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HSCI Reports on 2010-2011 Investment Program Results and Presents Corporate Strategy through 2016

Human Stem Cells InstituteMoscow, 12 March 2012 – OJSC HSCI – The Human Stem Cells Institute ("HSCI", MICEX: ISKJ), one of Russia's leading biotech companies, has announced the results of the first two years following its IPO and presented an overview of the Company's strategy for 2012-2016.

The management of HSCI held a meeting in Moscow with representatives of the business community and journalists to review post-IPO achievements, discuss progress on current projects and look ahead at the Company's development strategy. The meeting was organized with the support of the IIM MICEX-RTS.

In his opening remarks, Gennady Margolit, Managing Director of the IIM MICEX-RTS, recalled HSCI's milestone IPO: the first IPO after the crisis, the first IPO on the IIM and the first IPO of a biotech company in Russia. He also noted that the Company's market capitalization has risen by approximately 50% since trading began, and this success has been achieved despite the crisis and declining stock indexes.

Speaking at the meeting, HSCI's General Director Artur Isaev focused on how the plans put forward during the IPO in late 2009 have been implemented, what ideas are central to the new corporate strategy and what the Company's vision and prospects are for the medium-term.

Implementation of IPO plans:

Following its investment program, HSCI has actively built its cord blood banking business, both developing in Russia's regions and expanding internationally. Furthermore, the Company has successfully implemented its plans for the development, market authorization and launch of products and services in the field of regenerative and genetic medicine.

In late 2010, two years ahead of schedule, HSCI brought to market a new technology of applying autologous dermal fibroblasts to correct the effects of aging and skin defects (SPRS therapy). In the course of 2010-2011, HSCI completed the clinical trials of Neovasculgen®and in December 2011 received state approval to market this first-in-class drug for therapeutic angiogenesis. Commercialization of the product is underway. Thus, HSCI has made successful steps toward achieving its financial targets as presented in pre-IPO models. Plans regarding revenue growth from cord blood stem cells isolation and storage services have been corrected in light of post-crisis changes in consumer demand, which nonetheless began to rebound in the second half of 2011.

HSCI's status as a public company as well as the resources generated in the course of the IPO provided a powerful impulse, allowing the Company not only to carry out planned projects but also to launch a number of new initiatives aimed at supporting long-term growth. The Company has developed Gemascreen, a portfolio of services in medical genetic diagnostics and consultation for the prevention and treatment of inheritable diseases launched in 2012 on the Russian market.

In line with HSCI's mission, the Company has secured investment in its intellectual capacity, having become a major co-investor in the multilateral project SynBio. This international partnership is the first global biotech project to have been initiated by a Russian company, and it is being implemented with the support of RUSNANO, a state-owned co-investment institution for nanotechnology development. This special investment project is aimed at the development and production of first-in-class medicines as well as next-generation pharmaceutical products known as BioBetters for the treatment of socially significant diseases.

HSCI's Development Strategy for 2012-2016:

Considering the results achieved over the past two years as well as the expansion of the Company's scope of business, a decision was made to review and update HSCI's business plan for the mid-term perspective. The strategy also reflects a new development paradigm: a substantial portion of R&D and product approval work has been completed and the focus has shifted toward bringing products to market, which substantially reduces project risks. This raises the value of the Company, which now has at its disposal a broader spectrum of instruments for attracting financing (including borrowings).

HSCI's investment program for 2012-2016 is projected to reach RUB 1 billion, 50% of which should come from the Company's own funds and 50% from attracted financing. It has been decided that prior to achieving substantial results from the sale of new products and creation of new markets borrowed funds will be the primary source of investment funds.

Investment expenditures will largely be directed toward boosting production capacities (to implement the programs of planned projects) as well as toward the expansion and development of HSCI products in markets outside Russia. Substantial R&D investments are also planned with the aim of both further expanding current projects and developing new products.

Opportunities for investing the Company's own funds in investment programs will arise from positive cash flows generated by the Company's business. Over the next five years, EBITDA is forecast to substantially rise and along with it the EBITDA margin, as revenue flows dynamically increase from the realization of eight projects in regenerative medicine, genetic medicine and biological insurance.

  • Cord blood stem cells isolation & storage (Gemabank)
  • Medical genetic diagnostics and consultation (Gemascreen)
  • Neovasculgen® – a gene-therapy drug to treat Peripheral Arterial Disease
  • Storage of human reproductive cells and tissues (personal storage, donation)
  • SPRS therapy and SPRG therapy – application of autologous fibroblasts in cosmetology and dentistry
  • Gemacell – a cell-therapy product designed to treat myocardial infarction
  • Distribution of cell processing equipment (reconstructive medicine) produced by Cytori Therapeutics (USA)

HSCI's revenues are forecasted to reach RUB 3.6 billion in the final year of the planning period (2016). Revenues from the sale of Neovasculgen®are expected to account for a major share of revenues, with HSCI beginning active promotion of the drug on the Russian market this year.

HSCI's strategy for 2012-2016 focuses on the Company's comprehensive development as a multifaceted biotech company with international status and growing shareholder value. This is achievable by maintaining the Company's leading positions on existing markets as well as via creation of new brands and occupation of specific market niches where HSCI's leadership will serve as a base for sustainable growth in the long-term.

Fully recognizing the importance of the international vector of the biotech market, the Company aims to develop and promote its products not only in Russia but in other markets as well. This entails, among other things, the creation of international patent protections for proprietary innovations and engagement in partnership programs to pursue the promotion of the Company's product portfolio in foreign markets.

Cutting-edge technologies, new ideas and innovative products created by HSCI all help bring to life the Company's mission – to deliver a new culture of medical care.

Full Version of the Press Release (179 kb)

12 March 2012