Recently, we reaffirmed our ‘Neutral’ recommendation on Haemonetics (HAE) with a target price of $67.00.
Haemonetics reported revenues of $176.8 million in the third quarter of fiscal 2011, up 7% compared with the year-ago period. Revenues from both domestic and international markets increased 6.5% and 7.5%, respectively.
The company earns about 82% of its revenues from the sale of disposables – plasma disposables, blood bank disposables and hospital disposables. Barring hospital disposables which recorded a year-over-year sales decline of 1.5% to $31.6 million, plasma and blood bank disposables increased 1.1% ($59.8 million) and 1.8% ($52.7 million), respectively.
While plasma disposables have been recording declining revenues for the past few quarters, the situation improved during the reported quarter with 1% growth. The company witnessed recovery in its plasma business despite increased whole blood collections by its largest customer Japan Red Cross (JRC), which hurt its plasma business in that region. Adjusted for decline in Japanese plasma sales, plasma business witnessed annualized growth of 5% during the quarter.
The company’s progress regarding penetration of its blood management system (IMPACT) has been encouraging. During the quarter, Haemonetics added 47 IMPACT accounts, the highest in a quarter, resulting in a total of 165 compared with the goal of 175 for fiscal 2011. Of the 165 IMPACT accounts, 108 are North American hospital customers, representing 14% of total year-to-date North American patient revenues.
For the quarter, disposable revenue for these 108 customers increased by more than 50%. In addition to hospitals, the company has also made considerable progress with its blood center customers as well as expansion in the international market.
Emerging markets are a key focus area for Haemonetics’ future growth and is on track to generate more than $100 million in sales for the full year, an annualized growth of 24%. Within a span of 5 years, business from this region has almost doubled.
Although the economic scenario is improving gradually, it continues to remain a challenge for Haemonetics. The company has been progressing with its blood management solution although the attempt is being negatively impacted by economic challenges, especially with respect to orthopedic surgeries.
Consequently, the company has witnessed lower OrthoPAT sales in non-IMPACT accounts with a decline in elective surgeries and increased cost pressure forcing customers to switch to cheaper options.
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