I read recently that one of the oldest and largest banks in the US has recently announced their financial results and described at the same time that they had made a fundamental change in the way they bank cord blood stem cell units, resulting in a 5X increase in their price of cord blood banking.
The recent Cryo-Cell International Inc. (OTC Symbol: CCEL or CCCEC) First quarter results for 2006 showed that although revenues were up by 12% from 2005, cost of sales was up by 7% and marketing, general and administrative expenses were up by 5%, all compared to the first quarter 2005.
The increase in cost of sales was attributed to:
1) Increased cost in lab supplies
2) Sales Promotions and Cord Blood Collection Reimbursements
3) Service Enhancements
The 1st point involving lab supplies increase was due to "the Company's April 2005 implementation of a new processing methodology in accordance with newly established standards of the AABB (formerly known as American Association of Blood Banks). The new process utilizes closed-system bags in place of vial storage".
With regards to how they are going to maintain their on-going financial strength, Cryo-Cell International Inc has raised their prices of cord blood stem cell banking.
Cryo-Cell Price Change to reflect change in storage system:
Vials Storage- USD 315 (initial), USD 50 (on-going). ie. RM 1170 (initial) and RM 190 (yearly)
TO
BAG Storage - USD 1,595 (initial), USD 125 (on-going). ie. RM 6,061 (initial) and RM 475 (yearly)
This means that Cryo-Cell's cord blood stem cell banking program has increased by 5X and yearly by 2.5X.
What this price increase does show is that lab consumables when using a bag system is more expensive than vials. However, due to the new safety regulations on cord blood banking, cryo-bags are now the standard. It may be merely a matter of time before most stem cell banks using vials change to the bag system in order to conform to international standards.
Analysis and Reasoning:
Coming from the angle of usage, many proponents of vials argue that by storing in several vials, a patient may be able to use each vial for a single treatment. However, this is misleading especially since:
a) ex-vivo expansion is not readily available and expensive
b) not every bag of cord blood collected contains sufficient cells for splitting into multiple vials
c) thus far, transplanters have used whole bags of cord blood and now propose using double cords to constitute sufficient numbers.
However, from the angle of safety:
a) bags use closed system processing (cells not exposed to air during transfer stages)
b) In handling of the bag, cells won't be spilt (unlike vials, potential spillage if mishandled)
c) Labelling safety- the unit is kept as one
d) Better risk management for transplant (no popping of cap or transfer needed when it comes to an IV line)
I also read separately that Cryo-Cell made a licensing agreement with an Indian company called Lifecell. Lifecell pays licensing fees to Cryo-cell Intl. Inc. for its set up and operations- with licensing fees contributing approximately 10% of Cryo-cell's topline revenue. It is unclear to me from their website whether Lifecell in India uses bags or vials for cord blood stem cell banking and if they currently use vials, when or if they will also make the change to bag systems.
But, looking at the prices that Lifecell charges since its launch in November 2004:
Enrolment & Processing = 27,000 Rupees (USD 599 ; RM 2,183)
Yearly storage = 2,900 Rupees (USD 64 ; RM 234)
And taking into account that Lifecell started in late 2004, perhaps they may not be using the bag system.
I wonder if our competitor in Malaysia (check out their amusing blog here) will continue trying to promote the benefit of vials given the clear (yet expensive) message that Cryo-Cell sends by changing all of their processes and systems to accomodate the benefits of storage in bags. At StemLife we thought about these issues carefully from our inception, which is why we have always stored in cryo bags and only cryo bags, in spite of the temptation to choose relatively inexpensive vials.
BOTTOM LINE:
Cryo-Cell's announcement confirms the decision of StemLife, Malaysia's first stem cell bank and therapeutics company, to use bags for stem cell storage rather than vials. As Malaysia's first and only company* to have also used stem cells stored in bags, we have first hand knowledge in assisting doctors in the thawing and use of stem cells for therapies when the patients need them. All stem cell units released from our bank have successfully engrafted, a testament that StemLife's cryopreservation procedures are valid.
*StemLife has expanded now to Thailand where Thai StemLife also uses the bag system of stem cell storage. Additionally, we have clients banked from Indonesia and Singapore where they have chosen StemLife's stem cell banking program for their babies' cord blood stem cells.
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2 comments:
It is not true that LifeCell International is using cryo-vials. The cord blood bank has raised its pricing from Rs 27,000 (USD 620) in 2004 to Rs 41,000 (USD 950) as of now in 2008. This is a result of various technological upgrades which has been done, like automated processing of cord blood- and also an exclusive stem cell transplant and research facility opened by LifeCell.
Thanks Mr. Nidhin, for the update on LifeCell International's pricing and technological improvements in India. I wrote the post in 2006 so its been a while and acknowledge that every organization's processes and technology continually undergoes scrutinization and upgrading.
What I find interesting is that LifeCell India is able to raise prices by 35% in two years. What is the price tolerance like in India and how have client's accepted the price increases?
In many other countries, cord blood stem cell banks have lowered their prices (in Malaysia prices offered by banks -other than StemLife- can be as low as 315 USD [at present foreign exchange rates] and standards and service varies accordingly) in response to competition.
Arguably, India is still a huge untapped market and do price increases as you have mentioned indicate a distinct market acceptance of your service? Or is regulation and start-up cost a barrier to entry to new banks in your vicinity?
Look forward to your thoughts.
Sincerely,
Sharon
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