daytrade diaries... may 28 part 2, page-46

PETE and
ROBbb


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No surprises over decision - As expected, the FTC announced that they have authorized the lawsuit to block CSL's acquisition of Talecris.
The FTC stated that substantial consolidation has already occurred in the plasma protein industry over the years which has led to the current oligopoly dominated by five main players. The proposed acquisition, would reduce the number of competitors in the US market for Immunoglobulin (IG) and Albumin from five to four (i.e. Baxter, CSL/Talecris, Octapharma and Grifols). More importantly the FTC was concerned that the top two companies (namely Baxter and CSL ) accounted for more than 80% of the IVIG and Albumin markets. For the other plasma derivative products Rho-D and Alpha-1, competitors would have been reduced from three to two.
As we noted previously, CSL were prepared to provide substantial remedies around many of the FTC's concerns such as plasma supply/collection and in the proteins of Alpha - 1 and RhoD. However, CSL claim that the FTC have failed to take these remedies into consideration
The FTC went on to say that the highly concentrated plasma protein industry already exhibits troubling signs of coordinated behaviour. Further, due to significant barriers to entry and expansion in these markets, the introduction of smaller players to increase competition was unlikely therefore reinforcing the FTC's view that any further consolidation would be anti-competitive. In response to this point CSL highlighted that two of the four companies (discussed above) are committed to launching new products in the near future and a number of substantial international players are intent on entering the US market ( such as Italy's fractionator 'Kedrion').
Where to from here? - For CSL, this decision seems a fait accompli, though they have indicated that they will 'vigorously defend' their case. The big question remains whether the vendors are happy to continue down this path with CSL or move to a plan B and perhaps IPO.