"Human Stem Cell Institute" (MCX: ISKJ) - a large biotech holding, Russia's first biotechnology company, placed securities on the Moscow Exchange.
About company
The stock exchange in the public domain is currently traded with ordinary shares of HSCI PJSC - ticker ISKJ. They belong to the sector of the innovation and investment market, initial offering was held in 2009, shares have been included in the MOEXINN Innovation and Investment Market Index since its inception in 2011. From companies, included in the holding, PJSC MMTSB has a listing on the Moscow Exchange, bonds, ticker GEMA.
Both securities of the group of companies belong to the third quotation list - illiquid stock market instruments. Stocks are famous for their volatility, comparable only with the shares of PJSC "Beluga Group". On news of a group's development of a vaccine against coronavirus, its shares rose by more than three days in three days. 30% - truth, then fell a little. At the same time, there were no positive data on the financial condition of the company..
history of the company. It would be most correct to start the history of PJSC "ISCH" from 1972, when on the basis of the National Medical Research Center of Oncology named after. Blokhin, the predecessor of this company was created - a cryobank of biomaterials. Until 1982, only experimental work was carried out, but in 1982, the first bone marrow transplant operation in the USSR was performed. In 1994, after the collapse of the USSR, cord blood was first frozen. In 2003, on the basis of the cryobank, the Institute of Human Stem Cells OJSC was established.. The cryobank itself has not ceased to exist - now it conducts independent activities. Some developments were carried out jointly with HSCI and cryobank.
Since 2006, stem cells have been harvested. SPRS therapy service has been provided since 2010, since 2011, the drug "Neovasculgen" has been produced, Since 2012, the Genetico project has been implemented. Since 2015 enterprises, belonging to the group of companies, presented in the Skolkovo Technopark, Created a multidisciplinary center for medical technologies R&D. Since 2016, cooperation has been underway with the United States and Canada in the development of an anti-ischemia drug.
Throughout its history, HSCI has actively diversified its products, services and directions of scientific activity, and also tried to enter foreign markets, what are the strengths of the group of companies.
Composition of the group of companies. In total, HSCI PJSC includes 16 companies, out of which 12 - subsidiaries, two are associated companies with a share of PJSC in the capital of more than 20%, two - companies with a share of PJSC in the capital of more than 10% with the prospect of growth.
Composition of the HSCI PJSC group of companies
| Brand represented | Status | Segment | |
|---|---|---|---|
| NextGen LLC | "Neovaskulgen" | Subsidiary | Gene therapy |
| OOO NextGen Farma | "Neovaskulgen" | Subsidiary | Gene therapy |
| Angiogenesis LLC | "Neovaskulgen" | Subsidiary | Gene therapy |
| LLC "Histograft" | "Histograft" | The share in the management company is larger 10% with the prospect of growth | Gene therapy |
| Artgen Inc. (USA) | ArtGene | The share in the management company is larger 10% with the prospect of growth | Gene therapy |
| Vitacel LLC | SPRS therapy | Subsidiary | Cell technologies and tissue engineering |
| LLC "Skintsel" | SPRS therapy | Subsidiary | Cell technologies and tissue engineering |
| OOO "Genes and Cells" | Scientific and practical journal "Genes and Cells" | Associated company (>20%) | Cell technologies and tissue engineering |
| PAO «MMCB» | Stem cell bank "Gemabank" | Subsidiary | Biobanking |
| JSC "Krioniks" | Stem cell bank "Gemabank" | Subsidiary | Biobanking |
| Reprolab LLC | Bank of reproductive tissues "Reprobank" | Subsidiary | Biobanking |
| JSC "CGRM" GENETIKO " | Genetic | Subsidiary | Genetic research for medical and scientific purposes, including in the field of reproductive technologies |
| Betuvax LLC | BetuVax | Subsidiary | Biopharmaceuticals: vaccines, antibodies, biopreparations |
| Biotechnology Development LLC | — | Associated company (>20%) | Biopharmaceuticals: vaccines, antibodies, biopreparations |
| LKT LLC | — | Subsidiary | IP holder. Participation in the capital of target profile companies |
| IceGen 2 LLC | — | Subsidiary | IP holder. Participation in the capital of target profile companies |
The largest number of companies belongs to the gene therapy segment. Two companies, LKT and IceGen 2, are intellectual property holders and investment companies, they carry a helper function. Another auxiliary function - rent and management of own or leased property - is carried out by Razvitie Biotekhnologii LLC.
Shareholders. The largest share in the capital of the group of companies belongs to Maria Isaeva, mother of the former CEO and founder of the holding Artur Isaev. Now he is the General Director of JSC "TsGRM" GENETICO "", the position of General Director of PJSC "ISCH" was transferred to Sergey Masyuk. At the same time, Dynamic Solutions Ltd and MirMam are indirectly controlled by Isaev.
The Isaev family has almost complete control over the group of companies, although Artur Isaev himself officially accounts for an insignificant share of shares: the whole board of directors 3,23% from their number. In 2014, Isaev transferred his share to Dynamic Solutions Ltd..
Composition of HSCI PJSC shareholders
| Isaeva Maria Ilyinichna | 31,72% |
| Dynamic Solutions Ltd | 25,65% |
| MirMam LLC | 16,88% |
| Members of the Board of Directors of HSCI PJSC | 3,23% |
| IceGen 2 LLC | 2,87% |
| Free float | 19,65% |
31,72%
What he earns
As the name of the company suggests, its main activity is concentrated around the use of stem cells. This is the kind of cells, which is responsible for the regeneration of other body cells. These cells are not fully differentiated, which allows the cells derived from them to develop in different directions. It is because of these cells, in particular, regeneration of lost limbs occurs in salamanders and newts.
The best way to obtain stem cells with a human genotype is from the connective tissue of the umbilical cord in a newborn. But this is not the only source., adults also have the opportunity to receive stem cells from the body. Not hard to guess, that in medicine stem cells are used for tissue regeneration. Since the number of stem cells decreases with age, in theory, introducing them into the body, life can be extended.
The activities of PJSC "ISCH" can be divided into several areas, that are related to one degree or another..
Banking in "Gemabank" of biomaterials. PAO «MMCB», JSC "Krioniks". Preservation of cord blood stem cells and umbilical cord tissue, mesenchymal stem cells - germ cells, found in small amounts in human bone marrow, tooth pulp, adipose tissue, isolation of stem cells from human tissues and their cryopreservation with subsequent storage.
Banking in Reprobank of reproductive cells and tissues. Reprolab LLC. Sperm preservation, eggs and embryo cells to realize the possibility of future childbearing with the threat of infertility. For example, before oncology treatment, as well as to obtain donor sperm in case of infertility.
SPRS therapy. Vitacel LLC, LLC "Skintsel". Cellular anti-aging skin therapy with a drug, containing her own fibroblasts, skin cell banking, R&D in this area.
Gene therapy. NextGen LLC, OOO NextGen Farma, Angiogenesis LLC, Artgen Inc. Therapy with the first in Russia gene therapy drug for angiogenesis "Neovasculgen" - used for ischemia of the lower extremities, myocardial infarction, coronary heart disease instead of surgical methods due to their inefficiency or contraindications. As well as scientific research in this direction, development and commercialization of a similar drug in the US and Canada.
Tissue engineering. LLC "Histograft". Production of gene-activated materials for osteoplasty using the "Histograft" method.
Genetics and research. JSC "Center for Genetics and Reproductive Medicine" GENETICO "". Genetics, reproductive genetics, oncogenetics, diagnostic testing based on genetic technology, genetic research Genetico, non-invasive prenatal testing, R&D in these areas, as well as the development of methods for preimplantation genetic testing.
Bioinformatics. JSC "Center for Genetics and Reproductive Medicine" GENETICO "". Computer methods for the study of human DNA and proteins in the framework of genetic research Genetico.
Development of testing methods for antibodies to SARS-CoV-2 coronavirus. Betuvax LLC. Detection of immunity to the causative agent of SARS and a number of other coronaviruses, R&D in development, registration and commercialization of COVID-19 vaccines under the BetuVax research system.
Publication of the scientific and practical journal VAK "Genes and Cells". LLC "Genes and Cells" with the support of companies, included in the structure of Gemabank: PJSC MMTSB and JSC Cryonics.
Revenue structure. In 2020, HSCI PJSC launched a new service: testing and test systems for the novel coronavirus SARS-CoV-2. Because demand was high at the height of the pandemic, this service generated income, actually comparable to one of the basic services of the group of companies - "Gemabank". In terms of revenue, testing for coronavirus and antibodies to it came in third place among all services. In terms of revenue growth for 2020, “other” was in first place, showing a change in the indicator to fabulous 2756,91%. “Other” services include bioinformatics, as well as tissue engineering and osteoplasty "Histograft".
The financial results of economic activities of Genes and Cells LLC are immaterial. Group strategy includes investment in osteoplasty, which continued this year, therefore, further increase in revenues from this industry should be expected.
PJSC "HSCI" income structure in 2019 and 2020, thousand rubles
| 2019 | 2020 | The change | |
|---|---|---|---|
| Testing services and test systems: COVID-19 | — | 219 120 | — |
| Other revenue | 492 | 14 056 | 2756,91% |
| "Neovaskulgen": drug sales | 74 883 | 140 612 | 87,78% |
| Reprobank: donation, personal storage, transportation of reproductive materials | 85 871 | 100 595 | 17,15% |
| Hemabank services: cryopreservation and personal storage of biomaterials | 241 677 | 245 236 | 1,47% |
| SPRS therapy, including long-term cryopreservation of skin's own fibroblasts | 39 752 | 35 442 | −10,84% |
| Genetico services: genetic research and testing | 392 900 | 328 962 | −16,27% |
That, that SPRS and Genetico showed negative revenue dynamics in 2020, quite understandable: during the economic crisis, caused by coronavirus, Russians are not up to cosmetology and genetic research, vital and socially important services are more in demand.
The crisis in the cosmetology industry is evidenced by, that the owners of beauty salons are afraid of mass exodus of employees into self-employed due to vaccination. The Association of Beauty Industry Entrepreneurs appealed to the authorities in the midst of the coronavirus infection with a request for state support. Therefore, the decrease in revenue of these two segments should not be considered a negative result..
The results for the first half of 2021 compared to the same period of the previous year show, that a number of basic services came to the fore, however, Gemabank's revenue growth is below average. On the one side, this cannot be regarded as a positive factor, since the underlying activities of the group of companies did not show an increase in profitability, On the other hand, this indicates the differentiation of business areas.
Anxiety factor: revenue from sales of "Neovasculgen" fell by 25%. This can only be attributed to the general economic crisis., caused by the pandemic, with nothing more. There is no data on a decrease in demand for the treatment of vascular diseases.
The income structure of PJSC "HSCI" in the first half of 2020 and 2021, thousand rubles
| 6м2020 | 6м2021 | The change | |
|---|---|---|---|
| Reprobank: donation, personal storage, transportation of reproductive materials, testing for COVID-19 | 46 099 | 131 844 | 186% |
| Genetico services: genetic research and testing | 151 967 | 194 493 | 28% |
| Hemabank services: cryopreservation and personal storage of biomaterials | 114 244 | 130 259 | 14% |
| SPRS therapy and others | 112 709 | 116 399 | 3% |
| "Neovaskulgen": drug sales | 108 268 | 81 161 | −25% |
| Revenue total | 453 153 | 556 754 | 23% |
Financial results. In 2020, only three main financial indicators of HSCI PJSC showed growth: OIBDA, operating income and EBITDA. All other indicators show negative dynamics, and revenue is the worst.
Truth, in the first half of 2021, revenue increased compared to the same period of the previous year. But everything else was even worse., than for 2020.
We can conclude, that the financial position of the group of companies is deteriorating, and much. The observed growth of shares is not justified in terms of PJSC financial performance, and this growth occurs on the news amid speculation, which is often observed in the case of illiquid securities.
Financial performance of HSCI PJSC, thousand rubles
| 2019 | 2020 | The change | |
|---|---|---|---|
| OIBDA | 240 544 | 272 858 | 13,43% |
| Operating profit | 180 522 | 197 966 | 9,66% |
| EBITDA | 198 106 | 204 561 | 3,26% |
| Net profit | 111 335 | 103 404 | −7,12% |
| Total income | 111 335 | 103 404 | −7,12% |
| OIBDA Margin | 0,29% | 0,25% | −12,50% |
| Operating profit margin | 0,22% | 0,18% | −15,28% |
| EBITDA margin | 0,24% | 0,19% | −20,25% |
| Net profit margin | 0,13% | 0,10% | −28,57% |
| Revenue | 835 575 | 184 023 | −77,98 |
First half financial results, thousand rubles
| 6м2020 | 6м2021 | The change | |
|---|---|---|---|
| Revenue | 453 153 | 556 754 | 22,86% |
| EBITDA | 130 065 | 79 249 | −39,07% |
| OIBDA | 172 311 | 102 528 | −40,50% |
| EBITDA margin | 0,29% | 0,14% | −50,52% |
| OIBDA Margin | 0,38% | 0,18% | −51,58% |
| Operating profit | 137 151 | 65 721 | −52,08% |
| Operating profit margin | 0,30% | 0,12% | −61,06% |
| Net profit | 92 272 | 25 845 | −71,99% |
| Total income | 92 272 | 25 845 | −71,99% |
| Net profit margin | 0,20% | 0,05% | −77,45% |
Plans
General strategy of the group of companies. As a strength of HSCI PJSC, one can note the desire to take a majority share in the market, which is partially fulfilled: some services have no analogues in the Russian biotechnology market, for example, Gemabank. Another positive factor is the practice of investing in startups.. Differentiation of investment forms can be noted: in addition to the banal equity participation in enterprises, mezzanine financing and investments in licenses are also practiced.
Future plans. The main plan of the group of companies is to increase the production of services as part of the coronavirus pandemic. Testing for the presence of coronavirus and antibodies to it is a priority branch of PJSC. Everything else is a claim, to become the world's leading stem cell manufacturer, and so on - cannot yet be considered as real prospects.
Risks
The main risk is the domestic market. The only exception is the project for the production of an analogue of the drug "Neovasculgen" in the USA., therefore, HSCI business profitability is vulnerable. The incidence of the population of Russia COVID-19 remains high, and therefore potential consumers of services care more about, not to die from an infection, than about reproductive dysfunction, not to mention the rest, which is shown by the dynamics of sales in the first half of 2021.
Neovasculgen sales dropped significantly, sales of the SPRS service did not show a significant increase. At all, in general, in Russia, the incomes of citizens decreased due to the crisis, caused by the pandemic, therefore it is naive to think, that any significant part of the population will take care of the rejuvenation of the body with stem cells, not to mention skin rejuvenation.
Should not be discounted either, that there are discussions around all areas of the stem cell business, the results of which are not in favor of demand for services and products of PJSC "HSCI". Back in 2005, publications appeared in the Russian media about, that Ukrainian President Viktor Yushchenko was not poisoned with dioxin, and that, what happened to his face, the result of failed stem cell therapy. In 2010, there was a wave of publications in the press about the deaths from cancer of actors Oleg Yankovsky, Alexandra Abdulova, Lyubov Polishchuk, Anna Samokhina, who injected stem cells into the body. Subsequently, journalists added Clara Luchko and Volodymyr "Dynamite" Turchinsky to this list.. Truth, their deaths were not related to cancer, but at that moment the hype was important.
The management of the company drew attention to the "journalistic risk" during the additional issue in 2016, calling this risk "increased scrutiny from the journalistic community". The prospectus for the additional issue says, that the activities of the company depend on, How do clients perceive it?. Materials about the risk of stem cell treatment continue to appear recently, it can be like translations of foreign media, and original materials of Russian authors. The emphasis is everywhere on, that stem cells can cause cancer.
With regard to artificial human reproduction, which is one of the basic activities of PJSC "HSCI", then its assessment as experts, and society is also ambiguous. The Orthodox Church in Russia believes, that prenatal diagnosis is unethical, since with diagnosed abnormalities it can lead to abortion. In Sunni Islam, the Hanafi madhhab, which includes the majority of Muslims in Russia, theologians are divided on the timing of abortion. But abortion, even if known, that the child will be born sick, in any case is an undesirable act. Orthodoxy condemns artificial insemination.
The risks can be divided into three groups:
- Reducing the financial ability of Russians to buy products and services of a group of companies against the backdrop of their high cost.
- The presence of public fears about stem cell treatment against the backdrop of negative media coverage.
- Negative ethical assessment of the technology of artificial insemination and prenatal diagnostics by the believing part of society, if it leads to abortion.
conclusions
Compared to the strengths of the company, its risks are very significant. First of all, one should take into account the negative dynamics of the financial indicators of the group of companies against the background of the observed growth of shares on the news with the extreme volatility of their dynamics. This, however, typical for other low-liquid stocks, but not to that extent. Growth of shares of a group of companies, probably, can be classified as speculative phenomena, when some insignificant event causes some rise in quotes, a large number of retail investors in a hype rush to buy illiquid assets, which they consider to be underestimated, without delving into the financial performance of the issuer.
You can admit, that vaccine production work, on news about which, apparently, and the stock began to rise, are relevant now, given the pandemic situation in Russia and the unclear prospects for victory over the coronavirus. But the company's basic services do not show dynamics, comparable to stock performance. In addition, the risks of the stem cell business and artificial reproduction in general remain significant..
Attitude in society towards such branches of medicine is not improving, even though, that Russia has one of the highest levels of infertility in the world: the percentage of infertile women is three times higher, than in the USA.
For a long-term and medium-term investor, the shares of a group of companies are currently too big a risk. You can talk about buying shares, only if the purchasing power of the country's population recovers after the economic crisis, caused by the pandemic. At the same time, work in the field of vaccination does not compensate for not the most positive results in other areas of the group of companies..
And it shouldn't be discounted, that the risk of a negative public attitude towards the services and products provided by the company will not disappear even after the normalization of the situation in the economy.
