On February 1, Haemonetics (NYSE:HAE) announced that it will acquire Global Med Technologies (OTC:GLOB), a Lakewood, Colorado based provider of medical software related to blood management in hospitals and blood banks. The company recorded $23 million in revenues in the first nine months of 2009, with net income of $1.70 million over the same time period, and cash flow from operations of $3.87 million. Global Med has a healthy balance sheet, with $7 million in cash and $8 million in total debt, as of September 30, 2009. In that September quarter, Global Med had a gross margin of 61 percent and operating profit, excluding depreciation and amortization, of 20 percent, both above Haemonetics’ levels for that September quarter of 52 percent gross and 17 percent operating margin.

The acquisition was announced in conjunction with Haemonetics’ December quarter earnings announcement. Haemonetics agreed to pay $1.22 per share for all outstanding common stock and $1,694 per share for preferred stock, for a total of $60 million. Haemonetics will fund the transaction from current cash reserves, which totaled $170 million at the end of December. The transaction is expected to close before the end of March.

In the past year, Haemonetics has been pursuing an acquisition strategy that does not drain its cash reserves or saddle the company with debt. They made three such acquisitions in calendar 2009: Neoteric, Altivation, and SEBRA. These were all small, tuck-in acquisitions that complement the company’s focus on shepherding the collection and transfusion of blood. Global Med is an acquisition in the same vein as the calendar 2009 acquisitions, but with a larger price tag.

In this particular case, Haemonetics already has a sizable software business that generated $40 million of revenues in calendar 2009. This was essentially flat with 2008. It was expected during 2009 that this division would be an important growth driver for the Haemonetics. The segment has been hindered by liquidity conservation by hospitals. With the new acquisition, Haemonetics will be able to offer a more complete software package to hospitals and blood banks.

In summary, we believe this acquisition will have a positive effect on Haemonetics. The company saw a method of improving their software offerings to make them more attractive to potential customers. In addition, management purchased a company that is generating solid profits and operating cash flow, and is not heavily in debt. We expect that the integration of Global Med into Haemonetics will proceed smoothly, and that the acquisition will improve the company’s top and bottom lines.

Healthcare spending represents some 20 percent of US GDP annually, yet technology driving the industry remains archaic. Doctors continue to keep track of patient health records in paper files, and clinical trial research is often conducted on paper. Boston has long been a hotbed of technology and startup activity, and two young companies that claim its suburbs as their home are improving how pharmaceutical companies and physicians use technology.

Athenahealth (NASDAQ: ATHN) is an on-demand software company that serves the medical industry, providing tools for medical practice management and electronic medical records (EMR). Due in part to the archaic nature of healthcare technology and the maze of insurance company billing procedures, revenue collection for physicians is a hopelessly challenging task. Doctors frequently lose out on revenue due to complicated billing procedures, constantly changing rules, and inefficiencies in the process, despite hiring teams dedicated to the job. Athenahealth’s flagship product, Athenacollector, launched in 2000, allows medical practices to outsource the process of billing paying entities like Medicare and private insurance companies. Leveraging modern technologies like Software as a Service and a social networking inspired rules engine, Athenahealth brings a large degree of automation to the claims process and drastically reduces the time it takes for doctors to get paid. Close to 15,000 physicians currently use the Athenacollector product, and customer satisfaction is very high.

Athenahealth’s second product, AthenaClinicals, was launched in 2006. It is an EMR product that is sold alongside AthenaCollector, and unlike the majority of solutions on the market today, is delivered in the Software as a Service model. Because Collector is a cloud solution rather than a client server product, it can partner with third party providers like radiology and blood labs to digitally track test results, entirely removing paper from the clinical process.

Phase Forward (NASDAQ: PFWD) is the market leader in Electronic Data Capture (EDC), software products and services which automate the clinical trial process. Founded in 1997, the company’s flagship product is InForm, which allows pharmaceutical, biotech, and clinical research organization conducting clinical trials to record, track, and analyze data in digital form. It is estimated that 60 percent of clinical trials launching this year will use an EDC product, up from 50 percent last year, leaving a surprising 40 percent that continue to use other methods including paper and disjointed excel spreadsheets.

Standardized digital capture of clinical trial data allows research organizations to rapidly analyze and identify relevant trends and signals as they develop. This allows the research organization to cancel and reallocate funding early on when a trial is showing signs of failure. It is estimated that drugs cost $800 million on average to be developed and brought to market, with the clinical trial process being a significant expense. Further, Phase Forward’s system is web-based and supports many languages, allowing data to be collected in various countries and languages. Increasing the population a research organization can draft to test new treatments and drive down costs are additional benefits provided by Phase Forward.

Athenahealth and Phase Forward, based near Boston, are improving efficiency and removing costs from clinical trial and ambulatory medical processes. Investors are becoming increasingly aware of the crucial role these companies are playing in driving healthcare into the 21st century.

Blood is one of the most fundamental elements of human health, and even today is a strong part of our rituals and customs. One only has to look to that old adage, “blood is thicker than water,” to find it an inherent part of humanity. It symbolizes family, strength, and in certain religions brings worshippers closer to their God or Gods. Folklore and popular culture are permeated with reference to blood. It is nearly Halloween, and doubtless there will be many children trick or treating tomorrow night in the guise of Dracula, the most famous blood sucking vampire.

Yet, the importance of blood in a cultural mindset is not without justification. It acts as the body’s highway system. Blood delivers oxygen and nutrients to the rest of the body, and within it are components that act as police, preventing unwanted contagions from threatening the rest of the body. It is composed of three important components: plasma (straw colored medium for other components), red blood cells (oxygen deliver), and platelets (clotting). A fourth component, white blood cells, are important to the body’s immune system, but cannot be donated. This is important because blood is rarely given to a patient as a whole. When blood is traditionally collected, it is done in whole form.

The three main blood groups, ABO, were initially identified in 1901 by Austrian Karl Landsteiner. This definition was further refined in 1937 when Landsteiner, working with Alexander S. Wiener, identified the Rhesus factor, which is represented as a + or – in a person’s blood type. Today it is almost incomprehensible how much of a leap forward this was. Before the discovery of blood types, transfusions were so dangerous as to be illegal in most countries.

For much of the 20th Century, a donor would encounter: a vein opened and the blood dripping through tubing into a bag, which is then stored in a cooler for transport. For most people, this is the Victorian process encountered when donating blood. Haemonetics (NYSE: HAE) produces and develops products that are changing the way donating blood is accomplished.

Haemonetics, based in Braintree, Massachusetts, manufactures devices that can collect the three main components separately. Of the three, plasma has been the most lucrative for the company in terms of sales. As a method of ensuring recurring revenue from its devices and eliminating high capital costs, Haemonetics will often place its equipment at blood banks or other collection centers, and generate revenues off of disposable products utilized the devices. But the involvement of Haemonetics does not end once the blood is taken out of the arm.

The vertical integration across all facets of blood management is unique to Haemonetics. At the hospital, Haemonetics manufactures a wide variety of products that aid in putting blood back into patients. For instance, the company has a product called OrthoPAT, which takes blood lost during and after orthopedic surgeries, cleans it, and transfuses it back to the patient. This increases the availability of blood within a hospital, so that donor blood can be reserved for trauma and other high use needs.

In addition to blood collection and surgery product segments, Haemonetics produces software to help hospitals and blood banks manage their supplies, as well as tracking equipment. Haemonetics has made several acquisitions of companies that produce these ancillary products to the physical collection of blood. The company manufactures a product called eLynx, which reads a barcode on a unit of blood and can determine all of the pertinent data that the physician needs, in order to determine if the patient should be administered the unit. On the horizon, the company plans to introduce a new transport product, a combination server/refrigerator that regulates the temperature of the blood more effectively than a Styrofoam cooler and acts as a database for the devices at the blood bank wirelessly linked together.

Blood is so important to medicine, it is almost inconceivable that with all of the technological advancement we have seen in the 20th Century, there has been little progress since 1901. Other areas of medicine have advanced far beyond what Karl Landsteiner could have envisioned when he identified blood groups. While blood banks may not be the most glamorous area of healthcare, they are certainly important. Haemonetics has established a portfolio of products that capitalize on this lack of innovation.

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In 1990 James Watson, one of the discoverers of the structure of DNA, led a group devoted to cracking the code he and Francis Crick uncovered nearly 40 years before: the Human Genome Project, part of the National Institutes for Health. After thirteen years and four billion dollars, the Human Genome Project had succeeded in mapping the vast majority of human DNA. The work of the Project validates the genetic principles embodied in Gregor Mendel’s peas and Charles Darwin’s finches. Now all that is left, it would seem, is for scientists to sift through the three billion base pairs of nucleotides and determine which of the estimated 25,000 genes match up with which part of the DNA strand. After all, the sequence is mapped, right?

Each person, except for identical siblings, contains a unique DNA sequence, which retains endless variations. The process has been getting cheaper than the $4 billion initially spent on the project. When Dr. Watson had his genome mapped in 2007, the cost had declined to $1 million. Today the cost of mapping one’s genome is roughly $100,000. These monumental cost declines have been brought about by companies like Illumina, which is at the forefront of this genetic revolution.

Illumina hopes to unveil new products by the end of this year that can map an entire genome for $10,000 to $20,000. The company hopes to reduce that cost to $1,000 in the next four years, eventually making genome sequencing an integral part of neonatal care.

But what is the usefulness of mapping a person’s genome? Was the $4 billion spent for mere academic curiosity, without any practical application? Of course not. Some inherited diseases derive from a relatively tiny stretch of DNA. It is relatively simple to analyze a small section of DNA for, as an example, cystic fibrosis, which is already done in delivery rooms today. Unfortunately, some conditions are not as simple to discover. For instance, being predisposed to having a weak cardiovascular system may involve hundreds of genes in different parts of the DNA strand. A simplistic and inexpensive analysis will not be able to uncover all of the factors that contribute to such a condition. Having an entire genome to look at will give a better picture of a person’s health. And it is not going to cause more anguish for the recently born child. The same amount of blood taken from a newborn’s heel for current analyses provides enough DNA to analyze the entire genome.

Illumina already has products that can analyze an entire genome. Its Genome Analyzer was recently used to map the genome of the Giant Panda. The company is actively pursuing whole genome mapping as part of its main strategy, and will hopefully reduce the cost of such an analysis by 80 or 90 percent this year alone. Knowing a person’s genome will revolutionize preventative medicine. If Illumina can produce machines that dramatically lower costs, making it affordable for most people, then there is no reason not to perform full genome mapping in the delivery room. If Illumina can fulfill these goals, then its genome mapping technologies will signal the direction medicine takes in this new century.