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Why HAE’s Blood Center Business Could See Small Revenue Decline

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Blood center business guidance

Haemonetics (HAE) expects its blood center business to report a year-over-year (or YoY) revenue decline in the range of 3% to 6% in fiscal 2019, resulting from a gradual decline in the rate of transfusions and from the rising market share of its competitor’s double-dose platelet-collection technology in Japan.

The blood center business is proving to be a challenge for Haemonetics, while the company competes with other medical device players such as Medtronic (MDT), Abbott Laboratories (ABT), and Stryker (SYK) for investor dollars.

The above diagram highlights the distribution of revenues across various segments in Haemonetics’s blood center business in the first three quarters of fiscal 2018.

Performance in fiscal 2018

In the fourth quarter of fiscal 2018, Haemonetics’s blood center business reported revenues close to $73.4 million, which is a YoY decline of 10.8% on a reported basis and 13.3% on a constant currency (or CC) basis, mainly attributable to its strong performance in the fourth quarter of fiscal 2017 due to a favorable customer ordering pattern. In fiscal 2018, the company reported revenues close to $284.9 million, which is a YoY decline of 6.2% on a reported basis and 7.5% on a CC basis. This decline has been much more modest as compared to the 14% YoY revenue decline reported in fiscal 2017.

The revenue decline of the Blood Center business has been partly attributed to Haemonetics exiting certain non-profitable businesses outside the US. In the fourth quarter of fiscal 2018, the platelet disposables business witnessed a 4% YoY revenue drop, while it was a 5.3% YoY revenue decline for fiscal 2018. This was the result of the rapid adoption of a competitor’s double-dose collection technology in Japanese markets as well as declining sales volumes in the EMEA markets. In the second half of fiscal 2018, double dose collection techniques accounted for almost one-third of the total platelet collections and for approximately half of the total platelet units collected in Japan. Haemonetics expects the use of this competitor technology to rise in fiscal 2019.

In fiscal 2018, Haemonetics witnessed a 9.8% YoY decline in revenues from the sale of red cell disposables, while the YoY revenue drop in this segment was 5.4% in the fourth quarter of fiscal 2018. In addition to the loss of customer share, the lower contracted pricing in the US also contributed to the drop in red cell disposable revenues in fiscal 2018.

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