Investor's Business Daily, May 4th, 2007
Sometimes staying focused on a small niche can generate big gains.
Just ask Gioacchino De Chirico, chief executive of Immucor BLUD.
The company makes and sells automated systems that perform blood typing and blood compatibility tests of donors and recipients prior to transfusions.
It also makes "reagents," which are products used on the instrument.
The firm's flagship product is Galileo, an automated instrument that performs blood typing and compatibility tests.
De Chirico pegs the size of Immucor's market niche at less than $1 billion worldwide. Though small compared to other markets in the medical equipment field, it has been lucrative for Immucor.
Over the past four years, earnings have grown at an average annual rate of 45% and sales by 22%.
Analysts polled by Thomson Financial see full-year fiscal 2007 earnings rising 45% to 81 cents a share and another 27% in fiscal 2008.
One key to its success: The company has stayed focused on a single niche in the blood-bank industry, De Chirico says.
Another reason for its strong performance is it's innovation, he says.
Until a few years ago, the tests Galileo performs were done manually. The manual process is rife with problems, including human error.
Immucor's management saw an opportunity to automate the process. The firm launched the first generation instrument, the ABS2000, in the last half of the 1990s.
That wasn't very successful because the machine was slow, De Chirico says. So Immucor went back to the drawing board and launched the Galileo, which it rolled out in Europe in 2002 and the U.S. two years later.
Galileo was the first fully automated processing system for blood typing and screening, says David Zimbalist, an analyst with Natexis Bleichroeder. It has been successful both in the U.S. and outside, Zimbalist says.
De Chirico spoke with IBD about Immucor's business and strategy.
IBD: What's Galileo's potential?
De Chirico: We believe that the worldwide market potential of Galileo is about 2,000 placements. At the end of the third quarter we had 460 cumulative instruments installed worldwide. We've only covered 25% of the potential market.
IBD: How will you expand that?
De Chirico: Our guidance for Galileo installation for this fiscal year is 130 units worldwide. At the end of the third quarter we (had) 93 orders for this fiscal year.
We are developing a second-generation Galileo that will have many more appealing features.
We improved some software and expanded the menu. It will have an urgent-test function. This will rejuvenate the Galileo. We haven't given a time (frame for its launch).
Along with that we have filed for (Food and Drug Administration) clearance for a new instrument called Galileo Echo.
IBD: How does the Galileo Echo differ from the Galileo?
De Chirico: The (Echo's) menu is the same. It has all the advantages of the Galileo, but only it's a smaller version.
The difference is mostly in size and throughput.
The Echo is much smaller in size and very light -- at around 60 or 70 pounds. The Galileo can run 70 routine tests per hour, while Echo can run 16 per hour.
The Echo is much more for medium- and small-volume customers. It will be out as soon as the FDA approves it.
IBD: What is your growth strategy?
De Chirico: Further growth will be based on implementing more and more efficiencies, placing more Galileo (instruments) and launching the Echo.
The fourth (component) is to improve our presence outside of North America. We have no presence in South America, none in Africa and none in Asia, other than Japan. Our market share in Western Europe is significantly lower than in North America.
IBD: How will you improve your presence outside of North America?
De Chirico: We're putting together a structure inside the company. We have hired export directors.
We've signed some distributors in South Africa and Indonesia.
IBD: Do you have many rivals?
De Chirico: In North America, it's between us and Johnson & Johnson's JNJ Ortho-Clinical Diagnostics. We have market share leadership in North America for large volume customers because of Galileo's success.
IBD: What's the business climate?
De Chirico: Our industry is in a fortunate position because we deal with a basic need for the patient -- that is, blood.
Anytime there is trauma from an accident or there's a big surgery, a patient needs blood.
More and more transplants are being done and that means more blood usage.
Our industry does not suffer seasonality because of the basic need of blood to improve the clinical outcome of patients.
