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Moscow, 3 May 2012 – OJSC HSCI – The Human Stem Cells Institute (“HSCI”, MICEX: ISKJ), one of Russia’s leading biotech companies, today announces its unaudited results for the first quarter of 2012 in accordance with the Russian Accounting Standards (RAS).

  • Revenue for the first quarter of 2012 increased by 50% year on year to RUB 61.9 million.
  • Gross profit rose 68% year on year to RUB 23.8 million;  first quarter 2012 operating profit totaled RUB 4.0 million compared to RUB 0.3 million operating loss in the first quarter of 2011.
  • OIBDA1 amounted to RUB 5.3 million compared to RUB 0.9 million in the first quarter of 2011; first quarter 2012 OIBDA margin amounted to 8.5%.
  • First quarter 2012 net profit amounted to RUB 2.7 million compared to RUB 0.3 million a year ago. 


HSCI’s General Director Artur Isaev commented:
“Summing up the results of the reporting period, I would first of all like to note that in the first quarter of this year we began to actively engage in the commercialization of the products and services which HSCI has brought to market. The Company’s management has focused on issues related to the organization of sales and promotion of our new Gemascreen services as well as the innovative new drug Neovasculgen®, the launch of which is planned for June.

At the same time, the Company continued to deliver revenue growth from its cord blood stem cell isolation and storage services as well as SPRS-therapy service, which was introduced to the market just over half a year ago.

Since the third quarter of 2011, thanks to the implementation of a new marketing strategy for promoting the Gemabank® brand as well as overall positive changes in the market, we have seen a reemergence of the growth trend in demand for cord blood stem cell banking services, the revenues from which continue to account for a substantial portion of HSCI’s revenues. Due to this, our operating results for the reporting period are much better than those of same quarter in 2011, when we were unable to generate sufficient revenue growth to compensate for expenditures on promising new projects.

The year 2012 marks the first year of our new five-year business plan, and already this year the increased number of HSCI’s products and projects should lead to both higher revenues and higher profits for the Company as well as the further diversification of revenue structure. Looking at the results of the first quarter of this year, we can see that revenues from SPRS-therapy and Gemascreen services accounted for 10.6% of HSCI’s total revenue.”

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HSCI’s first quarter 2012 revenue amounted to RUB 61.937 million, representing an increase of 49.7% year on year.

The Company’s main source of revenues came from the isolation, cryopreservation and storage of umbilical cord blood stem cells.

In the reporting period HSCI signed 921 contracts on the banking/storage of cord blood stem cells, which met the Company’s plan and represented a 38.7% increase from the first quarter of 2011 (664 contracts), when the market stagnated as a result of post-crisis structural changes in consumer demand. In comparison with the previous quarter, the fourth quarter of 2011, the number of contracts was down slightly (by 3.5%) due to the seasonal factor.

During the reporting period the Company began implementing a new outreach strategy for providing information to doctors. This strategy entails expansion of the number of information sources from which obstetricians and gynecologists can learn about umbilical cord blood stem cell banking/storage services and well as raising awareness of and loyalty to the Gemabank® brand.

The Company’s plans for the second quarter of this year include further expansion of coverage and development of a new strategy for engaging target audiences – both with regard to expecting mothers and vis-à-vis obstetricians and gynecologists. Upcoming projects include the rebranding of Gemabank® and implementation of a revamped advertising concept, as well as expansion and optimization of service delivery channels.

Ukraine’s largest cord blood bank Hemafund (in which HSCI holds a 50% stake) signed 345 contracts for cord blood banking/storage during the first quarter of 2012 compared to 243 contracts signed in the first quarter of 2011. The cumulative number of samples held in storage by Hemafund has thus exceeded 4.5 thousand.   


Commercialization of HSCI’s innovative proprietary drugs, technologies and services (regenerative medicine – cell services, medical genetics, gene therapy):

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

This service was authorized by the Russian healthcare regulator Roszdravnadzor 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. SPRS-therapy is offered at the leading dermatology and cosmetics clinics of Moscow.

In the first quarter of 2012 revenues from SPRS-therapy totaled RUB 4.5 million or 7.2% of the Company’s total revenue. More than 140 patients had used this service as of the end of the first quarter of 2012 (93 patients fully completed their treatment, with approximately one-third returning for second and/or additional skin treatments in other affected areas).

During the reporting period the results of post-marketing research on the effectiveness of the application of autologous skin fibroblasts were published. These results indicated a high level of patient satisfaction and confirmed that the clinical effect of SPRS-therapy continue for a minimum of one year.

In 2012 HSCI plans to introduce SPRS-therapy to the St. Petersburg market as well as expand the scope of potential customers of such services via the launch and promotion of autologous skin fibroblasts banking services to a new segment of potential customers in the age bracket of 25-35 years. 

Gemascreen – a project to provide genetic medicine consultation with the aim of early detection, prevention and treatment of inherited diseases.

Throughout 2011 HSCI developed a project to create a Russia-wide genetic medicine service network to provide genetic diagnostics and consultation regarding the inherited diseases most commonly found among the peoples of the Russian Federation.

The Gemascreen project includes a portfolio of genetic diagnostics and consulting services to identify carrier status of inherited diseases and predisposition to them as well as subsequent consultation regarding prevention or early treatment measures in the case that susceptibility is discovered. Gemascreen’s services can be used by various groups of customers: newborns, couples planning children and pregnant women.

The Company began to implement the first phase of this project in the fourth quarter of 2011, launching in Moscow and a number of other regions pilot sales of Gemascreen services, namely presymptomatic identification of the six most common inherited diseases in the Russian Federation and their carrier status through DNA screening using umbilical cord blood of a newborn.

This service was launched Russia-wide in January 2012 and during the first quarter generated RUB 2.1 million in revenue or 3.4% of HSCI’s total revenue. In the second quarter the Company’s management will focus on accelerating the advertising campaign for Gemascreen service and broadening outreach to target audiences in the regions.

The opening of HSCI’s own genetic medicine consultation offices is planned in major cities throughout Russia during the course of 2012. Hereafter, the spectrum of diagnosed diseases is planned to increase to more than 80 through the creation of HSCI’s own DNA array as well as expansion of both the portfolio of services and the group of potential customers (the adult population of reproductive age).

Neovasculgen® Russia’s first gene-therapy drug to treat Peripheral Arterial Disease (PAD), including Critical Limb Ischemia (CLI).

Neovasculgen® passed phase 2b/3 clinical trials and received marketing authorization on December 7, 2011 (the decision to include the drug in the state registry of medicinal products for medical use in the Russian Federation was adopted by the Ministry of Health and Social Development on September 28, 2011 – RU № LP-000671).

Throughout the first quarter of 2012, preparations were underway to begin sales of the drug: preliminary marketing events, launch preparation, creation and organization of a proprietary network to promote the drug and production of the drug.

The beginning of Neovasculgen® sales is planned for June 2012 upon certification of the drug’s first batches. Neovasculgen® will be made available on the retail market as well as sold directly to hospitals in Russia as a finished product. Over the course of 2012 HSCI will seek to include this new drug in federal and regional public medicine subsidy programs and, following successful promotional activities, Neovasculgen® sales should account for a substantial portion of HSCI’s revenues.

Future plans include bringing Neovasculgen® to other CIS markets as well as studying the possibility of introducing it in the European Union and United States. The process of registering the drug in Ukraine began in March 2012: the registration dossier has been prepared and filed.

As Neovasculgen® is the first-in-class gene-therapy product for PAD treatment via stimulation of angiogenesis, the drug has much potential for use in treating other conditions where the development of collateral blood flow is beneficial. At the moment, HSCI is preparing studies on a broader array of ischemia-related conditions where this drug could possibly be put to use (preparing of new clinical trials protocols).

HSCI’s operating expenses for the first quarter of 2012 amounted to RUB 57.893 million, up by 38.3% year on year. The primary driver behind this increase was planned expenditures on the development of new projects confirmed in the Company’s business plan for 2012-2016, which in part resulted in a growth in personnel costs and marketing expenditures. In addition, with the increase in the number of cord blood stem cell samples accepted for storage, the related cord blood banking costs also rose (raw materials, general supplies, services of third-party medical organizations, etc.).

However, with revenues gains outpacing increases in operational expenses, the Company demonstrated an operating profit of RUB 4.044 million in contrast to operating loss of RUB 0.327 million reported in the same quarter a year earlier .

OIBDA amounted to RUB 5.293 million compared to RUB 0.870 million in the first quarter of 2011.

Therefore, during the reporting period the Company saw higher margins, with a gross margin of 38.4%, an OIBDA margin of 8.5% and operating margin of 6.5%.

For the accounting period the Company’s net interest income substantially decreased year on year, which influenced profit before tax, which amounted to RUB 3.448 million.

HSCI’s net profit in the first quarter 2012 amounted to RUB 2.717 million compared to RUB 0.294 million in the first quarter of 2011.

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 (216 kb)

04 May 2012