Stem cells go to IPO: first-hand details

JSC "Institute of Human Stem Cells" (ISCH) plans to hold an initial public offering (IPO) in the sector of Innovative and Growing Companies (IRC) of MICEX in the autumn of this year. This IPO will not only be the first IPO in Russia this year, but also the first initial public offering of shares of a biotech company in the history of the Russian stock market.

The public offering of shares of JSC ISKCH will also become one of the first pilots in the Innovation and Investment Market – a joint project of MICEX and RUSNANO Group (on June 5, 2009, MICEX Group and RUSNANO signed a cooperation agreement to create a new exchange sector on the basis of the IRC Sector – the Innovation and Investment Market, which will allow high-tech companies to attract financing using exchange mechanisms).

During the IPO, it is planned to attract 120-150 million rubles through the placement of additional issue shares. CJSC "ALOR INVEST" was chosen as the organizer of the IPO.

ISKCH is a leading Russian company in the market of isolation and personal storage of human stem cells, simultaneously carrying out scientific developments in the field of creating the latest medicines based on biotechnologies.

As Maxim Dremin, Head of the Corporate Finance Department of ALOR INVEST CJSC, noted: "Now we are completing the evaluation of the company, according to preliminary results, we can say that investors will be offered from 15% to 25% of the shares of the Human Stem Cell Institute."

The General Director of JSC "ISKCH" Artur Isaev announced plans for the development of investments: "In twothousandten. We expect to allocate about $1.6 million for expansion into the CIS countries, primarily to Ukraine, Belarus, and Kazakhstan. Another $1.4 million will be invested in research and production of experimental and small-scale samples of innovative products, in particular medicines intended for the treatment of oncological and cardiovascular diseases and skin burn defects, in order to bring them to the stage of commercialization. Approximately $0.8 million will be allocated in 2010-11 for the expansion and additional equipment of the laboratory and the stem cell storage bank. About $ 0.5 million is needed in 2010-11 for expansion into the regions of the Russian Federation – expansion of the network of representative offices. And finally, in 2011-12, it is planned to build a laboratory worth $4.5 million for the production of innovative drugs."

"Thus, the volume of required investments by the end of 2012 is estimated at $8.8 million. Of these, about $4 million will be financed from the company's own revenues. We plan to raise the remaining $4.8 million through the IPO mechanism," A. summed up.Isaev.

These projects are characterized by a quick return on investment, which will be visible in 1-2 years. The volume of the CIS market in 2010 and 2011 is about 2500 and 3000 stem cell samples, or $4.2 million and $5.1 million in monetary terms. The effect of expanding its presence in Russian regions in 2010 will be approximately $2.3 million. The launch of the first innovative drug into production at the existing facilities will bring about $ 3.2 million in net cash flow in 2010-11.

"After the implementation of our plans, the HSCC will be able to occupy 70% of the Russian market by 2012, compared to 54% now, and at least 60% in the CIS countries. Expansion into Europe and Asia is expected in the perspective of 2014-16 with a market share of at least 10% in each region. In addition, a new and so far the only player from Russia will appear on the international super–promising market of cellular drugs," A.Isaev noted.

"We are confident in the success of this IPO," M. Dremin said. "The financial and production indicators of the HSCC confirm the status of a fast–growing company of the new economy. From 2006 to 2008 inclusive, the revenue of the HSC increased 3.26 times to $3.3 million, net profit – 3.8 times to $ 0.23 million. The cumulative average annual growth rate in 2004-2008 of the number of stored HSC stem cell samples was 136%. In the next 10 years, this figure will be 45%, which together will give more than 200 thousand new samples."

Specialists of CJSC ALOR INVEST believe that this issue will be of interest to almost all groups of investors:

• portfolio investors get an excellent opportunity to diversify their portfolio by industry and enter a new fast-growing biotechnology industry;
• speculative investors the possibility of obtaining significant income from the sale of shares after capitalization growth;
• strategic investors (pharmaceutical and biotech companies) expanding business areas, obtaining a synergistic effect through the exchange of technologies and the creation of complex products, expanding the list of products offered;
• venture investors finance a company that has the rights to produce original highly effective drugs based on cellular technologies that have a high degree of readiness for mass production.

JSC "Institute of Human Stem Cells" was established in twothousandthree for the implementation of projects in the field of cellular technologies. Today, ISKCH is an international biotechnology company with laboratories and offices in Moscow, St. Petersburg, Kiev (Ukraine) and Saarbrücken (Germany) and an extensive network of representatives covering 100 cities in Russia and CIS countries. The main business of the company is the storage of stem cells released at birth from umbilical cord blood. In the case of a child or his closest relatives with oncohematological diseases, stem cells can be used as one of the methods of treatment, which significantly increases the patient's chances of recovery.

In 2010-11, in addition to the development of the main direction, the HSC plans to begin commercialization of a number of unique cellular preparations of its own innovative developments in the treatment of blood cancer, heart attack, ischemia, burns and skin defects. Today they are in the stage of clinical trials, which means the presence of patents and positive conclusions on laboratory studies.

In the summer of this year, the HSC closed the first part of the transaction to acquire a blocking stake (25.01%) in the German biotech company Symbiotec. To complete the transaction, the HSCC must participate in the second phase of clinical trials of the Oncohist drug developed by Symbiotec, intended for the treatment of acute forms of blood cancer. It is expected that the transaction will be completed in 2009-2010, after which the HSCC, together with a private investor partner, will own a controlling stake in the German company.

It is expected that the effectiveness of Oncohist will exceed 20 percent, which is at least 50% more than other drugs currently used. At the same time, the estimated value of the rights to the currently used competitor drugs, which already have a certain market, is 200-400 million dollars.

Production and financial indicators of the HSC

CJSC ALOR INVEST has been operating on the Russian stock market since 1993, specializing in providing a range of financial services for corporate clients. Provides brokerage services on all stock exchanges with individual service and advanced tools, including on the commodity market, as well as the organization of bond loans; organizes the withdrawal of shares of open joint stock companies to the stock exchanges, their inclusion in quotation lists, conducting an initial public offering of shares (IPO).

The National Rating Agency (NRA) assigned the company an individual reliability rating at the level of "AA" (very high reliability, second level).

Portal "Eternal youth" http://vechnayamolodost.ru according to the materials of the press service of the ISC

25.08.2009