Oligopolies and Monopolistic Competition - Grifols/Talecris Merger

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Unit 5 – GROUP PROJECT
Oligopolies and Monopolistic Competition - Grifols/Talecris Merger Rhonda D. Smith-Payne
AIU Online

Contributing Group Members: Rhonda D. Smith-Payne

Non-Contributing Group Members:Ashley Battle, Latonia Jenkins, Betty Johnson, Crystal Williams

Abstract

The purpose of this report is to assess the impact of mergers on industry, on consumers, and on society as a whole and more specifically, the Grifols/Talecris Merger in the plasma-derived pharmaceutical industry. A complete description of the industry is discussed in depth. Part II discusses arguments in support of the merger and opposing the merger. Grifols purchased Talecris in 2009, creating a merger which did not come without strict opposition. Supporting references assist in discussing Federal Trade Commission case against the Grifols/Talecris merger. In regards to remaining cited material, references are provided. A footnote concludes this report, explaining the circumstances related to this project.

UNIT 5 - OLIGOPOLIES AND MONOPOLISTIC COMPETITION - GRIFOLS/TALECRIS MERGER

Part I

After reviewing The Federal Trade Commission’s website at http://www.ftc.gov/bc/index.shtml and selecting one proposed merger industry; this report will discuss the Grifols/Talecris merger. Grifols, S.A is a manufacturer of plasma-derived drugs. Headquartered in Barcelona, Spain, the company develops and manufactures human blood plasma-derived products, with facilities in Barcelona and Los Angeles. “Grifols entered the U.S. market in 2002, when it acquired the assets of a U.S. manufacturer, Alpha Therapeutics Corporation, and 42 plasma collection centers from SeraCare. Since then, Grifols has acquired additional plasma centers and is now vertically integrated, making it the second largest plasma collector in the world. Grifols employs approximately 6,000 people worldwide and had global 2009 revenues of $1.3 billion.” (Commission, 2011) Talecris Biotherapeutics Holdings Corp. also specializes in the development, manufacture, and worldwide sale of blood plasma-derived products. “Talecris is also a public company- owned in part by the private investment firm Cerberus Capital Management, L.P. (“Cerberus”) – that specializes in the development, manufacture, and worldwide sale of human blood plasma-derived products. Talecris began its 2 U.S. operations in 2005, when Cerberus acquired Bayer AG’s global plasma business and Precision Pharma in the same year. Talecris is headquartered in Research Triangle Park, North Carolina, with additional regional headquarters in Canada and Germany. Like Grifols, Talecris is a vertically integrated company, owning numerous plasma collection centers, as well as manufacturing facilities in Clayton, North Carolina, and Melville, New York. It employs approximately 5,000 people worldwide and had global 2009 revenues of approximately $1.5 billion.” (Comission, 2011). On June 6, 2010, Grifols agreed to acquire Talecris for approximately $3.4 billion in stock and cash. According to the FTC, “Grifols and Talecris currently have approximately 8.4 percent and 22.8 percent of the U.S. Ig market, respectively, and their merger would leave only three meaningful manufacturers with nearly all U.S. Ig sales. In the market for albumin, the companies have U.S. market shares of approximately 13 percent each, and the acquisition would leave only four significant competitors. In the market for pdFVIII, Grifols and Talecris have 23 percent and 3.6 percent of the U.S. market, and after their merger there would be only three main competitors.” (In The Matter of Grifolis/Talecris - press release, 2011) In the early 2000’s, the plasma-derived products industry maintained a competitive venue within the pharmaceutical drug market. Supply increases led to lower production and reduced production of the goods. This caused the product to vertically integrate, leaving it in the hands of only a few remaining firms. As...
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