Printing Money From Cord Blood: Interview With Cryo-Cell (CCEL) Executives

July 14, 2009 3:04 PM EDT

StreetInsider conducted an interview with Cryo-Cell (OTC: CCEL) executives, Mercedes Walton and Jill Taymans, to learn more about their company and how it plans to compete in the future. Cryo-Cell is one of the largest and most established family cord blood banks, ISO 9001:2000 certified and accredited by the AABB.

Currently, stem cells from cord blood treat more than 75 such conditions, including sickle cell disease, several types of acute and chronic leukemias, Non-Hodgkin's lymphoma, and Hodgkin's disease. Emerging science shows great promise for potential treatments including spinal cord injury, heart disease, breast cancer, stroke, diabetes, Parkinson's disease, Alzheimer's disease and many more.

Private Vs. Public
Cryo-Cell is a private family cord blood bank that provides storage of umbilical cord blood which could be used in case a child ever needs a transplant. The family owns the speciman for the life of the storage of it, whereas public banks just match based on blood type.

Price
The softening economy has negatively impacted Cryo-Cell, as less consumers are willing to shell out approximately $1600 initially and $125 a year for a service they may never utilize. Currently, insurance companies do not cover the cost of the service, but CCEL and other companies are doing some lobbying of insurance companies in order to make it affordable for more customers.

Earlier this month, Cryo-Cell praised legislative progress to enable and promote the continued research, public awareness and tax benefits related to storing and using cord blood. The proposed bill would provide significant tax benefits for the costs associated with umbilical cord blood banking.

Competition
Cryo-Cell competes with CBR and Perkin-Elmer's (NYSE: PKI) Viacord. Cryo-Cell is the low-price leader in this industry as CBR and Viacord's services are typically $200 to $300 higher. Cryo-Cell prides itself on its high-quality and its been in existence since 1992. To attract customers, Viacord and CBR are more focused on the OB-GYN community while Cryo-Cell is more focused on reaching consumers through viral marketing and client referrals.

Financial Situation
Cryo-Cell has been profitable during the last 3 quarters, cash flow positive, and maintains a strong balance sheet. Cryo-Cell has focused on cutting costs in order to increase its margins. In its latest quarter, Cryo-Cell cited a 26% decrease in marketing, general and administrative expenses along with a 27% decrease in the cost of sales for its financial results. CCEL's profit margin is approximately 70%.

For the 6 months ended May 31, net income was $1.3 million, or 11 cents a share, on revenue of $8.1 million. In the year ago period, CCEL reported a net loss of $603,000, or 5 cents a share, on revenue of $8.7 million.

Future
Cryo-Cell is focusing on expanding internationally (it has affiliates in Latin America and Asia). In its latest quarter, it received an installment of $63,750, a non-refundable up-front fee from a licensee based in India. Additionally, CCEL is innovating in this space and is now offering another product where it will store menstrual stem cells for family use. Menstraul cells reportedly have bone marrow and embryonic markers contained in them.

In summary, Cryo-Cell offers a service that could potentially be life-saving and invaluable to its customers. It has 175,000 clients worldwide that pay an annual fee for the storage of umbilical cord blood. The CCEL executives said they expect CCEL will continue to grow and be profitable.

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