MTF Extends its Dominance of Allograft Industry
BY ROBIN R. YOUNG CFA, NOVEMBER 22, 2004
For an undisclosed amount, MTF Foundation (a non-profit 501(c) 3 corporation) has agreed to purchase the $40 million (annual revenue) allograft business of the American Red Cross. With this purchase, MTF will account for, we estimate, approximately 45% of the allograft tissue sold in the United States and Europe and will be the supplier for nearly two-thirds of the tissue processed by Osteotech (OSTE:NASDAQ), the second largest for-profit allograft company.
The combination brings to MTF a significant number of new donors as well as access to two very important new tissue categories for MTF: skin and cardiovascular tissues including heart valves. MTF will apply both its organizational scale and relationships to these new tissue categories. For 2005, we estimate, MTF can realistically generate $300 million in revenues and more than double its European sales.
For MTF's 28 contributing organ procurement organizations, this is particularly good news since the American Red Cross didn't really use OPOs to process its tissues. MTF will, we expect, start channeling the ARC volume through its own OPOs, strengthening those organizations in the process.
The American Red Cross Tissue Services is one of the oldest processors of allograft tissue in the United States. It operates out of 13 locations around the country and specializes in a full range of tissues for the surgeon. One of the key factors behind the decision to sell these assets to MTF was the fact that these are both non-profit organizations.
All in all, an excellent move and one that, we think, will stimulate much strategic thinking and planning across the allograft industry.
