Haemonetics Corporation

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Haemonetics Corporation

400 Wood Road
Braintree, Massachusetts 02184
U.S.A.
(617) 848-7100
Web site: www.haemonetics.com

Public Company
Founded: 1971
Employees: 1,526
Sales: $309.8 million (fiscal year ended March 29, 1997)
Stock Exchanges: New York
SICs: 3841 Surgical and Medical Instruments

Haemonetics Corporation is the world leader in automated blood processing, developing and manufacturing equipment that automatically collects and processes blood and blood products. In 1997, it was the only company in the world with clearances from the U.S. Food and Drug Administration to market devices which collect whole blood and separate out the individual blood components (red cells, platelets, and plasma) at the same time. It also owns blood banks in Arizona, Kansas, and California and provides management services to blood centers throughout the United States. Its corporate headquarters are in Braintree, Massachusetts, with international headquarters in Nyon, Switzerland, and Far Eastern headquarters in Tokyo, Japan.

The company’s primary products are used to collect and process blood from donors and from patients in operating rooms. In the surgical blood salvage market, involving the collection and reinfusion of an individual’s own blood for use during surgery, the company had a worldwide market share of 60-65 percent in 1997. It held an even larger share (65-70 percent) of the worldwide market for collecting plasma, and had nearly 40 percent of the blood component therapy market— collecting blood components for therapeutic use.

Haemonetics’ fourth market area is automated red cell collection. Technology developed by Haemonetics and approved in 1997 makes it possible for blood banks to collect two units (pints) of red blood cells from a donor, twice the amount that could be collected manually, the only alternative technology.

The company markets its products to hospitals, blood banks and centers, national health organizations, and plasma fractionators in over 50 countries, with 60 percent of its business coming from outside the United States.

Early Years

Allan “Jack” Latham, Jr. founded Haemonetics in 1971 and the company opened for business in 1972. Its first product was a blood processing machine called the Model 10, which it sold to blood banks and hospitals. Latham developed the Model 10 in the mid-1960s, while working as a scientist for Arthur D. Little Company, and Abbott Laboratories marketed it for a short time. When Abbott decided to stop selling the machine, Latham raised about $1 million from some private investors and created Haemonetics.

The Model 10 made use of a technology Latham had developed working with scientists and doctors from Harvard University to solve the problem of removing glycerol, a kind of antifreeze, from stored, frozen blood. His solution was a plastic, disposable bowl, which could be spun at high speeds to separate the glycerol from the denser red blood cells. His blood centrifuge, called the Latham bowl, made the development of large-scale blood freezing possible.

Haemonetics combined the chamber with a set of plastic tubing that could also be thrown away after being used. Because the plastic chamber was relatively inexpensive, and could be discarded after each donor, the Latham bowl revolutionized the way blood was collected and processed. No longer was it necessary to use stainless steel chambers that had to be taken apart carefully, sterilized, then put back together after each use.

These disposable sets served as the foundation for the company’s future products and development. With Haemonetics’ technology, the donor or patient blood was first mixed with a sterile solution to avoid clotting. The treated blood was then pumped between the person giving the blood and the Latham bowl chamber through disposable plastic tubing by pumps on the equipment. The blood flow was controlled by microprocessors and the blood was separated into its components by density, with red blood cells (the heaviest component) moving to the outside and the lighter cells and plasma moving to the inside.

In the mid-1970s, Haemonetics expanded on this technology to automate the collection of platelets, needed to help cancer patients whose own bone marrow could not produce enough platelets. Called bone marrow suppression, this condition usually occurred as a side effect of chemotherapy. Platelets made up a very small portion of a person’s 10 pints of blood; a single pint of whole blood contained only one-sixth to one-eighth the number of platelets required for a therapeutic dose. Therefore, before Haemonetics introduced its system, platelets from as many as eight donors had to be pooled or merged to get enough for a treatment.

What Haemonetics did was to take the plasma out of the chamber once it was separated and collect it in a special bag. The remaining blood components (still in the chamber) were then returned to the donor. This apheresis technology meant that donors were not limited to donating whole blood, which could only be done every eight weeks. Instead, a donor could give plasma as often as twice a week. A blood bank thus could reduce the number of donors needed for pooling and provide a safer product. In 1979, the company went public.

The 1980s—More Innovations and a New Company

In the early 80s, Haemonetics introduced Cell Saver. This system automated the salvage and cleaning of a patient’s blood during surgery. During the procedure, the red blood cells remained in the chamber and were washed clean of other blood components before being routed to a bag for reinfusion.

The timing was advantageous as the fear of contracting HIV infection or hepatitis from blood transfusions became a major health concern in the mid-1980s. To reduce that risk, the industry instituted what was known as autologous blood transfusions. That procedure involved a patient donating a pint or two of his or her own blood that was then given back to them after surgery. The CellSaver went even further, often eliminating the need for banked blood, since it recovered the patient’s own blood in the operating room and reinfused it during and after surgery. Between 1984 and 1988, Haemonetics’ sales tripled to over $90 million and net income skyrocketed, reaching $10 million. No only did the systems become more popular, the fact that they were disposable meant that hospitals and blood centers kept buying replacement tubes, chambers, and other supplies to use with the centrifuge, pumps, and other original equipment.

During this time, the company was sold, spun off, then taken private. In August 1983, American Hospital Supply Corporation bought Haemonetics for $70 million. Two years later Baxter Traneol Laboratories (Baxter International, Inc.) acquired American Hospital Supply and then divested Haemonetics because of antitrust concerns since the two companies competed in certain areas. In December 1985, a group of private investors purchased Haemonetics. The investors were primarily present and former employees of Haemonetics, including John F. White, who became chairman, president, and CEO, and James L. Peterson, who became vice-chairman and president of international operations, and E.I. duPont de Nemours and Company (Du Pont).

The company introduced its first Automated Plasma Collection System (PCS) soon afterwards. Traditionally, plasma was collected manually as part of whole blood collection. In the United States, commercial firms collected the plasma from donors and then processed or fractionated it themselves to derive various products including gamma globulins used in preventing such diseases as tetanus, rabies, and measles; hepatitis vaccine; and albumin used with burn and shock victims.

Haemonetics’ new system significantly cut the time needed to collect plasma, so that an individual spent only 40 minutes donating plasma instead of the 90 minutes required for manual collection. It also yielded a higher-quality plasma than manual methods because a smaller amount of anticoagulant was needed, and increased donor safety—since the donor was never separated from his or her own blood, there was no risk of having the wrong red cells returned.

To encourage commercial firms such as Alpha Therapeutics, Bayer, and Centeon to convert from manual procedures to the automated system, Haemonetics established a program under which it installed and serviced its plasma collection systems free of charge to certain plasma collection centers. Those centers, in turn, agreed to purchase at least a minimum number of the disposable chambers from the company.

By the end of the decade, fiscal 1990, Haemonetics had sales of over $124 million and net profits of over $11 million.

Improving the Systems, 1990-93

In May 1991, the company was taken public again, with Du Pont selling all of its 47 percent interest during the initial public offering. That same year Haemonetics acquired direct distribution rights for their blood component therapy and plasma collection products in Japan from Labo Science Co., Ltd. of Tokyo. The company, which had over 900 employees, ended fiscal 1992 with sales of $216.3 million and net income of $18 million. A few years later, the company acquired the direct distribution rights for their surgical blood salvage products in Japan from Kuraray, Co., Ltd.

Company Perspectives:

Our mission is to enhance the safety and quality of the world’s blood supply and increase the availability of blood components from a shrinking donor population.

Over the years, the company introduced various improvements on its systems. Building on its years of experience with automated platelet collection, the company developed the MCS and MCS+ apheresis systems which put the equipment on wheels, making it possible to collect blood components and provide blood component therapy to cancer patients or those with blood disorders at a blood bank or other outpatient location. Blood component therapy involved treating people who needed only specific blood components, not whole blood. The same system was also used for therapeutic plasma exchange, in which a patient’s plasma was replaced with either frozen plasma or albumin. Because patients received treatments over weeks or months, convenience was a major consideration for them as well as for the hospitals and other groups providing the treatment. The company’s major competitors in the blood component therapy market were COBE Laboratories, Inc. (a subsidiary of Gamboro AB) and Baxter International.

The company also expanded its Cell Saver line of products used to salvage blood during and after surgery. In situations such as organ transplants or open heart surgery, requiring transfusion of large volumes of blood and fluids, the Rapid Infusion System (RIS) incorporated a proprietary heating element that warmed the blood products before they were infused, eliminating the threat of hypothermia. The CollectFirst system could be used either for direct reinfusion or with the Cell Saver system for washing the collected red blood cells. The HaemoLite product line provided a portable automated system useful for procedures where there was less blood loss. The company sold these systems to surgeons, primarily cardiovascular, orthopedic, and trauma specialists. In this market, Haemonetics competed with Medtronics, Inc., COBE Laboratories, Inc., and Sorin Biomedica.

In the area of plasma collection, the company’s PS and PS + systems competed with Baxter International and with manual collection systems. In the red cell market, Haemonetics had no competition other than traditional collection and separation methods.

New Ventures: 1994 to the Present

In 1994, the company began augmenting its traditional manufacturing activities. First was the establishment of Haemonetics Blood Services and Training Institute. Located in Arizona, the institute provided Haemonetics’ customers with courses lasting three to five days in which they learned apheresis theory, regulatory requirements, and program management, and gained first-hand experience with the company’s equipment in noncritical situations. HBSTI also maintained an extensive library in the field of transfusion medicine.

The following year the company acquired DHL Laboratories Corporation, a contract pharmaceutical manufacturer. DHL made solutions, including anticoagulants, storage liquids, and similar products. Haemonetics’ products now included the solutions as well as the equipment and disposables used during blood and plasma collection.

In 1996, Haemonetics made a strategic move into the blood bank service business and created Haemonetics Management Services to manage blood collection agencies. It signed its first agreements with New England Medical Center, a major hospital in Boston, and the Oklahoma Blood Institute. Services included recruitment of donors and collection and distribution of blood components, with the new division receiving a fee for each blood component collected. To attract more donors to the centers, the company made telephone calls to people who had never donated blood before, opened easy-to-reach centers, and decorated the locations in bright, cheery colors with a play area for donors’ children.

As part of this new strategy, the company also formed Pacific Blood Services, a 50/50 joint venture with the San Diego Blood Bank, to open apheresis centers in Orange County and other counties surrounding Los Angeles.

During 1997, Haemonetics continued to expand the number of blood centers it owned. In April it acquired the Santa Barbara-based Tri-Counties Blood Bank. That blood bank annually collected and distributed more than 24,000 red cell units and over 3,500 apheresis platelet components in Santa Barbara, San Luis Obispo, Santa Maria, and Salinas, California. In conjunction with Pacific Blood Services, Haemonetics was now able to provide blood products and services from Orange County in southern California to San Mateo in the north. In July, the company purchased Kansas Blood Services, a Topeka-based blood center collecting and distributing some 20,000 units of red cells and over 1,000 apheresis platelet products.

Both of these blood centers were not-for-profit entities, and the proceeds from each sale were distributed to a local foundation, to be used in medical education and research activities. All regulatory licenses owned by the centers transferred to Haemonetics with the purchases, making the company fully licensed to collect and distribute blood components. Through its owned and managed centers, Haemonetics was now a vertically integrated company, providing products and services as the company expressed it, “vein to vein.”

While the growth of the service business was undoubtedly important to the company, more significant to the nation’s blood supply was FDA approval to market Haemonetics’ proprietary technology that made it possible for donors to give two pints of blood at one sitting. FDA gave its approval in 1996 to use the system with people donating their own blood, and then gave clearance in 1997 to use it with voluntary donors at blood banks.

Most of the 12 to 13 million units of blood collected by banks in the United States were collected and processed manually. The same held for the approximately 36 million units collected worldwide. Even if used only to collect the blood types in shortest supply, it was a big market. Haemonetics’ challenge was to convince cost-conscious hospitals and other users that their systems were cost-effective and less than the additional recruitment and testing expenses needed with the cheaper manual procedure.

Principal Subsidiaries

Kansas Blood Services; Tri-Counties Blood Bank; Haemonetics S.A. International (Switzerland); Haemonetics Scandinavia AB (Sweden); Haemonetics GmbH (Germany); Haemonetics France; Haemonetics U.K. Ltd.; Haemonetics Japan Co., Ltd.; Haemonetics Ventures Corp.; Haemonetics Foreign Sales Corp. (Virgin Island); Haemonetics Services, Inc.; Nayon Associates Corp.; Haemonetics Blood Services and Training Institute; Haemonetics Belgium S.A./N.V.; Haemonetics Italia Sri (80%).