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Haemonetics Corporation (HAE - Analyst Report) marked the fiscal 2013 as a landmark yearbased on several key growth factors including the purchase of transfusion medicine business of Pall Corporation (PLL - Analyst Report) in August 2012, the largest acquisition in the company’s history. Haemonetics stated that it will discuss about the key growth initiatives at the 31st Annual J.P. Morgan Health Care Conference in San Francisco on January 9, 2013.
The above-mentioned $551 million acquisition has allowed Haemonetics to enter into the $1.2 billion whole blood collection market. The performance of this business, with the integration process on track, during the last reported quarter was at par with expectations. The company noted that the integration effort is expected to be completed substantially by the end of fiscal 2013.
Manual whole blood collection accounts for the vast majority of the nearly 60 million red blood cells collection procedures performed annually worldwide. The entry into the whole blood market precedes the planned launch of the company’s automated whole blood product beginning later this fiscal year.
A limited market release is expected in the fourth fiscal quarter with a full market release expected shortly thereafter. Automated whole blood collection is considered to be an important growth driver for the company.
The company has also planned to discuss on its paperless phlebotomy product offering in the conference. Earlier, Haemonetics revealed its plans to introduce the paperless phlebotomy products in the whole blood market, the first out of the three phases of the Automated Whole Blood product launch. The company expects the FDA (Food and Drug Administration) clearance of the paperless phlebotomy offering and a limited market release to an identified U.S. blood center customer by the end of the fourth quarter of fiscal 2013.
Haemonetics believes that the emerging markets are a key focus area for future growth of the company. The company is currently investing more in this market, especially in China, as over the next five years business from China is slated for a CAGR (compound annual growth rate) of 20%−25% driven by sales from platelets, cell salvage ("Cell Saver Elite") and thromboelastography (“TEG”).
We also note that the robust growth of Diagnostics is based on 23% growth of TEG revenues in China, which is penetrating deeper in the field of interventional cardiology. The company is looking at recording 9%−13% growth in revenues from emerging markets (except Plasma) in fiscal 2013.
Over the next five years, business from China is slated for a CAGR of 20%−25% driven by sales from platelets, cell salvage and TEG. Given further penetration in these markets, revenue contribution from the emerging markets will be more significant.
The other important factors, which the company wants to discuss in the conference, are the 510K approvalfor next-generation OrthoPAT perioperative autotransfusion device, OrthoPAT Advance (expected limited market release in the first half of fiscal 2014) and an update on the Hemerus Medical acquisition.
Haemonetics sounds optimistic with its several recent growth drivers working on track. We believe that low global penetration and positive demand dynamics provide an encouraging long-term thesis for investing in the blood processing and supply chain management industry. Gradual improvement of the plasma business should further aid growth of the company.
Over the long term, we have a Neutral recommendation on Haemonetics. The stock retains a Zacks #2 Rank (Buy) in the short term.