AIDS Research Strains HemaCare Funds : Treatment: The tiny Sherman Oaks company has invested significantly in an effort to bolster patients’ defenses. The cost is worth it, the CEO says.
The prospect of developing a treatment for AIDS convinced tiny HemaCare Corp. to invest $435,000 in research last year, one reason the company lost more than $1 million in 1990.
The expense is worth it, maintains Hal I. Lieberman, chief executive of the Sherman Oaks company that provides blood products and blood-related medical services. “It’s something we can do that may have a dramatic effect on the treatment of this disease,” he said, adding that if the experimental treatment that HemaCare is testing proves effective, there could be “tremendous demand” for the product.
But HemaCare directors Antone J. Lazos and Thomas O. Gephart resigned last month from the board over a disagreement about the expensive research into the still-experimental AIDS treatment, Lieberman said. The treatment involves trying to bolster patients’ defenses against the virus that causes AIDS by infusing their blood with specially treated human plasma.
Mark Matheson, an analyst with Cruttenden & Co. in Newport Beach, reads the resignations as “a warning flag” that the research was straining HemaCare.
For any company, the chances of coming up with an effective treatment for acquired immune deficiency syndrome are slim. According to the U.S. Food and Drug Administration, there are about 90 experimental AIDS drugs or treatments being tested today under federal supervision. Another seven trials--including HemaCare’s--are under way in California under the auspices of the state Department of Health Services’ Food and Drug Branch.
The financial risk of HemaCare’s investment in its AIDS research is clear enough. On top of HemaCare’s start-up of a medical testing lab business last spring, the AIDS research has squeezed the company so hard that it had to slow down its bill-paying and scramble for bank financing last fall, according to a filing the company made in November with the Securities and Exchange Commission.
HemaCare estimated that it lost $492,000 in the fourth quarter ended Dec. 31, compared to a profit of $137,000 a year before. The loss was mainly due to the research and the start-up business, but a $300,000 writedown of assets that HemaCare hopes to sell also contributed. The company’s revenue for the quarter climbed 69% to an estimated $2.69 million from $1.59 million a year before.
For the full year 1990, HemaCare’s estimated $1.02-million loss came on revenue that climbed 47% to an estimated $8.47 million from $5.77 million. In 1989, HemaCare reported a net income of $471,000.
Lieberman said HemaCare is now looking for more bank financing and a partner to help cover the costs of its AIDS research--which could reach $1 million in 1991--and is hoping to sell most of a subsidiary that makes specialized blood plasma products.
HemaCare would seem well positioned to carry out the particular AIDS research it has begun. HemaCare’s business centers around hemapheresis, a procedure in which blood is taken from a patient or donor, then separated into its component parts: plasma, red blood cells, white blood cells, and platelets. After being separated, any of the components can be removed, and the rest returned to the patient or donor.
The process can be used to remove harmful elements from a sick person’s blood or beneficial parts from a donor’s. For example, patients with Guillain-Barre syndrome, a condition in which the blood plasma contains too many antibodies, may have their plasma separated out and replaced with albumen, which is essentially plasma that contains no antibodies. Most of HemaCare’s revenue typically comes from providing hospitals and patients with various hemapheresis treatments.
HemaCare’s experimental AIDS treatment, called passive hyperimmune therapy (PHT), involves a similar process, in which plasma is taken from people who have been infected with the virus that causes AIDS, but who haven’t yet come down with the symptoms of AIDS. Their plasma is thought to have antibodies that fight the AIDS virus.
In PHT, such plasma is treated to remove the AIDS virus itself, and then infused into people who have become sick with the symptoms of AIDS in hopes that it will help them stave off some of the symptoms.
HemaCare received a license to provide PHT in California from a Montreal company called Medicorp, which has a patent on the treatment. HemaCare got permis-sion from the state of California to begin collecting plasma for a clinical trial of PHT last June, but it took months longer to get the state’s permission to actually administer the treated plasma to AIDS patients. (Unlike most states, California has a system like the federal government’s for approving new drugs and medical treatments for use within the state.)
The delay was mainly due to the state’s concerns about whether the chemical that HemaCare used to kill the AIDS virus in the donors’ plasma was safe. Making its case didn’t always go smoothly for HemaCare. At one point, the effort was delayed a month because of a national shortage of a particular breed of laboratory mice needed in its experiments, according to Lieberman.
Final approval was at last granted by the state in November, and AIDS patients in Los Angeles and San Francisco began receiving plasma infusions in January. The research will eventually include about 225 patients, about 75 of whom will be in a control group receiving a placebo instead of the real treated plasma.
The entire trial will take a year, but in October the state will review preliminary results of the tests. If the infusions are proving safe and effective, the control group will be given PHT as well.
As HemaCare was spending money on its research, it was also investing in a new medical testing business--HemaCare Clinical Laboratories--which it founded last April. To date, that start-up has cost HemaCare $1.37 million.
Thanks to all the costs, HemaCare’s cash reserves and money in various bank accounts fell 42% to $1.1 million as of Sept. 30 from $1.87 million a year earlier. (HemaCare has not yet released year-end balance sheet figures.)
HemaCare was forced to find $800,000 in new bank financing from City National Bank in October. The bank loan helped HemaCare catch up with its bills, but even so, Lieberman said, HemaCare will need more money to finish the AIDS research, and will continue to look for more loans, as well as a partner in the research. Since November, the company discussed such a partnership with about 30 companies--mostly in the pharmaceutical business--and narrowed its prospects down to about five, said Thomas M. Asher, HemaCare’s chairman.
PHT, the treatment HemaCare is testing, was first developed by Abraham Karpas, a scientist at the University of Cambridge in England. Karpas had noted that when people are first infected with the HIV, the virus that causes AIDS--before they develop AIDS symptoms--the body creates antibodies to fight it. But later, when actual symptoms of the disease develop, the body’s immune defenses break down and those antibodies are no longer found in the blood.
Karpas theorized that antibody-rich blood plasma from the first group of people might help AIDS patients fight off the disease.
