The Biopharmaceuticals Industry - Commonwealth Serum Laboratories Limited - Case Study Example

INDUSTRY ANALYSIS by (Name) The Name of the Class (Course) Professor (Tutor) The Name of the School (University) The City and State where it is located The Date The Biopharmaceuticals Industry Commonwealth Serum Laboratories Limited commonly referred to as CSL is a publicly traded Australian company listed on the Australian Stock Exchange (ASX) (CSL, 2015). CSL may be described as a global specialty biotechnology enterprise that is engaged in the manufacture, development, research and marketing of products intended to prevent or treat chronic human illnesses and conditions. The major specialties of the company include anti venom, derivatives of blood plasma, vaccines and cell culture reagents crucial in a range of manufacturing, genetic and medical research and applications (CSL, 2015). While CSL is the market leader having operations in over 20 countries in Australia, Europe and the US, it faces intense competition especially from Baxter international (BAX) and Grifols-Talecris. CSL has a 45% market share with Baxter at 35% while Grifols –Talecris has about 10% (Walsh and Murphy, 1999, p. 67). Other competitors include Glaxosmithkline, and the Cangene Corporation. A rapidly growing market for biopharmaceuticals means that competition will be high in this space in coming years. The sale of biopharmaceuticals especially immunoglobins which is the main product informing CSL’s profitability has risen 22% year on year from 2015 (CSL, 2015). This rise in demand for blood proteins is what has resulted in the rise in competition thus resulting in a need for innovative strategies by CSL. CSL controlling 45 percent of the market is in a good position to continue its dominance if it maintains its dynamic approach of coming up with new products every few years. Grifols-Talecris is the European market leader in the supply of blood plasma products. The acquisition of Talecris in 2011 and the purchase of the blood diagnostics unit from Norvatis have increased its influence in the biopharmaceuticals space (CSL, 2015). Baxter with a 35% market share is the biggest competitor to CSL particularly in the US (Dogramatzis, 2010, p. 75-77). It provides a wider range of products to prevent disorders ranging from kidney disease, haemophilia, and immune disorders. Baxter International Inc is the second largest biopharmaceutical in the world with a 35% market share. It is headquartered in Deerfield Illinois. With sales of over 15 billion in 2013 In Medical Products and Bioscience Businesses, it remains a significant player in the biopharmaceuticals space (Baxter, 2015). What makes Baxter different form other players is the organization of the company into only two departments. Its BioScience Division is in charge of production of vaccines, blood plasma and recombinant proteins for the treatment of bleeding disorders, regenerative medicine products, plasma based therapies for the treatment of acute blood related conditions and immune deficiencies. Its Medical Products Division is involved in the manufacture of intravenous solutions and equipment that is used in delivering drugs ad fluids to patients, contract manufacturing services, inhalation anesthetics, and products that are used in the various stages of renal disease including hemodialysis and peritoneal dialysis. Founded in 1931 it innovated the extension of the shelf life of blood from hours to weeks. It first expanded outside the US when it opened a subsidiary in Belgium in 1954. Continuous expansion through the 80s and 90s made it one of the largest biopharmaceuticals in the world (Dogramatzis, 2010, p. 123). It has also been involved in controversies such as the 640 million dollar settlement it had to settle with haemophiliacs in 1999 with regard to selling blood concentrates found to have HIV. Such controversies have spoilt its name in the industry and weakened its position relative to companies such as CSL and Grifols-Talecris that have had relatively few controversies. Post 2010 it has been involved in the acquisition of a number of subsidiaries such as Baxa, Gambro, and Multi-Source Injectables that have enhanced its footprint in the sector. Baxter’s sale of its commercial vaccine business to Pfizer and the consequent concentration on R & D may make it a formidable force that would drive innovative solutions in the space in coming years. Grifols, S.A the Spanish pharmaceutical and chemical company is the third largest biopharmaceutical company in the world. Its main activities are the production of blood-plasma based products in which it is the largest manufacture globally and the European leader. It is also a manufacturer of medical devices, reagents and instruments used in clinical research laboratories. It is a highly specialized company with almost half the production of Factor VIII, albumin and IVIG coming from its manufacturing plants. Owning and operating 150 plasmapheresis centers means that it collects nearly 6 million liters of plasma every year making it a major global supplier. Baxter and CSL have much smaller facilities given that they are more diversified companies. Similar to other companies in the space, it has been involved in aggressive acquisitions acquiring the American company Alpha Therapeutic in 2003 and Tlecris Biotherapeutics in 2011. In 2013 it bought the blood transfusion diagnostics unit from Novartis which means that it is changing its specialized strategy and is becoming a more diversified company similar to Baxter and CSL. The acquisition of Talecris makes the company the third largest plasma protein manufacturer that will be very competitive in the market (Grifols, 2015). Its expansion into Canada, Germany and Latin American markets such as Colombia, Argentina, Mexico, Chile and Brazil opens a new frontier in the biopharmaceuticals space. At present none of the big two Biopharmaceuticals; Baxter and CSL operate in Latin America and hence this is an untapped market with huge potential. However, the company has a very small footprint in Asia where CSL has the lion’s share of the market in countries such as Malaysia, Singapore and China. The fact that Grifols-Talecris has spent relatively insignificant amounts in research and development as compared to its rivals means that it stands to lose a lot in terms of innovation against it competitors. The competitive situation and the markets in which the biopharmaceuticals operate make this a very exciting yet delicate situation for the companies to maneuver. While the biopharmaceutical world has found treatments and preventive measures for many medical conditions, many more have come up. The demand for plasma therapies continues to grow though much of the research and development is geared towards incremental progress rather than revolutionary discoveries (Murphy and Walsh, 2009, p. 156). Companies such as Grifols that have been aggressive in acquisitions pose a threat of increasing their market share at the detriment of CSL. Baxter that is a highly specialized company unlike CSL poses a risk of dominating the immune disorders, kidney disease, and immune disorders space. In order to deal with an increasingly dynamic market place and competition, biopharmaceuticals employs a strategy of business, research and development intended to make the company products seem dedicated to making significant change in people’s lives. For instance Grifols-Talecris is actively involved in the establishment of R & D partnerships with academic institutions and other companies in Europe, Australia, North America, and Asia. These are aimed at making it remain ahead of the competition in terms of innovation in recombinant biotechnology, vaccines, and therapeutics (Dogramatzis, 2010, p. 234-37). It has developed internal capacities and has experience that enables it to take advantage of early stage research opportunities, manufacturing, and commercialization. An important aspect that has to be taken into account in analyzing competition has to do with the location of the company headquarters. For instance, Grifols-Talecris is the largest biopharmaceutical in Europe and hence controls the largest market share in the continent even if it trails the others globally. Similarly, Baxter an American company is CSL’s largest competitor in the US. On the other hand, CSL is the largest company in Australia and Asia being headquartered in Melbourne Australia. It would seem to suggest that headquarter presence in a region, gives a company advantages such as first entrant and better understanding of the given market (Dogramatzis, 2010, p. 443). In order to analyze fully the pharmaceutical industry it is critical to analyze key financial ratios for the past five years. It is important that these key ratios are analyzed to determine whether the financial position of the market and the industry has improved or deteriorated as benchmarked according to industry and competitor data in the same period. The data shows that CSL is well ahead of the other companies with only Baxter keeping up on the important financial ratios. The industrial and market analysis for the biopharmaceuticals industry, show that this is a market with high potential for growth (Walsh and Murphy, 2009, p.134). Nevertheless, the increasing competition because of acquisitions and consolidation may result in higher costs because of increased competition. The increase in investment in research and development in the industry shows that this is next frontier in which the company that gets it right will lead the competition. Companies with a large footprint in the emerging markets of Asia and Latin America and the established markets will be well placed to compete in the increasingly dynamic marketplace Bibliography Baxter, 2015, Baxter, Retrieved from http://www.baxter.com/index.page CSL, 2015, CSL, Retrieved from http://www.csl.com.au/ Grifols, 2015, Grofils, Retrieved from https://www.grifols.com/en/web/international/home Dogramatzis, D., 2010, Health Care Biotechnology: A Practical Guide, CRC Press. Walsh, G., & Murphy, B. 1999. Biopharmaceuticals, an Industrial Perspective. Dordrecht, Springer Netherlands. http://dx.doi.org/10.1007/978-94-017-0926-2. Read More