Thursday, December 11, 2003

The blood industry concentrates In the small but crucial segment of the health system that deals in blood, Australia's CSL just took a major step. It announced that it would buy the blood plasma unit of French-German healthcare company Aventis SA, a billion dollar acquisition that will make it the largest blood plasma company in the world. The new company will deal in products in areas like immune globulin, wound healing, and coagulation agents. CSL was already the #3 company in the overall blood market, behind American company Baxter International and Aventis. Now Baxter will be relegated to the #2 position, while Aventis will exit the market. Also up for grabs may be the blood products business of Germany-based Bayer SA. The new unit, to be called ZLB Behring, will have over 20% market share. According to a story  from Datamonitor (12/10/2003) entitled "CSL/Aventis: new leader in plasma": CSL needed to expand its operations since the plasma market has suffered from falling prices, oversupply and a high level of competition. We can take that to mean that CSL wanted to make its life easier, reducing competition in the market by swallowing up one its competitors. Lowering the number of strong competitors eases the risk of disruptive change. Blood plasma is not yet a tight oligopoly, but like other medical market segments, it seems to be heading that way. As the #1 player, CSL is in better position to shape the segment's future. For every pick-up, there's a discard. Aventis dropped the plasma division to head to what it sees as more advantageous business. As the article says: The sale also suits Aventis' strategic transition to a pure pharmaceutical company. During the first half of 2002, the company divested Aventis Animal Nutrition and Aventis CropScience. More recently the company divested its holding in the chemical company Clariant and announced that it was in discussions with the European Commission for additional flexibility to dispose of its stake in the chemical company Rhodia. The company is also divesting its generics business, RPG Aventis. Aventis is getting rid of divisions that it knows it cannot get its expected return from, and which distract it from its core business. The big money is in the patented pharmaceutical industry, and the other pieces of the empire even at their best can't show the same return on investment. Aventis is still a smaller player  (#7) in the prescription drug oligopoly, but it is now in the position to concentrate on growing and perhaps merging with another big pharma company. It's not just megadeals that change an industry into an oligopoly. Bit by bit, the worldwide healthcare industry has become more concentrated, as big companies maneuver for favorable positions as oligopoly players and retreat from distracting side businesses. 8:59:51 PM

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