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HSCI Announces Full Year 2015 Consolidated Results under IFRS

Moscow, 29 April 2016. PJSC HSCI – The Human Stem Cells Institute (“HSCI”, MOEX: ISKJ), one of Russia’s leading biotech companies, today announced its audited consolidated results for the full year 2015 in accordance with the International Financial Reporting Standards (IFRS).

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OIBDA 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.

General Director of HSCI Artur Isaev commented:

“From 2014 up to date, the Company has been focusing on the development of those businesses, where a good start was made during the previous years. We have gone away from active investment in early R&D, which require a long investment horizon and we are now targeted on those areas and projects where we expect the good momentum of revenue growth over the coming years. The Company are spending up to 90% of its resources on these projects, and we expect them to become profitable by the end of 2017.

In the reporting year, the Company was focused on optimizing costs, increasing management efficiency, as well as work on market access, marketing and promotion. In 2015 HSCI actively invested its own and attracted funds in medical genetics and genetic research and testing, in reproductive medicine, and finally, in the promotion of our innovative gene therapy drug Neovasculgen®.

We had passed key milestones for Neovasculgen® market access, and in the end of the last year it was included in the List of Vital and Essential Drugs in Russia. This is an important milestone that opens up the possibility for further positive results for this product in the market.

I would like to note that we see positive trends in all areas of the Company’s activities and we are confident in their prospects both in terms of growth of the Company's revenues and Russian healthcare development.”


Consolidated revenue and revenues generated by key products and services

Consolidated revenue for FY2015 amounted to RUB 310.821 million – a year-on-year decrease of 13.5%.

The decrease in consolidated revenue compared to FY2014 is primarily attributable to lower revenues received from the sales of HSCI’s own innovative drug Neovasculgen® (for details - see below).

The largest portion of the consolidated revenue – 66% - was generated by PJSC HSCI as well as its subsidiary Cryonix JSC and IMCB LLC from cord blood stem cells isolation and storage services.

The second largest revenue generator was Genetico® testing lab and medical center services with share in the consolidated revenue of 21%.

SPRS-therapy services provision accounted for 10% of the consolidated revenue.


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

In 2015 revenues from the sales of Neovasculgen® amounted to RUB 1.454 million, while for 2014 revenues from the sale of this drug to distributors amounted to RUB 86.083 million in 2014 (0.5% and 24.0% of the Company’s consolidated revenue respectively).

Neovasculgen® is an innovative drug, mostly intended for the treatment of patients in stationary (hospital). Therefore, Neovasculgen’s sales are highly dependent on its inclusion in the state public medicine subsidy programs (state drug reimbursement), and the Company began this work already in 2012, when Neovasculgen® went on sales in Russia.

One of the steps in this direction is inclusion of Neovasculgen® into the List of Vital and Essential Drugs (VED) – to substantially increase hospital procurements of this drug.

Up to this moment, patient access to Neovasculgen® and, accordingly, its sales in the Russian market have been cut by the absence of this first-in-class innovative drug in the VED list and state drug reimbursement programs. This strongly constrained the ability of hospitals to purchase the drug for all patients suffering from PAD.

On September 4, 2015 after thorough study of the drug’s safety, clinical efficacy and pharmacoeconomics, the Ministry of Health Commission made the decision to include Neovasculgen® into the VED list for 2016. Corresponding Government directive (# 2724-р.) was published on December 26, 2015. The drug was included in the VED list under the group name “Plasmid Deoxyribonucleic acid [supercoiled circular double-stranded]”.

In mid-March 2016, following the obligatory rule and procedure for all drugs included into the VED list, the cap price limit for manufacturer’s wholesales was set for Neovasculgen® in the amount of RUB 120,000 (VAT excluded).

Consequently, the drug’s sales volumes are expected to notably increase in 2017 upon the placement of Neovasculgen® in hospital’s procurement plans budgeted by the State.

As of today, dozens of healthcare centers (hospitals) across the Russian Federation have positive track of Neovasculgen® clinical administration. The Company continues to work on further promotion of the drug within medical community as well as on increasing vascular surgeons’ and angiologists’ awareness of this new therapy approach.

In November 2015, the data on therapeutic effect following a treatment course of Neovasculgen® according to 5-year observation were reported at the XXI All-Russian Congress of Cardiovascular Surgeons in FSBSI «A.N. Bakoulev SCCVS» and also at the XXXI International Conference «Selected topics of cardiovascular surgery» at A.V. Vishnevsky Institute of Surgery.

In addition, active work with the Agency for Strategic Initiatives (ASI) is under way as ASI renders a support to HSCI’s program of production and marketing of Neovasculgen® innovative drug. Currently, under the aegis of ASI regional events (round tables) are held for the discussion of therapeutic angiogenesis application in PAD treatment.

During the reporting year 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.

According to the drug’s clinical trial results and more than 3-year track of its use in practical healthcare (starting autumn 2012 when the drug was launched in the Russian market), Neovasculgen® increases the functioning capillaries number in ischemic tissues, improves the blood supply, reduces the rate of amputation and mortality in patients with lower limb ischemia, especially in those who are inoperable. Containing the gene of the Vascular Endothelial Growth Factor (VEGF) embedded in a plasmid vector (carrier), Neovasculgen® stimulates the growth of collateral blood vessels (аngiogenesis) and, as a result, promotes a long-term therapeutic effect and improves patients’ quality of life, first of all manifested in a substantial increase of Pain Free Walking Distance.

As 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), HSCI plans to implement new clinical trial protocols in order to expand the range of indications for applying Neovasculgen®. HSCI aims to work in the therapy of IHD (Ischemic Heart Disease), Diabetic Foot Syndrome, trauma-induced peripheral nerve damage. Also, the R&D is in progress for the creation of gene-activated bone grafts based on Neovasculgen®.

In addition to the Russian market, HSCI intends to make Neovasculgen® available on the other markets as well, particularly the the markets of the U.S. and China, which, taking into consideration their size, present great prospects.

Thus, as for the development of the drug candidate based on IP connected with the Russian drug Neovasculgen® in the United States – the partners have been selected and preparation of the agreements to be announced upon signing are under way. In the course of 3 years from the project start, the contract manufacturing are planned to be set up on the U.S. grounds and pre-clinical studies and the Phase I clinical trials are expected to be completed.

The work with potential partners for the registration of the drug in China is also in progress.

For the development of the drug in the USA and China, HSCI’s partners plan to raise necessary funds.

In addition, there are talks to potential partners and conclusion of distribution agreements for the sales of the Russian Neovasculgen® on some other foreign markets is underway.


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

In 2015 consolidated revenue from this service amounted to RUB 203.865 million (65.6% of the Company’s consolidated revenue).

Compared to FY2014, Gemabank® revenue increased by 1.5% - due to sustainable growth in revenues from the storage of cord blood stem cells but the decrease in revenues from the isolation and cryopreservation of cord blood stem cells (new contracts) which was attributable to the decline in consumer demand because of economic recession in Russia.

As of today, the total number of personal cord blood stem cell samples held in storage at Gemabank® has exceeded 24.7 thousand.

Despite the increase in activity and the number of competitors, Gemabank® retains its position as a leading player in the Russian market, traditionally outpaced the peers as for geographical coverage.

As during the last 3 years the market of bio-insurance - personal cord blood banking has stabilized growing only slightly, it has become more competitive. With that said, its penetration in Russia is rather low and the market has great potential for growth, therefore competition will inevitably decrease. Also, an increase in the number of treatment cases with the application of stem cells should provide a significant positive impact on the promotion and growth of this service both in Russia and globally. During its 12-year history, Gemabank® has already delivered more than 20 cord blood SC samples to use in treatment of various diseases.

Gemabank® short-term plans include expanding the number of services in order to attract new groups of customers as well as flexible pricing.

NB: From October 1, 2015 the Company started rendering Gemabank® services through IMCB LLC (HSCI’s
100%-subsidiary) – with the aim to increase effectiveness as well as to use state tax allowance for medical companies.

IMCB (International Medical Center for Biomaterials Processing and Cryostorage) was set up in October, 2014 and in July 2015 obtained the license for hematopoietic cord blood stem cell isolation, transportation and storage services. In Q4 2015 IMCB started providing this complex service of personal cord blood stem cell banking which used to be provided by HSCI itself, and recorded the revenue from provision of isolation and cryopreservation of cord blood SCs service to new clients. In the course of 2016 the whole client base from Gemabank’s first days is planned to be handed over from HSCI to IMCB. Therefore, IMCB total revenue will include both revenues from isolation & cryopreservation of cord blood SCs and revenues from the storage of cord blood SCs samples in Gemabank® (annual charges).

IMCB’s net income, starting 2016, will be allocated to the parent company in the form of dividends to contribute to HSCI’s net profit which may be distributed through dividend payment to the HSCI’s shareholders.


SPRS-therapy – a set of personalized diagnostic 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 2015 amounted to RUB 30,762 million (9.9% of the Company’s consolidated revenue) – a year-on-year increase of 32.6%.

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.

The 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 and CIS (covering 15 cities as of December 31, 2015).

The total number of patients that had used this service, as of the end of the reporting year, exceeded 570 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.

SPRS-therapy marketing strategy includes continued work in professional aesthetic medicine community (attracting new clinics, conducting trainings and seminars for doctors, lecturing postdoc students at field-specific medical universities) as well as the promotion of SPRS-therapy services directly to consumers (including Social Media engagement).

Also, we are working on protection of our IP related to SPRS-therapy®. In 2015, the Company has stopped the infringement of exclusive rights to SPRS-therapy® trademark owned by HSCI, violated by one of the clinics in St. Petersburg. The compensation assessed by the Arbitration Court of St. Petersburg in favor of HSCI amounted to 1.5 million rubles.

Talking about SPRS-therapy® promotion in the Russian market, we should note that its sales may be affected negatively by the new federal law "On biomedical cell products", which should pass the 2nd and 3d (final) readings in 2016.

In the event the law is passed, all the technologies associated with the cultivation of cells - even if they have already been introduced to the market – will have to be re-registered and we will be forced to suspend sales for the time of re-registration.

Currently, the Company is negotiating with public authorities regarding the fact that registered products should be provided with exceptions, just like SPRS-therapy which was authorized by Roszdravnadzor in 2009. In the event that no exceptions are given, the Company will have to re-conduct all preclinical studies and clinical trials, fill dossiers with trials results for the regulator etc., which is a long and expensive process.

In addition to the Russian market, the Company is making efforts to promote SPRS-therapy and the Service of personalized skin diagnosis (“Skin Passport”) internationally. An international medical tourism project is being prepared for launch in order to attract patients globally to receive SPRS-therapy services in partner clinics in Moscow. The project is initiated in cooperation with a partner from Great Britain and the first sales are anticipated not later than mid-year 2016.

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.

Vitacel LLC (HSCI’s subsidiary) applied for an international patent (PCT) to protect its IP “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). Ukrainian patent application passed qualification expertise in February 2016, and, according to the Announcement of confirmability to patent requirements, the decision on patent’s issuance was made.


Genetico® services (genetic diagnostics and consulting as well as Reprobank® services at Genetico® medical center & testing lab)

In partnership with RVC BioFund, HSCI implements its socially significant project for the development of personalized medicine in the field of early identification, prediction and prophylactic treatment of genetic disorders, including reproductive system diseases.

The Genetico project is implemented on the base of HSCI’s new laboratory and production complex, opened in 2013 in Moscow.

Revenues from genetic diagnostic and consulting services as well as Reprobank® services provided by GENETICO LLC, HSCI’s subsidiary, in 2015 amounted to RUB 64.963 million (20.9% of the Company’s consolidated revenue) which represents 2.9 times increase over 2014.

As of today, Genetico® center & testing lab activities include as follows:

  • A range of medical genetics diagnostic and consulting services using various genetic testing technologies (including microfluidics and NGS):

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.

HSCI’s PGD laboratory, created in cooperation with the pioneer and world leader in this field – the US Reproductive Genetics Institute, as of today holds #1 place in Russia by the number of patients.

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: when there is a risk of giving birth to a child with a serious inherited disease, in the case when there is a high risk of a chromosome abnormality which could lead to the death of the embryo or birth of a child with a pathology (such as Down syndrome), when it is vital to ensure that the future child will be a suitable donor of hematopoietic stem cells for the treatment of an older brother or sister suffering from an inherited disease (the selection of an embryo which is free of the disease-inducing mutation and also a compatible match (HLA-matched) for the sick sibling…

Prenetix® – non-invasive prenatal testing of fetal chromosome aberrations using maternal venous blood (can be performed starting from the 10th week of pregnancy to cover the most common chromosome abnormalities leading to the risk of delivering the child with Down syndrome, Klinefelter syndrome, Patau syndrome and other).

Neonatal screening – with the 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 (with an inherited disease, sometimes life-threatening).

In the case the 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 (see above).

Oncogenetics (identification of genetic predisposition to breast cancer and/or ovarian cancer; NGS-based extended diagnostic panel for familial oncological diseases).

Other diagnostic panels and tests for specific classes and particular types of socially significant disorders as well as genetically determined pathologies, including in the reproductive health area; genome sequencing and interpretation (employing NGS methods), including Whole Exome Sequencing for the diagnosis of complicated inherited disease cases and selection of better targeted therapy…

  • Reprobank® - reproductive cell and tissue bank offering personal storage as well as a sperm/oocyte donation. Reprobank® is Russia’s largest reproductive cell bank operating independently of IVF clinics.

The Company’s plans include further promotion of Genetico® services among both medical and patient communities, geographic expansion of sales and the increase in the number of partnerships with health centers. The Company also cooperates with regulatory, medical and patient communities to develop and implement new standards and programs aimed at the development of cutting-edge technologies in genetic diagnostics and their widespread introduction into practical healthcare (including within the framework of the National Technology Initiative, initiated by the President of the Russian Federation).


Operating expenses, OIBDA, Operating profit/ (loss)

Consolidated operating expenses in 2015 decreased by 1.0% year on year to RUB 406.338 million.

In response to the recession in the Russian economy, the Company has taken steps to curb the growth in operating expenses. We cut rental fees for office space, measures were taken to improve the efficiency of personnel: the total number of employees was reduced, part of work became outsourced, part of the staff was transferred to the subsidiary companies which have "Skolkovo" resident status (with State tax allowance provisions). Due to the difficult economic situation, R&D expenses were reduced and R&D activities are now carried out mainly on the base of external funding.

However, along with cost cutting, it was necessary to increase the expenses associated with capturing and maintaining the leading positions in the current and promising prospective markets.

We have increased advertising costs in order to ensure good promotion of HSCI's services in the traditional and new markets. In order to increase revenues, generated by Genetio® services and SPRS-therapy, we increased expenses for consumables, reagents and services of third-party contractors. Behind the surge in these costs there was mainly the increase of price for outsourced genetic tests and consumables purchased abroad (due to decline in the ruble).

As there was no such revenue increase to compensate rather high operating expenses necessary as of now to promote a range of promising products and services, in 2015, similar to 2014, the Company demonstrated negative operating profitability and margins (see Appendix I).

Operating expenses before depreciation and amortization amounted to RUB 380.143 million, resulting in a negative OIBDA of RUB -69.322 million.

The Company’s operating loss amounted to RUB 95.517 million in the reporting year.


Net other gain/ loss, Profit / (loss) before income tax

In 2015, the Company’s net other gain (share of loss of associates + net interest expense + net other non-operating income + net foreign exchange gains) amounted to RUB 35.208 million compared to RUB 51.419 million in 2014.

The year-on-year decrease of consolidated net other gain was mainly attributable to the drop in the gain from the revaluation of purchased securities (quoted shares). In 2015 the reduction in their number, along with the financial market trends, resulted in a revaluation gain in the amount of RUB 42.422 million (compared to RUB 57.816 million in 2014).

As there were no such gains from non-operating activities which would have surpassed operating loss in the reporting year, as it took place in 2014, the Company recognized loss before income tax in the amount of RUB 60.309 million in 2015 (compared to the profit before tax in the amount of RUB 0,160 million for 2014).


Profit / (loss) for the year (net profit / (loss))

Due to the reasons mentioned above, in 2015 the Company demonstrated a consolidated net loss totaling RUB 62.525 million (compared to a net loss of RUB 16.016 million for 2014 as a result of the significant deferred income tax liabilities derived from the receiving of material gain from the revaluation of purchased quoted securities).



The consolidated financial statements for the full year 2015 include the operating results of HSCI and its subsidiaries – Vitacel LLC, NextGen LLC, Cryonix JSC, GENETICO LLC, Cell Technologies Laboratory LLC, IMCB LLC, NVG-cardio LLC and also HSCI’s share in the loss of its associated company IceGen LLC (see Notes 2, 9, 10 to HSCI’s audited consolidated financial statements for the Full Year of 2015 under IFRS).



  1. Condensed audited consolidated statements of profit and loss and comprehensive income for the years ended December 31, 2015, and December 31, 2014 – in RUB thousands
  2. Condensed audited consolidated statements of financial position as of December 31, 2015 and December 31, 2014 – in RUB thousands

HSCI’s audited consolidated financial statements prepared in accordance with IFRS as of and for year ended December 31, 2015 can be viewed on the Company’s corporate website under “For Investors”
(Financial Reports -> IFRS):

Full Version of the Press Release (744 kb)

29 April 2016