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Plasma Market Dynamics

Defining the Market The plasma market encompasses the collection of human blood plasma from paid donors, the sale of source plasma to fractionators, and the use of the source plasma by fractionators as a raw material in the manufacture of pharmaceuticals. These pharmaceuticals include: Factor VIII clotting factor prescribed to hemophiliacs Intravenous Immunoglobulin (IVIG) used to treat patients with immune deficiencies or disorders involving the immune system Albumin used to treat liver disease, for example Haemonetics participation in this market is limited to supply of its automated collection systems to plasma collectors and its information technology (through the 5D Information Systems subsidiary) to collectors and fractionators. Haemonetics sells approximately 60% of the disposable collection sets used worldwide. Baxter Healthcare supplies the remaining disposable collection sets. Unlike Baxter, Haemonetics does not collect, sell, or fractionate plasma. Conversely, Baxter, unlike Haemonetics, does not sell information systems to automate plasma operations. In more than ten years the worldwide market for systems to collect plasma has nearly doubled, from $125 million to $200 million, averaging over 6% annual growth. Today, there are about 20 million liters of plasma collected annually versus only 10 million liters collected ten years ago. Sale of Haemonetics systems are affected by the supply and demand for source plasma. The Company can also be affected by industry consolidation as fractionation companies merge and acquire plasma collection centers to secure control of their raw material. Haemonetics is not directly affected by pharmaceutical price pressure. Plasma Supply The plasma market has been turbulent over the past 10 years. In the late 1990s and early 2000s, many fractionation companies were operating under FDA consent decrees or other regulatory restrictions that significantly constrained their manufacturing capacities. As a consequence, the demand by fractionators for source plasma decreased (even as patient needs for plasma derived products continued steady or increased). In response, plasma collections, and thus sales of Haemonetics disposable used to collect the plasma, temporarily declined. A shortage of IVIG resulted and almost immediately industry consolidation (discussed below) began as a tactic by fractionators to protect their supply of raw material the plasma which was also in short supply. As fractionation plants came back on line, demand for source plasma increased significantly and rapidly. Plasma collectors struggled to catch up to the increased supply pressures, opening new collection centers and aggressively recruiting new plasma donors. The number of collection centers increased 8% from 2000-2002. Haemonetics disposable sales grew rapidly. In the recent past, there has again been an oversupply of plasma. Some pharmaceuticals, like Factor VIII, can now be made from recombinant processes that are more expensive but without the perceived risks of human plasma. In the developed world, sales of the recombinant product are increasing and sales of plasma derived Factor VIII were decreasing then stabilized. Sales of plasma derived Factor VIII and albumin are increasing in developing countries who cannot afford recombinant product. So, the market for collections declined in the U.S. over the course of the past several years, and Haemonetics disposable sales have been impacted.

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Most recently, in calendar year 2005, U.S. and European plasma suppliers have worked through much of their excess plasma inventory, and plasma collections are again beginning to increase in these regions. Japan, however, continues to have an oversupply of plasma, and a collection decline in Japan is partially offsetting the collection increases in the U.S. and Europe. Market sources suggest that the worldwide demand for plasma is about 22 million collections annually. Haemonetics anticipates that plasma collections will need to increase over the next several years to meet that demand. Certain plasma-derived products, such as IVIG and albumin, are not expected to be manufactured by recombinant means. Inasmuch as the end market for these products continues to increase as more indications are identified for these medicines, the overall plasma collection market is expected to continue to grow, over the long term, in low single digits. IVIG demand is now the primary driver of the plasma collection market, with demand growing 6-8% annually. While the need for these products is increasing, we expect that market demand for more plasma will be somewhat offset by increased plasma protein yield obtained by state of the art fractionation plants, as well as by some shift from plasma-derived Factor VIII to recombinant Factor VIII. We expect that the plasma collection market will grow an average of 2-3% over the next 10 years.

Consolidation There are two consolidation dynamics that have occurred over the past several years in the plasma market: 1) Fractionators buying other fractionators, resulting in fewer companies. 2) To secure the supply of their raw material the source plasma fractionators had been buying plasma collection centers. This consolidation affects Haemonetics. For example, when Baxter buys fractionators or collection centers that currently use Haemonetics automated systems Baxter is expected to convert from Haemonetics systems to Baxter systems. This happened in October 2003. Baxter announced it had acquired certain assets of Alpha Therapeutics, including 41 Alpha plasma collection centers. It also announced that it was closing 38 of these 41 centers and had sold the remaining 3 centers. Haemonetics had exclusive purchase and supply contracts with Alpha, and Baxter assumed these contracts as part of its acquisition of Alpha. The contracts include minimum purchase obligations for Haemonetics plasma collection kits, anticoagulants, and bottles, through terms ending in 2005, 2006 and 2009, respectively. In October 2005 Haemonetics was awarded $31 million as a result of winning an arbitration proceeding against Baxter for Baxters failure to honor Haemonetics contracts. (See Company press release of January 22, 2004) In addition to closing 38 of 41 of the Alpha plasma collection centers, Baxter had previously announced that it was closing 26 of its existing centers. With this, 15% of the plasma collection capacity had been suddenly eliminated. We believe that supply and demand now in alignment at our competition. Therefore, in the near term, Haemonetics is less vulnerable to significant losses in revenue from additional plasma collection systems being converted to competitive systems with the aforementioned exception of the Alpha acquisition. It is also important to note that another fractionator, Bayer, is moving away from owning collection centers and is moving toward multiple contracts with independent collectors. Additionally, in May 2004 CSL Limited purchased Aventis therapeutic protein and recombinant products division, which includes plasma operations. CSL closed 35 of the acquired plasma collection centers, many of which were Haemonetics customers, resulting in about another 10% decline in plasma collection capacity, and negatively affecting Haemonetics revenues. More recently, in February 2005, Haemonetics was awarded an exclusive supply contract by CSLs plasma collection division (ZLB Behring) that gave significant positive impact to

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revenues in FY06 and are anticipated to further contribute to revenue growth in FY07. In short, there are still market changes occurring that affect Haemonetics. At this time, the total number of collection centers in the U.S. is now below year 2000 levels. In summary, the market remains somewhat unstable, and we may see further consolidation, if not among collectors then perhaps among fractionators and pharmaceutical manufacturers. Plasma Pricing Although Baxter is Haemonetics only competitor, unlike Baxter, Haemonetics is not affected by pharmaceutical price pressure. Baxter not only sells plasma collection equipment, but also owns and operates plasma collection centers and uses plasma to make Baxter brand pharmaceuticals. Plasma derived pharmaceuticals have experienced price pressure in the past year because of increased competition and supply. This price pressure has not affected and is not expected to affect the price of the Haemonetics automated plasma collection systems. Summary If we review 10 years of plasma sales at Haemonetics, our quarterly performance has certainly fluctuated. However, our long-term performance has been roughly in line with market growth rates. These are the key takeaways: 1) The plasma market can be volatile on an annual basis, but over the long term it continues to grow at a very steady rate, averaging 2-3%, as the market for end product continues to increase. 2) Despite having lost some business due to industry consolidation trends in the past, Haemonetics has made up that volume and is well positioned for future growth. 3) Industry consolidation has shown that collection capacity was reduced by 15% over several years. However, our market intelligence tells us that the plasma industry in the U.S. and Europe has worked through its oversupply of plasma which is prompting another cycle of increases in collection capacity which could last several years. This is consistent with the fluctuations weve witnessed for more than a decade. Most importantly, were confident that this market continues to grow, notwithstanding temporary contractions in one part of the plasma supply chain, and we will win our share of that growth.

This document contains forward looking statements that involve risks and uncertainties detailed in the Companys filings with the Securities and Exchange Commission. The forward looking statements are based on estimates and assumptions made by management of the Company and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results and experience could differ materially from the forward looking statements. ###

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