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HSCI Announces 1H 2020 Consolidated Results under IFRS

Moscow – 7 September, 2020. PJSC “HSCI” – The Human Stem Cells Institute (“HSCI”, MOEX: ISKJ), one of Russia’s leading biotech companies, today announced its reviewed consolidated interim results for the first half of 2020 in accordance with the International Financial Reporting Standards (IFRS).

In 1H 2020, the HSCI Group of Companies (hereinafter – “the Company”, «the Group”, or “HSCI”) demonstrated the following main consolidated financial results:

 

RUB thousands 6mo 2020 6mo 2019 (as restated*) % change, y-o-y
Revenue 453,153 384,956 17.72%
Operating expenses, incl. (348,605) (312,078) 11.70%
Depreciation & amortization (35,160) (31,014) 13.37%
OIBDA[1] 139,708 103,892 34.47%
OIBDA margin, % 30.83% 26.99% n/a
Operating income/ (loss) 104,548 72,878 43.46%
Operating margin, % 23.07% 18.93% n/a
Net profit/ (loss) 92,272 62,837* 46.84%
Net margin, % 20.36% 16.32% n/a
Total comprehensive income/ (loss) 92,272 62,837* 46.84%

* For details, see Note 4.3 to HSCI’s condensed consolidated interim financial statements as of and for the 6-month period ended June 30, 2020 under IFRS.

[1] OIBDA is a non-U.S. GAAP and non-IFRS financial measure, which the Company calculates as total revenues less operating expenses excluding depreciation and amortization. We believe that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our business operations, including our ability to finance investments and to incur and service debt. OIBDA should not be considered in isolation as an alternative to net income, operating income or any other measure of performance under U.S. GAAP or IFRS.

Impact of the coronavirus pandemic on the activities of the HSCI Group

In the first half of 2020, the coronavirus pandemic (the COVID-19 pandemic) had a significant impact on the economic situation both in Russia and in the world. The Group’s management took a number of steps to adapt business processes to the new economic situation and mitigate the negative consequences of the crisis on the Group’s operations. The maximum decrease in demand for the services of some companies of the Group was recorded in April 2020, after which the demand began to recover slightly.

In addition, to increase the stability of the business and compensate for temporarily lost revenues, the HSCI Group of companies has developed and launched a number of new services, including antibody testing for COVID-19 (detection of antibodies to SARS-CoV-2). The management of the Group believes that it is taking appropriate measures to maintain the economic stability of the Group in the current environment.

Consolidated revenue and revenues generated by key products and services

The Company’s consolidated revenue for 1H 2020 amounted to RUB 453.153 million, a year-on-year increase of 17.72%. The key revenue boosters were the sales of antibody tests for COVID-19 as well as testing services, and the significantly increased sales of Neovasculgen®.

The largest portion of the consolidated revenue – 31.23% – was generated by Genetico® services (genetic testing and counselling).

The second largest revenue generator was Gemabank® with its cord blood stem cell isolation, cryopreservation and personal storage service and the service of cryopreservation and personal storage of mesenchymal stem cells isolated from umbilical cord (the share in the consolidated revenue of 27.42%).

The sales of Neovasculgen® accounted for 13.90%, the services of reproductive cell bank /Reprobank®/ – for 8.14%, SPRS-therapy – for 4.4%, licensing income – for 2.21% of the consolidated revenue in the reporting period.

In addition, the total (summarized) revenue from the sales of new products – antibody tests for COVID-19 and relevant testing services – amounted to RUB 62.056 million (13.69% of the Company’s consolidated revenue for 1H 2020).

 

Genetico® services (genetic testing and counseling by Genetico® center & lab)

In 1H 2020 revenues from Genetico® services amounted to RUB 141.534 million (31.23% of the Company’s consolidated revenue) – a year-on-year decrease of 23.10% as a result of the slump in customer demand due to the COVID-19 pandemic (including due to restrictions introduced by the state to slow the spread of the virus).

The main markets for Genetico® services in Russia are far from saturation, therefore, despite the drop because of the COVID-19 pandemic, have substantial growth potential.

 

Gemabank® services (bio-insurance: cord blood stem cell isolation, cryopreservation and personal storage service and the service of cryopreservation and personal storage of mesenchymal stem cells isolated from umbilical cord)

In 1H 2020 consolidated revenues from these services provided by Gemabank® amounted to RUB 124.262 million (27.42% of the Company’s consolidated revenue) – a year-on-year increase of 3.43%.

Despite the COVID-19 pandemic, Gemabank® has managed to generate organic revenue growth in the reporting period. In total, the number of cord blood and umbilical cord stem cells personal samples stored in Gemabank® amounted to 33 thousand, as of this press release publication date.

 

Neovasculgen® – the first-in-class gene-therapy drug for treatment of Peripheral Arterial Disease (PAD), including Critical Limb Ischemia (CLI)

In 1H 2020 revenues from the sales of Neovasculgen® amounted to RUB 62.978 million (13.9% of the Company’s consolidated revenue), compared to RUB 8.075 million for 1H 2019 – representing a year-on-year growth of 7.8 times.

As a result of the work carried out to expand the presence of Neovasculgen® in the Russian market, the Company has increased the sales to existing customers and significantly augmented the number of new contractors, which made it possible to speed up hospital purchases to secure further revenue growth.

 

Reprobank® services — sperm & oocytes donation and personal storage; shipment

In 1H 2020 revenues generated by Reprobank® reproductive cell and tissue bank amounted to RUB 36.898 million (8.14% of the Company’s consolidated revenue) – a year-on-year increase of 5.69%.

 

SPRS-therapy® a set of personalized diagnostic and treatment procedures for repairing skin damage due to aging or other structural changes

In 1H 2020 revenues from SPRS-therapy®, including the long-term storage of autologous skin fibroblasts, amounted to RUB 15.299 million (3.38% of the Company’s consolidated revenue) – a year-on-year decrease of 36.17% as a result of lower consumer activity and state restrictions caused by the COVID-19 pandemic.

 

Operating expenses, OIBDA, Operating profit/ (loss)

Consolidated operating expenses in 1H 2020 increased by 11.70% year on year to RUB 348.605 million.

The increase in operating expenses is associated with the development of the Group businesses and the launch of new projects (e.g. antibody tests for COVID-19 and relevant testing services). Though, cost growth rates were outpaced by revenue growth rates.

Thanks to consolidated revenue increase and cost control, in 1H 2020 the Company demonstrated OIBDA of
RUB 139.708 million – a year-on-year increase of 34.47%. OIBDA margin increased to 31% compared to 27% in 1H 2019.

The Company’s operating profit amounted to RUB 104.548 million in the reporting period – a year-on-year increase of 43.46%.

Profit / (loss) for the period (net profit / (loss))

In 1H 2020, the Company’s non-operating loss amounted to RUB 24.006 million, the income tax gain was
RUB 11.730 million.

Therefore, consolidated net profit totaled RUB 92.272 million – a year-on-year increase of 46.84%.

Consolidation

The consolidated financial statements for 1H 2020 include the results of HSCI PJSC and its subsidiaries – IMCB PJSC, GENETICO LLC, Reprolab LLC, NextGen LLC, NextGen Pharma LLC, Vitacel LLC, Skincel LLC,
Cryonix JSC, Cell Technologies Laboratory LLC, “Angiogenesis” LLC, IceGen 2 LLC (see Note 2 to HSCI’s condensed consolidated interim financial statements as of and for the 6-month period ended June 30, 2020 under IFRS).

 

APPENDICES:

  1. Condensed consolidated interim statements of profit and loss and other comprehensive income for the 6-month periods ended June 30, 2020 and June 30, 2019 – in RUB thousands (extended).
  2. Condensed consolidated interim statements of financial position as of June 30, 2020 and December 31, 2019 –
    in RUB thousands.

 

HSCI’s condensed consolidated interim financial statements prepared in accordance with IFRS as of and for the 6-month period ended June 30, 2020 (with an auditor’s review) can be viewed on the Company’s corporate website under “For Investors” (Financial Reports -> IFRS):

 

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