By HOWARD FINE
Staff Reporter
HemaCare Corp., a regional blood products provider that has waged a long and largely unsuccessful battle against giant American Red Cross, has taken several drastic steps in a bid to attract more capital.
Under pressure from outside investors, the Sherman Oaks-based company’s board last month recruited Charles Schwab Jr., the son of discount brokerage founder Charles Schwab, as an outside director.
Schwab’s firm, Kensington Capital Management, is a major investor in HemaCare, which posted $10.8 million in sales last year.
As part of a management shakeup, President and Chief Executive Hal Leiberman and Chief Financial Officer Sharon Kaiser resigned their board posts. Although Leiberman remains CEO, the company said he is in that post on a temporary basis until a new chief executive can be recruited.
At the same time, Chairman Glenn Bartlett stepped down, citing ill health.
Alan Darlington, president of Calabasas-based Tempe & Darlington, a health care consulting firm, has been named interim chairman. Jay Steffenhagen, vice president of health care provider Beckman Coulter, has been named as a replacement board member.
The reshuffling comes amid a prolonged slide in the company stock: since reaching a high of $3.18 a share in February, it has plummeted to just 53 cents.
Earnings have been anemic for the last two years, with HemaCare eking out net income of $52,000 for the first nine months of 1997. That’s a long way from offsetting the $3.5 million loss in 1995 and the $440,000 loss in 1996.
“The outside investors in the company felt that progress was happening too slowly,” said Michael LeConey, an analyst with the New York investment house of Dirks & Co. (Neither LeConey nor Dirks holds any HemaCare stock.)
“What they need is more money and time. So they brought in a Charles Schwab, who has a lot of contacts in the capital community, and they reorganized the board to try to convince Wall Street that they are serious in their attempts to grow,” he said.
Interim Chairman Darlington said that the company’s 1996 losses were due to a failed expansion attempt into St. Louis.
“We’ve improved our operations to the break-even point, but our margin pressures are high because the cost of blood components is going up while the price we can charge for our blood products has stayed very low,” Darlington said.
“We initiated the changes in the board of directors because we realized we had been losing money and needed to take some action,” he said. “We are not finished with the changes yet; when we pick the new CEO, he or she will help us develop a new strategic plan for the company.”
But the company faces a daunting task. Despite problems over the years with tainted blood supplies and spot blood shortages, the American Red Cross is still the dominant player in blood supply and products.
“The Red Cross has been the only game in town for most of this century. Most blood procurers don’t even know to consider alternatives,” LeConey said. “Those kinds of attitudes take a long time to change, so it will be a long, uphill battle for HemaCare.”
Unlike the Red Cross, HemaCare’s operations are focused on Southern California, where it provides customized blood management programs to area hospitals. While that provides HemaCare with a niche market, it also means that the company does not have a national supply network to draw from, as does the Red Cross.
Given enough capital, LeConey says the company can compete.
“As a smaller company, HemaCare should be better able to make the transition to managed care than a huge organization like the Red Cross,” he said.
The 20-year-old company has pulled itself out of trouble before.
In the 1980s, it won a vital assist from then-Assemblyman Tom Bane, D-Tarzana, who sponsored and won passage of legislation that lifted a ban on distribution of blood components from paid donors.
The ban was enacted in the 1970s to protect against the transmission of hepatitis and other diseases including, subsequently, the AIDS virus. Lifting the ban benefited HemaCare, which paid donors for blood-clotting agents, known as platelets.
HemaCare gave $4,800 in campaign contributions to Bane, but the company and the lawmaker a top lieutenant to then-Speaker Willie Brown denied any quid pro quo, saying that lifting the ban would benefit all blood products suppliers.
