Paul Kelly of UBS Securities and David Crossen of Montgomery Securities issued extensive reports on blood substitute companies, reaching different conclusions.
Kelly initiated coverage of three companies: Alliance Pharmaceuticals Inc. (ALLP) with a "hold," and Northfield Laboratories Inc. (NFLD) and Somatogen Inc. (SMTG) with "sell" recommendations. He said the blood substitute market is vastly overstated at $5 billion, based on two misconceptions: that blood substitutes will sell at a significant premium, and that they can be used as direct replacements for allogeneic (donated) blood in acute blood loss situations.
Kelly argued that blood substitutes will have to sell at a nearly equivalent price to donated blood because the latter is generally safe and effective. He said all of the adverse outcomes associated with donated blood use result in only $5-$7/unit of additional health care costs. In addition, Kelly said, blood substitutes can’t replace allogeneic blood unit-for-unit because of their short half-life. As a result, multiple units of blood substitutes would be needed in most surgical situations to replace a single transfusion of donated blood.
He projects a wholesale price of $180 per unit for blood substitutes, which would result in a patient charge of about $300 per unit. Donated blood now costs the patient $250. This, he said