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HSCI Announces First Half 2015 Consolidated Results under IFRS

Moscow, 3 September 2015 – PJSC HSCI – The Human Stem Cells Institute (“HSCI”, MOEX: ISKJ), one of Russia’s leading biotech companies, today announced its unaudited consolidated interim results for the first half of 2015 in accordance to International Financial Reporting Standards (IFRS):

  • Consolidated revenue for the first half of 2015 amounted to RUB 151.9 million compared to RUB 174.2 million in the same period of the previous year.
  • Operating loss amounted to RUB 18.4 million compared to an operating loss of RUB 14.2 million for 1H 2014.
  • Net profit for the first half of 2015 amounted to RUB 13.9 million compared to a net profit of RUB 30.0 million in the same period of the previous year.

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Consolidated revenue and revenues generated by key products and services

Consolidated revenue for 1H2015 amounted to RUB 151.944 million – a year-on-year decrease of 12.8%.

The largest portion of the consolidated revenue – 68.3% - was generated by PJSC HSCI as well as its subsidiary Cryonix JSC from cord blood stem cells isolation and storage services.

The decrease in consolidated revenue compared to 1H2014 is primarily attributable to lower revenues received from the sales of Neovasculgen® - HSCI’s innovative drug.

Neovasculgen® – the first-in-class gene-therapy drug for treatment of Peripheral Arterial Disease (PAD), including Critical Limb Ischemia (CLI)

In 1H 2015 revenues from the sale of Neovasculgen® amounted to RUB 1.152 million compared to RUB 41.800 million in 1H 2014 (0.8% and 24.0% of the Company’s consolidated revenue respectively).

Patient access to the drug and resultant Neovasculgen® sales on the Russian market are highly influenced by the absence of this first-in-class innovative drug in the list of Vital and Essential Drugs (VED) and state drug reimbursement programs. This strongly constrains the accessibility of Neovasculgen® for all patients suffering from PAD. However, in the VED list for 2015 approved in December 2014 Neovasculgen® was not included. In the end of March, 2015 the Company submitted a new application to the Ministry of Healthcare for the inclusion of Neovasculgen® in the VED list which will be formulated for 2016. The regulator’s decision is expected to be adopted in September 2015.

In 1H 2015 HSCI continues to promote Neovasculgen® in the professional medical community.

The Company took part in the 30th International conference of angiologists and vascular surgeons held in Sochi in June 2015; at the conference data on therapeutic effect during 4,5 years after a treatment course with Neovasculgen® were reported.

Active work is underway to actualize the problem of PAD therapy using new state-of-the-art ways of treatment – supported by the Agency for Strategic Initiatives (the autonomous non-profit organization established by the Government of Russia in order to implement the set of measures in economic and social spheres) as ASI promotes HSCI’s program of marketing Neovasculgen® innovative drug by providing administrative and methodological support on federal and regional levels.

During the reporting period HSCI also received from the Federal State Institution “The Fund for Promotion of Small Innovative Enterprises in Science and Technology” a grant of RUB 12 million to finance the project “Neovasculgen® innovative gene-therapy drug commercialization in Russia and abroad”.

Peripheral Arterial Disease (PAD) is a serious, incapacitating disease, which is exceeded in frequency (amongst cardiovascular diseases) only by ischemic heart disease (IHD) and brain stroke. In Russian Federation the number of patients with critical form of the disease (CLI, Critical Limb Ischemia) annually amounts up to 145,000, of which 35,000 - 40,000 undergo amputations, while around 25% of patients die. A part of patients diagnosed with CLI is inoperable, and for them Neovasculgen® could be the only treatment, allowing the opportunity to evade amputation as well as to significantly improve the quality of live.

The drug’s action mechanism – therapeutic angiogenesis – introduces a new approach to the treatment of ischemia: the use of an evolutionarily programmed process of blood vessel creation and growth. For this reason HSCI is now preparing to implement new clinical trial protocols in order to expand the range of indications for applying the drug. HSCI starts to work in the therapy of IHD (Ischemic Heart Disease), Diabetic Foot Syndrome and treatment of trauma-induced peripheral nerve damage. Also, the R&D is in progress for the creation of tissue-engineered products based on Neovasculgen®. 

In addition to the Russian market, HSCI intends to make Neovasculgen® available on other markets as well. At the moment the Company is negotiating with potential co-development partners as well as working on attracting required funds from Russian / international investors, and also grants for the process of development, FDA clearance and launch of Neovasculgen® in the United States and China. In addition, the talks to potential partners and reviewing of opportunities to license the drug manufacturing and marketing on other foreign markets are underway.

Cord blood stem cell isolation, cryopreservation and storage service – bio-insurance (Gemabank®)

In 1H2015 consolidated revenue from this service amounted to RUB 103.847 million (68.3% of the Company’s consolidated revenue) – almost flat compared to 1H 2014, which was attributable to sustainable growth in revenues from the storage of cord blood stem cells (+24%) but the decrease from cord blood stem cell isolation and cryopreservation services /new contracts/ (-13%).

In 2015 Gemabank® set in operation a new automated cryostorage facility which allows to store up to 40,000 cord blood samples with monitoring and controlling each bio-storage unit in real time mode.

As of today, the total number of personal cord blood stem cell samples held in storage at Gemabank® has reached 23.4 thousand.

Before the year-end it is planned to start rendering Gemabank® services through IMCB LLC (HSCI’s 100% subsidiary) with the aim to increase operational effectiveness as well as to use state tax allowance for medical companies’ procurement. IMCB (International Medical Center for Biomaterials Processing and Cryostorage) was

set up in October, 2014 and obtained the corresponding license (for hematopoietic cord blood stem cell isolation, transportation and storage services) in July 2015.

Research and assessment of the cord blood stem cell banking market in Russia conducted by the Company has shown that, according to 2014 year results, Gemabank® retained its leading positions. However, it should be noted that competitors have become more active and new players have emerged. Despite the noticeable consolidation of the market, the important fact for the future is that, as statistics shows, the Russian market for personalized cord blood stem cell banking has potential for growth. In Russia cord blood stem cell banking services are used for about 0.3% of newborns, while, for instance, in the U.S. penetration is around 4%, in Germany – 2%. According to experts, in the mid-term prospective market penetration in Russia may reach 0.6% (out of total births) due to higher growth rates in the Russian regions.

However, speaking on the current situation, the resumption of Gemabank’s sales growth on quarterly base will directly depend not only on global market trends and marketing efforts of the Company, but also on economic situation in Russia. Cord blood banking market in Russia demonstrated relative stability to the influence of economic crisis, but the decrease in oil price, the remaining Western sanctions and Russia’s counter measures continue to negatively affect the country’s economy and therefore consumer demand as a result of customers’ negative expectations.


SPRS-therapy – a set of personalized diagnostics and treatment procedures for repairing skin damage due to aging or other structural changes.

Revenues from SPRS-therapy, including the long-term storage of autologous skin fibroblasts, in 1H2015 amounted to RUB 17,331 million (11.4% of the Company’s consolidated revenue) – a year-on-year increase of 63.3%.

This service was authorized by the Russian healthcare regulator and introduced to the Russian market starting in January 2011. An innovative medical technology, SPRS-therapy entails the use of autologous skin fibroblasts to correct the effects of aging and skin damage.

The service includes diagnostics of the condition of the patient’s skin; a therapy course using the cell product with the patient’s own fibroblasts; and long-term storage of the patient’s skin fibroblast culture in a cryogenic bank.

This service is primarily offered through the leading dermatology and cosmetics clinics of Moscow (more than 30); however, in 2012 cooperation in providing this service began to extend to clinics in Russia’s regions (covering 14 cities as of June 30, 2014).

The total number of patients that had used this service, as of the end of reporting period, reaches 550 people. More than 50% of patients have returned for second and/or additional skin treatments in other areas besides the face. Therefore, the increase in number of requests for services within the spectrum SPRS-therapy (both initial and follow-up applications) is securing revenue growth.

The age of patients undergoing SPRS-therapy ranges from 40 to 65. In the end of Q1 2015 a stand-alone SPRS-bank service was launched for the younger clients as the type of bio-insurance. The service allows them to cryostore autologous skin fibroblasts in order to use in future – for repairing skin damage due to aging in such areas as face, neck, décolleté or hands applying SPRS-therapy as well as for the treatment of skin after burn injury or other trauma-induced skin damage.

In parallel with continued work with doctors and clinics specializing in aesthetic medicine, the marketing strategy continues to also include a focus on the promotion of SPRS-therapy services directly to consumers (including Social Media engagement).

In addition to the Russian market, the Company is making effeorts to launch SPRS-therapy and the Service of personalized skin diagnosis (“Skin Passport”) internationally.

Alongside, work on receiving global patent protection for the unique diagnostic component of SPRS-therapy know-how, i.e. personalized skin diagnosis (“Skin Passport”), is underway.

In September 2012, Vitacel LLC (HSCI’s subsidiary) applied for an international patent (PCT) to protect its IP for the related “Diagnostic method for connective tissue and its application” and this PCT application was published on April 11, 2013 and in 2013-2014 moved to the national and regional phases (EU, Eurasia, USA, Brazil and Japan)

In February 2014, the US Patent Office completed its expert review and issued Vitacel a patent for its “Method of determining tissue regenerative ability of the skin” (published on July 29, 2014).


Genetic diagnostic and consulting as well as Reprobank® services at Genetico® medical centers & lab

Revenues from genetic diagnostic and consulting services as well as Reprobank® services in 1H2015 amounted to RUB 26.578 million (17.5% of consolidated revenue) which represents almost a 3.5 times increase over 1H 2014 and exceeds the corresponding revenue received for the full year 2014 by 19%.

These services are provided by the Regenerative and Genetic Medical Center of the Human Stem Cells Institute (RGMC HSCI LLC), a subsidiary of HSCI, which develops the Russia-wide network of advanced medical genetic centers under the Genetico® brand. RVC BioFund, a state investment fund, is HSCI’s partner in this project.

The investment agreement signed by the parties was approved by HSCI’s EGM on March 27, 2014 and has come into force (for details, see: the press-release on EGM results and the press-release on the Investment agreement for RVC BioFund to become a participant in RGMC HSCI LLC). As for the moment, RVC BioFund holds a 23.89% stake in RGMC HSCI LLC.

The development of Genetico socially significant project includes the creation of the Company’s Russia-wide network of advanced medical centers as well as a testing lab to provide genetic diagnostics and consulting services with the aim of early identification, prediction and prophylactic treatment of genetic disorders. In addition, the project entails the development services based on Reprobank®– reproductive cell and tissue bank (personal storage, donation).

The services were introduced on the Russian market starting Q2-Q4 2013, and their range is continually expanding. As of the end of 1H 2015, the services provided in the Russian market were as follows:

A range of medical genetics consulting services using complex genetic testing technologies, including proprietary Ethnogene DNA-array for genetic screening:
- Neonatal screening with aim of early identification (preventing the development of clinical symptoms / complications) as well for prophylactic treatment of the most widespread inherited disorders.
- Preconception screening (for couples in pregnancy planning to minimize the risks of giving birth to a sick child). In the case that carrier status is identified among future parents, the development of the pathology in future generations can be prevented with the help of modern assisted reproductive technologies, namely, the use of IVF with PGD (preimplantation genetic diagnosis of embryos for monogenic inherited diseases during an IVF cycle, see below).
- Medical genetics consulting for patients with infertility.
- Prophylactic genetic screening for adults (determination of the genetic features and identification of risks for clinically healthy individuals and their future offspring).

Prenetix® (non-invasive prenatal testing of fetal chromosome aberrations using maternal venous blood).

PGD (preimplantation genetic diagnosis of early-stage embryos for monogenic inherited diseases and chromosomal abnormalities during an IVF cycle, which allows specialists to determine which embryos can be recommended for transplantation into the uterus).
The PGD laboratory, which operates within the HSCI’s new laboratory and production complex, was created in cooperation with the pioneer and world leader in this field – the Reproductive Genetics Institute in the United States. The laboratory uses a broad arsenal of methods and technologies which meet the strictest requirements for the fullness, informative value and reliability of the analysis as applicable to any situation in which preimplantation genetic diagnosis is required.
In the field of embryo genetic chromosome aberrations diagnosis, as of today HSCI’s PGD-lab holds #1 place in Russia by the number of patients.

Oncogenetics (identification of genetic predisposition to breast cancer and/or ovarian cancer).

Bioinformatics (genome sequencing and interpretation /employing NGS methods/, including Whole Exome Sequencing for the diagnosis of complicated inherited disease cases).

Genetico® clients have also access to the services offered by Reprobank® (reproductive cell and tissue bank) which started operations in Q3 2013 with the sale of donor sperm samples (incl. distribution for the California Cryobank – the one of world’s largest sperm banks) as well as the service of the personal sperm storage for bio-insurance purposes. In 2015 the oocyte cryopreservation service was launched, and before the year-end the donor oocyte bank is to start operations. Also it is planned to expand geography of services to cover St. Petersburg in addition to Moscow.
Reprobank® is Russia’s first and largest reproductive cell bank operating independently of IVF clinics.

Genetic diagnostics and consulting services as well as Reprobank® services are provided based on HSCI’s new laboratory and production complex, opened in 2013 in Moscow.

HSCI plans to expand the range of medical genetics consultation services offered by Genetico®, built on highly-technological diagnostics methods.

Starting Q3 2015 the introduction of new diagnostics platform (based on microfluidics) commenced, which offers more affordable pricing compared to Ethnogene DNA-array – in order to promote genetic screening and testing (including oncogenetics) for the mass market.

As of now, the validation of diagnostic panels have been completed and based on it, a range of new services elaborated and launched (for identification of socially-significant genetic disorders – e.g. genetic male and female reproductive health factors, thrombophilia, cystic fibrosis …). The development and launch of the new diagnostic panel for the complex of serious genetic diseases (48 mutations) is planned.

Expansion of bioinformatics services includes building universal range of products based on Next Generation Sequencing (NGS) technologies – ‘full genome’, ‘full exome’, ‘clinical exome’ as well as diagnostic panels for the specific disease classes and cases.


Expanding into new geographic markets – international markets entry (development of the Company’s products and services outside of Russia)

At the moment the Company is making evaluations and plans as well as conducting preliminary actions, including fundraising, towards the development and marketing of Neovasculgen® drug HSCI’s proprietary services in the field of regenerative medicine and medical genetics on the global markets which are substantially larger than the Russian market and, therefore, definitely present greater opportunities.

Operating expenses, OIBDA, Operating profit/ (loss)

Consolidated operating expenses in 1H 2015 decreased by 9.6% year on year to RUB 170.312 million as a result of management’s efforts to reduce business costs – primarily by minimizing overall staff costs through optimization of the number and structure of HSCI’s personnel as well as by cutting down the rental fees.

Nonetheless, the Company did not manage to secure downtrend dynamics in operational expenses sufficient to compensate revenue decrease – mainly, because of increase in costs for materials and reagents as well as in advertising expenses to support the services, which demonstrated higher revenues in the reporting period – such as SPRS-therapy and genetic diagnostics services. The R&D costs also increased – due to the additional research of Neovasculgen® drug (its stability analysis, allowing for prolonging expiry (storage) terms of the product).

As a result, in the reporting period the Company demonstrated negative operating profitability and margins – similar to 1H 2014 (see Appendix I).

Operating expenses before depreciation and amortization amounted to RUB 157.671 million, resulting in a negative OIBDA of RUB -5.727 million.

The Company’s operating loss amounted to RUB 18.368 million in 1H 2015.

Net other gain/ loss, Profit before income tax

In 1H 2015, the Company’s net other gain (share of profit/ (loss) of associates + net interest expense + net other non-operating income + net foreign exchange gains) amounted to RUB 36.003 million compared to RUB 55.993 million in 1H 2014.

The size of consolidated net other gain was largely determined by:

  • The decrease in the gain from revaluation of the Company’s purchased securities (quoted shares).
    In the reporting period the reduction in their number, along with the financial market trends, resulted in a revaluation gain in the amount of RUB 16.888 million (compared to RUB 55.025 million in 1H 2014).
  • The decrease of long-term debt and increase in loans granted. In 1H 2015 the interest expense decreased, which alongside with increase in interest gain from loans granted led to a drop of net interest expense in 1H 2015 compared to 1H2014 (RUB -0.756 million against RUB -5.144 million, respectively).
  • The gain from associates for 1H 2015 amounting to RUB 28.335 million. In the condensed consolidated interim financial statements for 1H 2014 the Company did not recognize a gain/loss from associates assumed there was no indication of impairment, so value of investments remained the same that resulted in no negative influence.

As a result, in 1H 2015 the Company’s profit before income tax amounted to RUB 17.635 million – a decrease compared to RUB 41.751 million for 1H 2014 when the Company received a significant gain from revaluation of purchased quoted securities.

Profit for the period (net profit)

In 1H 2015 the Company demonstrated a consolidated net profit totaling RUB 13.863 million, compared to a net profit of RUB 29.970 million in 1H 2014.


The condensed consolidated interim financial statements for 1H 2015 include the operating results of HSCI and its subsidiaries – Vitacel LLC, NextGen LLC, Cryonix JSC, RGMC HSCI LLC, Cell Technologies Laboratory LLC, IMCB LLC, NCG-cardio LLC and also HSCI’s share in the profit of its associated company IceGen LLC (see Notes 2, 11 to HSCI’s condensed consolidated interim financial statements for 1H 2015 under IFRS).


  1. Condensed consolidated interim statements of comprehensive income for the six months ended June 30, 2015, and June 30, 2014 – in RUB thousands
  2. Condensed consolidated interim statements of financial position as of June 30, 2015 and December 31, 2014 – in RUB thousands

HSCI’s unaudited condensed consolidated interim financial statements prepared in accordance with IFRS as of and for the six-month period ended June 30, 2015 can be viewed on the Company’s corporate website under “For Investors”(Financial Reports -> IFRS):

1OIBDA is a non-U.S. GAAP and non-IFRS financial measure, which the Company calculates as total revenues less operating expenses excluding depreciation and amortization. We believe that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our business operations, including our ability to finance investments and to incur and service debt. OIBDA should not be considered in isolation as an alternative to net income, operating income or any other measure of performance under U.S. GAAP or IFRS.

Full Version of the Press Release (739 kb)

03 September 2015