Immucor, Inc.

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Immucor, Inc.

3130 Gateway Drive
P.O. Box 5625
Norcross, Georgia 30091-5625
U.S.A.
Telephone: (770) 441-2051
Toll Free: (800) 829-2553
Fax: (770) 441-3807
Web site: http://www.immucor.com

Public Company
Incorporated: 1982
Employees: 531
Sales: $144.78 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: BLUD
NAIC: 325412 Pharmaceutical Preparation Manufacturing; 325413 In-Vitro Diagnostic Substance Manufacturing; 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing; 339112 Surgical and Medical Instrument Manufacturing

Immucor, Inc., is the market leader in North America and Europe in human blood testing systems and related products. The company introduced automated blood testing in the United States and is one of only two companies in the country offering a complete line of blood banking reagents, chemical substances used to test blood prior to a transfusion. Immucor markets and distributes its products directly, and through its subsidiaries in Canada, Europe, and Japan to hospitals, blood banks, and research laboratories worldwide.

ORIGINS

Since its establishment in 1982, Immucor, Inc., has been in the blood bank reagent and instrument business. The company was founded by Edward Gallup, Ralph Eatz, and Richard Still, executives who had worked together for Biological Corporation of America, a Pennsylvania-based blood reagent company. After growing Biological Corp. from $700,000 to $15 million in annual sales in six years, the group defected to start their own enterprise a year after the company was acquired by Cooper Laboratories. The trio raised over 50 percent of their initial capital, more than $500,000, mostly from direct contributions from 18 employees, and set up Immucor headquarters in an office park in Norcross, Georgia.

In the United States, the Food and Drug Administration (FDA) regulates human blood as a drug and a biological product and the transfusion of blood as the administration of a drug and of a biological product. Initially unlicensed and lacking FDA approval, financing was a major hurdle for the new company but more start-up funds came from a bank loan and from doctors, pathologists, and other industry sources. The FDA approved Immucor's Norcross facility in December 1982 and the company began marketing kits used to determine blood types to hospitals and blood banks. In March 1983, Immucor acquired its "solid phase" technology and patent rights from five researchers at the Community Blood Center of Greater Kansas City. After losing money for several years, in October 1985 Immucor announced an initial public offering and in December began listing on the NASDAQ under the ticker symbol BLUD. Stock sold for $7 per share and the company raised $6.1 million.

The year 1986 was a breakout one for Immucor. When the company's fiscal year ended on May 31, the balance sheet showed a profit for the first time. Earnings were $311,000 on revenues of $6.2 million, up from $4.3 million the previous year. An even bigger milestone was achieved when the FDA granted approval for the company to market a blood test based on its proprietary solid phase technology. Capture-P, marketed to hospitals and blood banks, was designed for blood platelet analysis and radically reduced test time from ten hours to one hour. In September, Immucor received FDA approval to begin marketing an AIDS test kit developed by Cellular Products Inc., a New York-based biotechnology firm.

By 1987, Immucor had established a client base in the United States, Canada, and Europe, and in April announced that it had reached an agreement with Sanko Junyaku Co. for Sanko to distribute Immucor blood-banking products in Japan. The firm continued to offer pioneering products in 1988 with the introduction of Capture-R, a test used to detect foreign antibodies in the red cells of donated blood. The procedure utilized the company's solid phase technology in which blood components are dried on a plastic coated surface before immunological tests are carried out. The technology allowed for manual or automated operation and removed the need to mix blood and chemicals in a test tube, potentially cutting labor time and costs by half.

In October 1989, Immucor took steps to boost its overseas activities, which accounted for about one-fourth of its revenues, by forming a marketing alliance with Diagnostics Transfusion, a French firm. The two companies agreed to market each other's products and Diagnostics Transfusion became a joint venture partner by paying Immucor $4 million for 10 percent of its capital.

1990–1996: EXPANSIONS AND CONTRACTIONS

After completing an expansion of its Norcross production facilities, in February 1990 Immucor rolled out a second Capture-P test. In June it received FDA approval to market two additional solid phase blood tests, Capture-R Ready-Screen, for the detection of unexpected antibodies to red blood cells, and Capture-R Ready-ID, an antibody identification test. The company continued its strategy to expand European operations and market share when it acquired 100 percent of its German distributor in September 1990, and again in 1991, when they bought their Italian distributor, BCI-Human. In April 1991, the FDA granted Immucor approval to market Capture-CMV, a solid phase blood test for the detection of cytomegalovirus, a herpes virus, marking the company's first application of its proprietary technology to infectious disease testing.

In July 1992, Immucor reached an agreement with Bio-Tek Instruments, Inc. of Burlington, Vermont, to begin joint development of the ABS2000, the company's first blood bank instrument system and the industry's first fully automated "walk-away" blood analyzer. The instrument was designed to use Immucor's proprietary Capture reagent product technology. In July 1993, the company announced that its year-end net income had fallen to $1.83 million compared to $3.04 million in 1992. Due to research and development costs on the ABS2000, and shrinking European profits, the company also declared a hiring and salary freeze. Immucor stock sank to $4.75, its 52-week low, after the announcement.

COMPANY PERSPECTIVES

Immucor, Inc. is a global in vitro diagnostics company specializing in the area of pre-transfusion diagnostics. We develop, manufacture, and sell products used by hospital blood banks, clinical laboratories, and blood donor centers to detect and identify certain properties of human blood prior to patient transfusion. We have revolutionized the industry through our dedication to automating manual processes in the blood bank laboratory.

Immucor added to its troubles with investors in August 1994 when it announced a delay in clinical trials of the ABS2000 in order to modify the system's software to permit the reuse of miniaturized test tubes, causing some stock analysts to lower ratings from Hold to Sell. However, by August 1995, Immucor stock had rebounded to $15.50, a 52-week high, on good year-end financial news and premature anticipation of the start of clinical trials for the company's automated blood-testing machine. The firm finally filed an application with the FDA for clearance of the ABS2000 on March 18, 1996. In June, the Medical Devices Bureau of Canada approved the machine, and Italy's Ministry of Health did likewise in October, the same month Immucor announced the start of U.S. clinical trials for its premier product. The year ended with the acquisition of privately held Dominion Biologicals Limited of Dartmouth, Nova Scotia, which gave Immucor a second FDA licensed manufacturing facility and additional international distribution capabilities.

1998: AUTOMATION AND ACQUISITIONS

In January 1997, Immucor signed an exclusive distribution agreement to market an HIV-monitoring system, IMAGN 2000, in the United States, Canada, and Europe. In November 1997, the FDA approved an Immucor-developed syphilis screening test called Capture(R)-S. In March 1998, Immucor acquired the North American marketing and distribution rights of the Rosys Plato system, a semi-automated blood grouping instrument, from an English company. On July 6, 1998, Immucor received its long-awaited clearance from the FDA to market the ABS2000 in the United States, making it the first fully automated instrument for the hospital blood bank transfusion laboratory in the country when it was launched in September.

In October 1998, Immucor became the market leader in providing blood reagents and systems in the United States and Canada when it acquired Houston-based Gamma Biologicals, a company with 130 employees and annual revenues of $18 million. Adding Gamma's product line, which included the FDA-approved React Test System for detecting red blood cell antibodies, and its client base in over 50 countries, expanded Immucor's core blood reagent business and strengthened its market position worldwide. The company made another major acquisition in April 1999 when it bought the product lines of Biopool International, Inc.'s BCA blood bank division, making Immucor one of only two major players with a complete line of blood bank reagents in the United States.

In November 2000, a group including Kairos Partners acquired a 7.1 percent interest in Immucor through stock purchases, which it raised to 10 percent in July 2001. Kairos, a healthcare industry investment fund, expressed concerns about Immucor's strategic plans and falling stock prices and in August began a hostile proxy contest by announcing plans to replace part of the company's six-member board with four of its own members at the November annual shareholder meeting. Immucor's board of directors prevailed in the showdown when shareholders voted for the company's six director nominees. Immucor brought 2001 to a close with a flurry of late December product rollouts including its I-TRAC Plus System, the first verification and tracking system utilizing PalmPilot technology designed to prevent errors in the blood transfusion process, and the North American launch of ReACT, a new technology for antibody screening and identification. The year also saw the firm win approval from the Japanese Ministry of Health to market the ABS2000 and its related reagents in Japan.

KEY DATES

1982:: Immucor, Inc., is founded by Edward Gallup, Ralph Eatz, and Richard Still.
1985:: Company raises $6.1 million through public offering.
1986:: FDA approves proprietary blood test technology that radically reduces labor time and costs.
1992:: Immucor begins development of ABS2000, the industry's first fully automated blood analyzer.
1996:: Regulatory agencies in Canada and Japan approve use of ABS2000.
1998:: FDA clears use of ABS2000 in the United States; Houston-based Gamma Biologicals is acquired.
2002:: Company launches second-generation instrument system, the Galileo, in Europe.
2004:: FDA clears Galileo for use in the United States; bribery probe of subsidiary is launched in Italy.

When fiscal 2002 ended in May, Immucor reported an earnings increase of 235 percent from the previous year. In June 2002, Immucor launched its second-generation instrument system, the Galileo, in Europe. Capable of processing 224 different samples at once, the fully automated high-volume system was designed for large hospitals, clinical reference laboratories, and blood donor centers. In January 2003, Immucor reported record revenues and net income for the previous quarter due to renewals of group contracts and reagent price increases at substantially higher prices. The firm's share price had improved more than 600 percent from mid-October 2001 to a high of $25.91 in mid-January. In March 2003, the company signed a development agreement for the production of human collagen mesh with Inamed Corp. that called for Immucor's subsidiary, Gamma Biologicals, to manufacture the product. Revenues for fiscal 2003 totaled a record $98.3 million and the Atlanta Journal and Constitution newspaper recognized Immucor as the second best performing company in Georgia for the year.

2004: CLEARING GALILEO FOR U.S. TAKEOFF

On January 30, 2004, Immucor submitted an application for approval to the FDA for Galileo, its flagship product. With over 100 systems already in place in Europe, Galileo was cleared for use in the United States on April 26, 2004, prompting Immucor's stock price to shoot up 20 percent. In May, Immucor made its first U.S. sale of the revolutionary machine, which was eight times faster than any competing instrument, to Detroit-based Henry Ford Health System. In July, the $160,000 blood-test machine was approved in Canada and Japan.

November 2004 brought bad news from abroad when Immucor announced that its CEO and President, Dr. Gioacchino De Chirico, and the company's Italian subsidiary, were subjects of a criminal investigation in Milan, Italy. Dr. De Chirico, formerly president of the Italian subsidiary, was forced to give up his CEO job as the company conducted an internal investigation. The charges centered on improper payments that companies allegedly made to an Italian physician and hospital administrator in exchange for favorable contract awards.

In December 2004, Immucor took the unusual step of canceling contracts with two of the nation's largest group purchasing organizations in order to raise prices on its blood test equipment. The firm asked for an average 105 percent increase on all covered products and invoked a cancellation clause when Novation and Premier turned down its request. Immucor's largest competitor in the U.S. market, Ortho Clinical Diagnostic Systems, a division of Johnson & Johnson, also canceled its contract with Premier after its September 2004 price hike of 110 percent was rejected.

In June 2005, the company entered into a long-term agreement with Canadian Blood Services for the purchase of five Galileo instruments and the related reagents. Hoping to expand its 2 percent share of the world's third largest transfusion diagnostics market, in July, Immucor entered into a joint venture with its Japanese distributor, Kainos Laboratories Inc., a publicly traded company that developed and distributed diagnostic reagents, pharmaceuticals, and medical instruments. In August, the Securities and Exchange Commission announced that its probe into Immucor's Italian unit had turned into a formal investigation of possible violations of the Foreign Corrupt Practices Act. In November, the company announced plans to shut its Houston plant in 2007 in order to cut costs and fatten gross margins.

In February 2006, the company revealed that a prosecutor in Milan, Italy, had completed an investigation into payments made by several companies to Italian physicians and alleged that the former president of Immucor's Italian subsidiary, Dr. De Chirico, participated in a payment of $16,094 to one physician and payments of $47,000 to another to gain favorable hospital procurement contracts. The company announced that Dr. De Chirico planned to present further evidence to the prosecutor and intended to dispute the allegations. By the end of February, the company had received purchase orders for a total of 339 Galileo instruments worldwide: 222 in Europe, 115 in North America, and two in Japan. Of those, 263 Galileo instruments were also generating reagent revenues that averaged around $100,000 annually.

In May 2006, Immucor announced its ninth consecutive quarter of record revenues. It attributed the growth to the renewal of customer contracts at higher prices, the continuing sales of ABS2000 in the United States, sales of the Galileo instrument in Europe, Japan and the U.S., the associated reagent growth associated with these instrument placements, and sales of the company's human collagen product. The company also announced that it planned to launch its third generation blood-testing instrument, the Echo, in the last quarter of 2006. The Echo was based on Galileo technology but was designed to serve an estimated 6,000 small-to-medium hospitals, laboratories and donor centers worldwide. On May 24, 2006, the company reported that potential criminal charges could be filed against the company in an ongoing bribery inquiry in Italy.

Immucor, Inc.'s strategy of building its business through the sale of medical instruments, which generated lucrative long-term contracts for its reagents and related proprietary technology, had propelled it to the top of the industry in both the U.S. and European markets. With a third generation blood-tester in the wings, and a toehold in the Japanese market, the company was positioned at the forefront of a global market that was primed for its cheaper and faster automated technology.

PRINCIPAL SUBSIDIARIES

BCA Acquisition Corp; Immucor Gamma Biologicals Inc; Immucor Sales Inc; Dominion Biologicals Ltd (Canada); Immucor Diagnosticos Medicos Lda (Portugal); Immucor France EURL (France); Immucor Gamma Benelux SPRL (Belgium); Immucor Italia Srl (Italy); Immucor-Kainos Inc. (Japan); Immucor Medizinische Diagnostik GmbH (Germany); Immucor SL (Spain).