HemaCare Tries Fiscal Transfusion for Growth

Times Staff Writer

Red ink notwithstanding, a Sherman Oaks firm that sells blood products and services has raised $3.5 million in the stock market--even though it plans to use the money to try something at which it has failed in the past.

HemaCare Corp. gets most of its revenue by selling platelets and by providing hemapheresis, a blood treatment for patients with immune-system disorders, usually excluding AIDS. It also claims to be Los Angeles' only private blood bank where individuals can store their own blood for later use.

Chairman Thomas M. Asher said HemaCare will use the $3 million it netted from its initial public securities offering on Oct. 22 to open four more full-service blood centers within two years, the first probably in Orange County.

In 1982, HemaCare tried the same thing--in Burlingame, Calif., and Portland--only to give up the following year.

The experience apparently has not deterred investors, who bought up the company's offering from underwriter Engler-Budd & Co. for $5 per unit, with each unit consisting of two common shares and a warrant for a third. The offering placed about 53% of the company's stock in the public's hands, with most of the rest held by Asher and other company directors. HemaCare units closed Monday at a bid price of $5.

The investor interest also comes despite the slow growth of "autologous" blood banking, the storage of one's own blood. The idea has garnered much attention, but so far the public has not rushed to embrace it.

"I think it's inertia," Asher said. HemaCare has less than 20 pints stored in liquid form at any given time, he said, and perhaps another 30 frozen for long-term storage.

HemaCare has a history as a financial bleeder. Incorporated as Immunogenetics in 1978, HemaCare has mostly lost money ever since. By June 30 it had a working capital deficit of $125,000 and a net worth of just $79,000, despite a private placement in May that brought in $170,000.

For the first six months of 1986, HemaCare lost $38,000 on revenue of $1.4 million. It earned $48,000 on sales of $2.4 million in 1985, and lost $237,000 on sales of $1.7 million in the 11 months ended Dec. 31, 1984, an odd period because the fiscal year was shifted.

"We certainly do not have a sterling, brilliant financial record," acknowledged Asher, an affable science entrepreneur who helped found the business.

Believes in Banking Idea

Nevertheless, Asher remains convinced that a combination of hemapheresis, private blood-banking, and the extraction and sale of platelets and other blood components will bring profitability.

Asher has succeeded in the past. A University of London doctor of microbiology, he co-founded in 1968 a plasma-products firm called Immuno-Science Corp. Asher, now 60, was its president and held an 18% stake until it was sold to Johnson & Johnson for $11 million in 1977.

Health-care industry analysts say investors are cautiously returning to medical stocks, which they abandoned in droves during Wall Street's shakeout earlier this fall. Firms specializing in drugs and equipment are especially regaining favor.

"As long as the economy's not going anywhere, health care looks good," said Kenneth Abramowitz, an analyst with the Sanford C. Bernstein securities firm in New York.

HemaCare fits the newly favored profile: it is the nation's only company that transports hemapheresis equipment to hospitals, Asher said, adding that others have tried before and failed.

He also said HemaCare is Los Angeles' only private blood bank where people can store their own blood--or donations from friends and relatives--for later use. Such services are available at some hospitals, Asher said, but there are only a handful of companies in the business anywhere in the country.

During the past year and a half, HemaCare got most of its revenue by selling blood platelets, which allow blood to clot and are used by patients undergoing chemotherapy, open-heart surgery or who have platelet-destroying diseases.

HemaCare gets the platelets by paying healthy donors $65 per donation session.

Hemapheresis and blood banking, however, are what HemaCare hopes to grow on.

Expensive Process

Hemapheresis is relatively expensive, and few hospitals have the equipment that HemaCare provides.

The process is sometimes prescribed for certain immune-system disorders because it can remove antibodies and other disease-fighting blood components that, in patients with multiple sclerosis, lupus and other disorders, attack healthy tissue.

Asher said the process is still relatively primitive, but future technology offers the prospect of refinements that could benefit more patients.

He said roughly 80,000 hemapheresis procedures will be done in the United States this year, and that his company will do 1,500 to 1,700 of them, with the average patient undergoing 10.

The technology, which is not proprietary, also offers an efficient way to gather platelets from healthy patients for resale.

Red Cross Has Reservations

HemaCare says autologous blood banking can avoid the risk of hepatitis, AIDS and other disorders that sometimes arise from transfusions, but Ralph Wright, a spokesman for the Los Angeles Chapter of the American Red Cross, agreed only in part.

The Red Cross approves of self-donated blood for elective surgery, he said, but generally opposes freezing a healthy person's blood for an unspecified later use, another HemaCare service. Wright said the process is expensive, and the blood often is unavailable in the event of an accident.

He also said that blood from known donors such as friends and relatives is not nearly as good as a patient's own, donated in advance, and may even be worse than blood from the general supply. Wright said friends and relatives may not answer questions honestly about drug use, hepatitis or homosexuality, which might increase a donor's risk of having AIDS.

"We're opposed to directed donations," he said. "Who knows how many closet whatevers there are among your friends and relatives?"

But Asher said most accidents occur close to home and that friends and relatives are probably no likelier to lie in pre-donor screening than anyone else.

Explaining Past Problems

As for HemaCare's prior mishaps, the chairman says its Burlingame and Portland ventures failed because the company was short of funds and because, in Portland, the medical community refused to support a competitor of the Red Cross, which also did mobile hemapheresis.

"We tried to do too much at once," he said.

This time, Asher said, the securities offering makes HemaCare better financed. The company plans to start out with another center in Southern California, where he said no one else does mobile hemapheresis.

Asher said the company soon will move to larger quarters in Sherman Oaks; it also has an office in West Los Angeles, where it does private blood banking.

HemaCare, which adopted its current name in 1983, had 2.9 million shares outstanding after the securities offering.

Asher is the biggest shareholder, with a stake of 13.6%, the prospectus says. His co-founders are also shareholders and directors: Dr. Joshua Levy has an 11% stake, and H. McMillan Lindsey, 7.8%. John Pappajohn, a Des Moines investor said to have invested in a number of Southern California biomedical companies, is also a director, and holds 10.8%.

As part of the offering, HemaCare directors or officers who own more than 5% of the stock have agreed not to sell or transfer any for 12 months.

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