OREANDA-NEWS. PJSC HSCI – The Human Stem Cells Institute, 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.

RUB thousands

6mo 2015

6mo 2014

% change, y-o-y

Revenue

151,944

174,201

-12.8%

Operating expenses, incl.

(170,312)

(188,443)

-9.6%

Depreciation & amortization

(12,641)

(13,676)

-7.6%

OIBDA

(5,727)

(566)

911.8%

OIBDA margin, %

n/a

n/a

n/a

Operating profit / (loss)

(18,368)

(14,242)

29.0%

Operating margin, %

n/a

n/a

n/a

Net profit/ (loss)

13,863

29,970

-53.7%

Net margin, %

9.1%

17.2%

n/a

Total comprehensive income/ (loss)

13,863

29,970

-53.7%

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, d?collet? 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).