HemaCare Corp., which shed its core blood bank business in August, is de-registering its common stock from Over the Counter trading. The company said the move will save money and resources, which have been squeezed in recent months as the Van Nuys company — the only for-profit competitor to the American Red Cross — has attempted to restructure and reposition itself. “It’s not unusual for a small company to do this,” said CEO Pete van der Wal. “There is an enormous cost associated with SEC compliance in terms of reporting. The benefits just weren’t there.” From more than $30 million in sales just a few years ago, HemaCare has shrunk to a fraction of its former self. Revenues this year will be between $17 and $20 million, van der Wal said. The company has struggled to reinvent itself, targeting new markets for its blood supplies, including emerging biotech and pharmaceutical companies and research universities. But van der Wal said those struggles are not what led to the decision to deregister. “People think it’s an indication of bigger problems, but for us, it was strictly a cost-cutting move.” He said the company’s CFO spends up to a third of his time filing SEC reports, and now he will be able to use that time to focus on growth opportunities. Shares of HemaCare common stock will no longer be quoted on the OTC Bulletin Board, but instead will be quoted on the OTC Pink Market, which has far less restrictive reporting requirements. At least some of HemaCare’s troubles can be traced back to the fact it was a for-profit competitor in the blood bank business. Nonprofits, including the American Red Cross, are able to subsidize their low prices with donations. Nevertheless, HemaCare was able to compete for years as the only blood bank operator in the Los Angeles and Orange County markets besides the American Red Cross. That all changed in 2010 when multiple nonprofits moved into the market, making HemaCare’s higher prices unsustainable and forcing the company to exit the blood bank business altogether, van der Wal said. HemaCare sold its blood bank line, which accounted for roughly half of revenues, to the American Red Cross last July. Since then, the company has been focusing on higher margin business, especially the business of therapeutic apheresis (TA), in which HemaCare separates abnormal components from blood in order to treat certain diseases such as Lupus. HemaCare has performed more than 50,000 such procedures. Compared to the blood bank business, TA is more profitable. Revenue from therapeutics services grew to $9 million for the year ended Dec. 31, 2011, up 18 percent from the previous year. Despite pricing pressures, that business had gross margins of 31 percent, according to company reports. An equally promising area has been auto-immune therapy, with HemaCare providing the essential service of isolating white blood cells for biotech company Dendreon Corp. Dendreon has an FDA-approved process for using the body’s own white blood cells to fight prostate cancer. HemaCare has been Dendreon’s partner for isolating white blood cells and sending them to Dendreon, which in turn manipulates the cells and enables them to fight cancer. “Patients get their own white blood cells back, re-energized to fight cancer in their own body,” van del Wal said. But even here, HemaCare has been hit by the uncertain nature of the biotech business. Dendreon’s prostate cancer therapy, Provenge, failed to hit projected growth targets last year, forcing HemaCare to close three centers that it opened to service the Dendreon business. But van der Wal is not discouraged. He believes Dendreon’s process to fight prostate cancer can be applied to fight a host of diseases using autoimmune therapies facilitated by blood separation. HemaCare hopes to be a partner to the emerging companies working on such therapies. In addition, he is confident in the company’s research segment, which supplies blood products to major pharmaceutical companies and research labs. “They are growing artificial arteries and veins and skin,” he said. “Such things were unheard of five to 10 years ago.” HemaCare hopes to leverage long-standing relationships with thousands of donors going back many years to supply scientists with blood to do their research. It’s an area that van der Wal believes can grow in excess of 20 percent a year. With some luck, he said he will turn that opportunity into enough business to one day reregister the stock. “We’re in the process of turning this company around,” he said. “If we can do that and sustain that, more people will be interested in buying the stock again.”
