Summary
CSL's recent communication that US regulators were likely to block their acquisition should intensify interest in this growing stable part of the healthcare market. While there may be opportunities for CSL to alter their bid, after a year of deliberation by regulators, a failure to approve the purchase means that a new market entrant may have more success. This opens the path for private equity, a smaller European plasma player, or specialty therapeutics firm.
Analysis
The purchase of Talecris by CSL promised to continue the trend towards stability of supply, price, and competitive behavior in the plasma protein therapeutics market. It appears that the resulting market share of plasma proteins, particularly IVIG, proved to be too high for US regulators.
While it is still possible that the sale of a specialty fraction like alpha antitrypsin or another portion of the business may still soothe authorities, it is unlikely.
During the last year, the perceived value of this market has only increased. Demand is steady, even in the face of a general pharmaceutical turndown. Competitors have continued to act rationally and the remaining ones have much at stake to dampen any historical swings in the market. Supply of IVIG has increased relieving political pressure caused by hospital shortages.
For this reason, it is likely that the owners of Talecris will find other buyers for this valuable asset. While the value could have been maximized by another plasma player, there is enough untapped upside by driving demand that a new player could recoup their investment.
Buyers with strategic fits include other small european plasma players who would not have the market share issues of CSL. They could leverage their operational knowledge to maximize value.
There are many specialty pharma players who would be interested in the broad untapped potential of IVIG which has few clinical trials but broad usage offlabel.
Lastly, private investors may be attracted by the stable returns and the relatively simple nature of this business compared with R&D intensive biotech.
Nevertheless, Talecris has built a business which still has some operational issues that need to be corrected for long term viability. This will be the challenge of the eventual new owners.
