Grifols: Family Management Culture
Former Divisional Executive at Grifols
inpractise.com/articles/grifols-family-management-culture
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 Divisional Executive at Grifols
Interview Transcript
This is a snippet of the transcript.Contact Salesto get full access.
Regarding the organization as a whole, they got some new management that changed things around. During your time there, can you speak more about the nature of the family culture, how it functioned, where it helped, and where it got in the way? I'm curious about your broad thoughts on that.
When we were purchased, Victor Senior was still in charge. At the end of 2016, in December, we were called into a meeting. Every month, except August, we traveled to Barcelona for our executive committee for diagnostics. We also had a meeting with all the executives to review the quarterly results. However, it was more of a show-and-tell exercise with little debate or discussion. The joke was that it was more important to socialize over lunch or dinner than to present, as they didn't grasp conceptual and abstract ideas. We had a talk track for presentations and another for social gatherings. This was how the US-based management team for the commercial side of the diagnostic division operated.
This is a snippet of the transcript.Contact Salesto get full access.
Regarding the organization as a whole, they got some new management that changed things around. During your time there, can you speak more about the nature of the family culture, how it functioned, where it helped, and where it got in the way? I'm curious about your broad thoughts on that.
At the end of 2016, Victor Senior announced his retirement, and his son Victor Junior, along with his younger brother Raymond, would take over. This raised alarm bells for me and others, but we gave them the benefit of the doubt. A year later, it was clear things were not going well. Raymond, who worked in the same legal company as Tomas, always traveled with him and David. Raymond was involved in all company deals but couldn't understand customer relations or operational issues. He always referred back to agreements rather than addressing customer concerns.
This is a snippet of the transcript.Contact Salesto get full access.
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Grifols & The Plasma Market - Part I
Former Northwest Division Medical Director at Grifols and former Associate Corporate Medical Director at BPL Plasma
Grifols & The Plasma Market - Part II
Former Northwest Division Medical Director at Grifols and former Associate Corporate Medical Director at BPL Plasma
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