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Gambro AB

Gambro AB

Hamngatan 2
PO Box 7373
SE-103 91 Stockholm
Sweden
Telephone: (+46) 8-613-65-00
Fax: (+46) 8-611-28-30
Web site: http://www.gambro.com

Public Company
Incorporated:
1964 as Gamla Brogatans Sjukvårdsaffär
Employees: 17,999
Sales: SKr 26.72 billion ($2.7 billion) (2001)
Stock Exchanges: Stockholm New York
Ticker Symbol: GAMBB
NAIC: 621492 Kidney Dialysis Centers; 334510 Electromedical and Electrotherapeutic Apparatus Manufacturing

Swedens Gambro AB specializes in renal care products, services, and equipment. With sales of nearly SKr 27 billion ($2.7 billion) per year, Gambro has captured the position as the worlds second largest dialysis services company, behind Germanys Fresenius AG. Gambro operates through three primary business units. Gambro Healthcare, its largest division accounting for nearly 60 percent of sales, operates an extensive network of dialysis treatment facilities, with more than 670 clinics worldwide. More than 520 of the companys clinics are located in the United States. Gambro Renal Products, the next largest division representing more than 35 percent of sales, makes and distributes products for hemodialysis, peritoneal dialysis, and renal intensive care treatments under the Gambro and Hospal brand names. The company has long been a leader in pioneering technology for dialysis treatments and operates several research and development laboratories in Sweden, the United States, France, Germany, Japan, and elsewhere. The last and smallest of the Gambro divisions is Gambro BCTfor Blood Component Technologywhich produces products for apheresis (blood separation), blood component collection, and blood component purification. The United States represents Gambros largest market, at more than 60 percent of sales. Europe contributes more than 10 percent of annual sales. Asia is also a significant market for the companys products and services. Gambro was formerly known as the manufacturing division of Incentive AB, run by Swedens Wallenberg family. The company trades on both the Stockholm and New York stock exchanges.

Dialysis Pioneer in the 1960s

Nils Alwall, a Lund, Sweden-based professor, invented the worlds first single-use artificial kidney in the early 1960s. In 1964, Swedish industrialist Holger Crafoord became determined to introduce Alwalls breakthrough invention to the medical world, forming a new company, known as Gamla Brogatans Sjukvårdsaffär (translated as Old Bridge Street Medical Supplies Company). The company quickly became known as Gambro and began developing the single-use artificial kidney into a marketable product. In 1967, Gambro debuted its parallel plate dialyzer and began mass production.

With the success of its first dialysis machine, Gambro was able to step up its research and development efforts. By the beginning of the 1970s, the company had readied a new product, the AK-3, which became the worlds first automatic dialysis machine. The success of this product led the company to expand its manufacturing base, with the opening of a production facility in Germany, the leading European market for dialysis products. The company also moved into France, establishing its subsidiary Gambro SA in 1972.

Gambro scored another first in 1977 when it introduced the successor to the AK-3, the AK-10, which incorporated new microcomputer technology to become the first computer-controlled dialysis machine. In 1980, the company debuted a new polyamide membrane. Then in 1983, Gambro went public, listing simultaneously on the Stockholm and New York stock exchanges and becoming Gambro AB.

Gambro continued to expand its operations, introducing dialysis servicesincluding opening its own treatment centersin addition to manufacturing dialysis machines and equipment. The companys growth hit a glitch during the 1980s, however, when healthcare cuts in the United States carved out a share of Gambros single largest market. By the mid-1980s, however, Gambro was preparing to continue its expansion and began searching for acquisitions.

In 1987, Gambro paid the equivalent of $187 million to acquire France-based Hospal, one of its main European rivals and itself the developer of a breakthrough dialysis membrane. Hospal had been formed in 1977 when Rhone-Poulenc and Sandoz merged their artificial kidney divisions. Hospal then acquired control of the high-flux AN69 membraneconsidered the worlds most advanced membrane technology of the timeas well as other patents, which enabled it to gain a significant market position. Hospal went on to develop its own dialysis system, which it launched in 1985 as the Filtral dialyzer.

After acquiring Hospal, Gambro launched a new breakthrough product, the BiCart Cartridge, using a dry bicarbonate cartridge for bicarbonate-based dialysis systems. In 1988, Gambro found itself a new owner, when Swedish investment company Cardo bought out the Crafoord family and other Gambro shareholders.

Building a Leadership Position in the 1990s

At the start of the 1990s, Gambro began a new expansion drive. In 1990 the company acquired its U.S.-based rival Cobe, for $253 million. Like Gambro, Cobe had been founded in 1964 as a maker of dialysis machines. A year after its founding, Cobe released its first significant product, a plastic extracorporeal blood set for use in chronic hemodialysis treatment regimes. The product, an industry first, formed the basis for the companys strong growth in the 1970s.

The 1970s began for Cobe with the release of a new generation of dialysis, the first in the world to offer servo-controlled dialysate proportioning. That machine also included an electronic monitoring and alarm system. In 1975, Cobe launched a new product line, the Centry 2, billed as the worlds first fully integrated dialysis machine. At the beginning of the 1980s, Cobe began its own expansion drive, diversifying into Blood Component Technology (BCT) products with the acquisition of IBM Biomedical Products in 1984. The following year, Cobe introduced its new generation of dialysis machines, the Centrysystem 3, an integrated, computer-driven hemodialysis machine. Cobe meanwhile began to develop a range of blood separation, cleansing, storage, and related products for blood banks and other research companies. This resulted in the launch of Cobes Spectra Apheresis System in 1988.

Gambro kept the Cobe brand name following the acquisition, as it targeted the United States for its 1990s growth. Gambro had already begun opening its own dialysis clinics in the United States; in 1992, the company began building toward critical mass in that operation with the acquisition of majority control of REN Corporation, then the leading operator of dialysis clinics in the United States (Gambro acquired 100 percent control of REN in 1995). In that year as well the company introduced its Centrynet data acquisition system.

Gambros dialysis line included hemodialysis systems, which purified blood using external artificial kidneys, and intensive care systems. In 1994, the company entered a new dialysis category with the launch of its first peritoneal dialysis system, which enabled blood-cleansing treatment in the patients own body. That year also marked a new turning point, when Incentive AB, an investment company held by Swedens Wallenberg family, acquired the Cardo stake in Gambro. Incentive took full control of Gambro in 1996. Incentive maintained the companys Gambro, Cobe, Hospal, and other brand names.

With its new financial backing, the Gambro division continued its acquisition spree, acquiring nearly 100 companies and dialysis clinics during the decade to build up its network of manufacturing and treatment facilities. The company also began to concentrate on its core renal care businesses, selling off a number of Cobes diversified operations. In this way, the company sold off operations in intensive care and anesthesia in 1994.

By then, Gambros treatment clinic operations had taken a new step forward. In 1996, the company acquired American Outpatient Services Corporation and its 16 dialysis treatment clinics. That purchase brought Gambros total clinics to 125. Yet the company targeted its clinics operation for still stronger growth. In 1997, the company acquired Vivra, another leading network of dialysis treatment clinics based in the United States. Its renal care division was boosted by the launch of its new renal intensive care system, Prisma, that same year.

By 1998, Incentive, which had been operating as a widely diversified industrial holding company with businesses including the Vikto Hasselblad camera company and the Hagglunds military vehicle business, had succeeded in streamlining itself into a focused healthcare company targeting the renal care market. In that year, Incentive changed its name to Gambro AB. That year, Gambro continued its own streamlining, selling off its Cobe cardiopulmonary business to Italys Sorin Biomedica. At that time, the company discontinued use of the Cobe brand name.

Gambros nearly decade-long growth drive had left the company burdened with debt. By 1999, the company was forced to restructure its operations, at a cost of more than SKr 1 billion. The reorganization also included the elimination of the companys multiple brand names. The companys product lines and operations were now brought under either the Gambro (and Gambro BCT) or the Hospal names, while the company was reformed into three primary business unitsGambro Healthcare, which took over operation of the companys more than 600 dialysis clinics; Gambro Renal Products, which provided the umbrella for its dialysis systems; and Gambro BCT. At the same time, the company also closed down two of its U.S. production sites, moving manufacturing to its facilities in France, Italy, and Mexico.

Company Perspectives

VISION: To be the globally preferred partner among patients and healthcare providers by delivering world class blood- and cell-based solutions and services.

CORE PURPOSE: To save lives and improve the quality of life for the people we serve.

The restructuring hit Gambros share price. By 2000, rumors began to circulate that Gambro had entered talks with Fresenius, its larger German rival, to merge the two companies operations. Both sides, however, denied the rumors. Similar rumors followed the launch of a joint venture with another rival, Baxter International, for the development of dialysis equipment and products. Yet as Gambros stock once again began to grow, the companys continued independence seemed more certain.

Gambro continued to launch new products at the turn of the century, including the latest generations of its AK series of dialyzers. In 2000, the company released its new Polyflux synthetic hemodialysis filters, considered the most advanced of its type on the market at the time. The following year, Gambro announced that it had acquired Renal Management Inc., based in the United States. That purchase added 21 new clinics to Gambros network, as well as acute dialysis services in 16 hospitals and related facilities. With more than 670 clinics, including 520 in the United States, Gambro then announced that it had reached critical mass and intended to slow down its acquisitions beginning in 2002.

Principal Subsidiaries

Parkdialysen AB; Scandinavian Heart Center AB; Örekron Holding AB; Örekron Service AB; Gambro Fastighet AB; Incentive Aircraft TWO AB; Incentive Grosshandel AB; Gambro NV/SA (Belgium); Hospal SA/NV (Belgium); Gambro BCT-Europe SA (Belgium); Gambro do Brasil Lda (Brazil); Gambro BCT Ltd. (U.K.); Gambro S.A. (France); Scandinavian Incentive Holding B.V. (Netherlands); Gambro Dasco SpA (Italy); Gambro China Ltd.; Gambro Medical Products Co. Ltd. (China); Gambro Medical Sales (Shanghai) Co. Ltd. (China); Gambro Korea Ltd. (South Korea); Gambro Poland Spzoo; Gambro Healthcare Poland Spzoo; Gambro Investimentos SGPS Lda (Portugal); Gambro Lda (Portugal); Sopamed AG (Switzerland); Gambro Taiwan, Ltd.; Gambro GmbH (Germany); Gambro Kft (Hungary); Gambro Inc. (U.S.A.); Gambro Reinsurance SA (Luxembourg).

Principal Divisions

Gambro Healthcare; Gambro Renal Products; Gambro BCT.

Principal Competitors

Aksys, Ltd.; American Healthways, Inc.; Baxter International Inc.; DaVita Inc.; Dialysis Corporation of America; Fresenius Medical Care Aktiengesellschaft; Haemonetics Corporation; Minntech Corporation; Renal Care Group, Inc.; Rockwell Medical Technologies, Inc.; Terumo Corporation.

Key Dates

1964:
Gambro is founded in order to develop and market an artificial kidney invented by Nils Alwall, of Lund, Sweden; Cobe, based in Colorado in the United States, is founded to develop and market dialysis systems.
1965:
Cobe launches its first product, a plastic extracorporeal blood set for use in chronic hemodialysis treatment regimes.
1967:
Gambro begins production of the first commercial dialysis system.
1971:
Gambro launches the AK-3 dialysis machine.
1975:
Cobe launches the Centry 2, the worlds first fully integrated dialysis machine.
1977:
Rhône-Poulenc and Sanofi combine their artificial kidney divisions to create Hospal SA.
1983:
Gambro goes public on the Stockholm and New York stock exchanges.
1984:
Cobe acquires IBM Biomedical Products.
1987:
Gambro acquires Hospal.
1990:
Gambro acquires Cobe.
1992:
Gambro acquires a stake in REN Corporation in the United States and begins building a network of dialysis treatment facilities in that country.
1994:
Gambro is acquired by Incentive AB, owned by the Wallenberg family of Sweden, which then streamlines its industrial holdings to focus on healthcare.
1996:
Gambro acquires American Outpatient Services Corporation and its 16 dialysis treatment clinics.
1997:
Gambro acquires Vivra, boosting its dialysis clinics network in the United States.
1998:
Gambro sells off the Cobe brand name and noncore cardiopulminary division; Incentive changes its name to Gambro AB.
1999:
Gambro undergoes $135 million restructuring drive.
2000:
Gambro launches the Polyflux filter-based dialysis system.
2001:
Gambro acquires Renal Management Inc., based in the United States.

Further Reading

Fresenius Denies Plans for Gambro Merger, Reuters, June 7, 2000.

Gambro Buys 21 Clinics in the United States, Reuters, April 3, 2001.

Gambro Makes Major Expansion in Dialyzer Production, Biotech Equipment Update, March 1, 2000.

Heller, Richard, Gambro Up for Grabs?, Forbes, July 24, 2000.

M. L. Cohen

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