for any potential or actual violations of laws, including without limitation any securities laws, based on Information sent to you by In Practise.
© 2024 IP 1 Ltd. All rights reserved.