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HSCI Announces 2017 Consolidated Results under IFRS

HSCI Announces 2017 Consolidated Results under IFRS

Moscow – 03 may, 2018.   PJSC “HSCI” – The Human Stem Cells Institute (“HSCI”, MOEX: ISKJ), one of Russia’s leading biotech companies, today announced its audited consolidated results for 2017 in accordance with the International Financial Reporting Standards (IFRS).

In 2017, the HSCI Group of Companies (hereinafter – “the Company”, or “HSCI Group”, or “HSCI”) demonstrated the following main consolidated financial results:

RUB thousands 2017 2016 % change, y-o-y
Revenue 494,441 390,356 26.7%
Operating expenses, incl. (552,584) (534,027) 3.5%
Depreciation & amortization (40,460) (23,992) 68.6%
OIBDA[1] (17,683) (119,679) -85.2%
OIBDA margin, % н.п н.п н.п
Operating income/ (loss) (58,143) (143,671) -59.5%
Operating margin, % н.п н.п н.п
Net profit/ (loss) (109,975) (130,968) -16.0%
Net margin, % н.п н.п н.п
Total comprehensive income/ (loss) (109,975) (130,968) -16.0%


Consolidated revenue and revenues generated by key products and services

The Company’s consolidated revenue in 2017 amounted to RUB 494,441 million, a year-on-year increase of 26,7% as a result of increase in revenues from all the Company’s products and services in the market.

The largest portion of the consolidated revenue – 45% – was generated by HSCI PJSC as well as its subsidiaries, IMCB LLC and Cryonix JSC, from cord blood stem cell isolation, cryopreservation and personal storage service – the business HSCI started its history in 2003 from.

The second largest revenue generator was Genetico® services (genetic testing and counselling, reproductive cell bank /Reprobank®/) with the share in the consolidated revenue of 42.7%.

SPRS-therapy service provision accounted for 7.1%, the sales of Neovasculgen® – for 5.1%, other revenues – for 0.04% of the consolidated revenue in the reporting period.

The total (summarized) revenue generated by Genetico®,SPRS-therapy® and Neovasculgen® increased by 46.3% year on year from RUB 185.624 million in 2017 to RUB 271.523  million in 2017, and the share of the sum of these revenues in total revenue increased from 47.6% to 54.9%.



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

In 2017 revenues from the sales of Neovasculgen®amounted to RUB 25.409 million (5.1% of the Company’s consolidated revenue), compared to RUB 7.011 million in 2016 – a year on year increase by a factor of 3.6.

In 2013-2016 the Company’s revenues from the sale of Neovasculgen® were not steady as in 2013 the Company made a wholesale RUB 200 million contract with a distributor, and the batches of the drug supplied under this contract in 2013 and 2014 (see the corresponding press-releases) were sold out by the distributor in the Russian consumer market up to October 2016. So in 2015 and the most part of 2016 the Company did not benefit from additional large bulk purchases.

In 2016 in-house commercial department was built and from October 2016 the Company has been increasing Neovasvulgen® sales by its own advertising and sales force. 9mo 2017 revenues from Neovasculgen® has already exceeded FY 2016 revenues by 2.6 times.

Primarily, these are direct deliveries to pharmacies, but the Company also expects hospital purchases to secure further revenue increase as, starting 2016, Neovasculgen® is included in the Vital and Essential Drugs (VED) List in Russia that enables state reimbursement.

In 2017, to accelerate the widespread introduction of Neovasculgen® into medical practice and to increase its accessibility for patients, the Company reduced the price of Neovasculgen® 2.5 times.

As Neovasculgen’s action mechanism – therapeutic angiogenesis – introduces a new approach to the treatment of ischemia (the use of a genetically programmed process of  blood vessel creation and growth), HSCI plans to implement new clinical trial protocols in order to expand the range of indications for applying Neovasculgen®. To begin with, HSCI aims to work in the therapy of Diabetic Foot Syndrome and IHD (Ischemic Heart Disease). In October 2016 HSCI received a permission to start clinical trials for Diabetic Foot Syndrome in Russia (CT will start in autumn 2017 right from Phase II). In addition, before the end of 2017 it is planned to receive the regulator’s approval to start clinical trials of Neovasculgen® for the treatment of IHD.

Together with its American partners, the Company continues to work on a project for the development of a candidate drug (the prototype of which is Neovasculgen®) in the United States. In the summer of 2017, an American design company, which is owned by PJSC «HSCI», and a research group from the University of Maryland received a grant to study the methods of assessing the clinical efficacy of this candidate drug based on the principle of therapeutic angiogenesis (see press release).

In cooperation with our partners, we develop a pipeline of gene-activated materials – a new class of medical products intended for the effective treatment of patients suffering from alveolar ridge atrophy, skeletal bone defects or skin lesions.

The advanced part of the project is aimed at the development of standardized and personalized (3D-printed) gene-activated bone substitutes containing plasmid DNA encoding VEGF  to cover a bone reconstruction in any clinical cases. As of now, R&D is in progress for the first product in a line – “Histograft”, a complex of octacalcium phosphate granules with the plasmid DNA. Its clinical trial started in March 2017 and is expected for completion in early 2018.


Cord blood stem cell isolation, cryopreservation and personal storage service – bio-insurance (Gemabank®)

In 2017 consolidated revenues from this service provided by Gemabank®amounted to RUB 222.714 million (45% of the Company’s consolidated revenue) – a year-on-year increase of 9.7%.

The increase in Gemabank’s revenue was driven by:

— a sustainable growth in revenues from the long-term storage of cord blood stem cells — as a result of increase in the number of samples in Gemabank®;

— a price increase (from November 2016) alongside launching attractive package offers with flexible pricing and new tariff plans.

From November 1st, 2016, Gemabank® offers a new unique service called «Bio-insurance with cryostorage of DNA,» which, along with cord blood banking, includes the preservation of a DNA sample isolated from a drop of newborn’s umbilical cord blood — for future use for genetic testing.

This stored DNA can be immediately used for neonatal screening for inherited disorders – treatable genetic conditions. From January 1, 2017, Gemabank®, as part of the package proposal, provides a service of the genetic screening of a newborn for a wide range of the most common hereditary diseases and their carrier status: in order to prevent the development of complications and even clinical symptoms of the disease if early identified, or for family prophylactic treatment of the most widespread inherited disorders (if carrier status is detected).

Since the summer of 2017, an extended «Personal genetic test «Gemabank»” is available to customers of Gemabank, detailing about personal genetic features: the risks of progress of multifactorial diseases, the propensity for sporting loads, the peculiarities of metabolism and recommendations on nutrition, the tolerability of medications, ( Also the genetic test «Your origin» is now available for the customers ( ).

Neonatal screening is carried out based on Gemascreen panel, which was developed by specialists of GENETICO LLC, a subsidiary of HSCI PJSC (see the section on Genetico® services below).

In addition, starting from 2016, Gemabank® provides the service of cryopreservation and storage of mesenchymal stem cells isolated from umbilical cord – a valuable biomaterial with the potential for therapeutic application in the field of regenerative medicine.

The Company pays much attention to informing the target audience about the use of cord blood stem cells in medical practice, including informing about the examples of using the samples stored in Gemabank® for the therapy of various diseases.

In total, the number of cord blood stem cells personal samples stored in Gemabank® as of the date of publication of this press release exceeds 28 thousand, the number of mesenchymal cells personal samples exceeds 200.

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

In 2017 revenues from SPRS-therapy®, including the long-term storage of autologous skin fibroblasts, amounted to RUB 35.150 million (7.1% of the Company’s consolidated revenue) – a year-on-year increase of 4.2%.

The SPRS-therapy® complex service was authorized by the Russian healthcare regulator in 2009-2010 and introduced to the Russian market starting in January 2011.

An innovative medical technology, SPRS-therapy® entails the use of autologous skin fibroblasts to correct the effects of aging and skin damage. The service includes diagnostics of the condition of the patient’s skin; a therapy course using the cell product with the patient’s own fibroblasts; and long-term storage of the patient’s skin fibroblast culture in a cryogenic bank (for future use: at the moment more than 80% of patients return for the second and/or additional skin treatments in other areas besides the face as they are satisfied by the therapeutic effect).

The service is primarily offered through the leading dermatology and cosmetics clinics of Moscow, with the growing number of clinics in Russia’s regions and CIS (in 19 cities). Overall, more than 80 clinics are providing the service as of now. The total number of patients who have used the service since its introduction to the market is over 700 people.

Also, the Company maintains the protection of the IP related to SPRS-therapy®. The Company thwarts violation of exclusive rights to the intellectual property, including trademarks, in court.

Since SPRS-therapy® service is oriented to the premium segment of market, the decrease of real disposable income in Russia negatively impacted the sales volume. The decrease of the demand due to the unstable economic situation turned out to be larger than it was forecasted. The positive dynamics of the demand is expected in 2018.

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

In 2017 revenues from Genetico® services amounted to RUB 210.964 million (42.7% of the Company’s consolidated revenue) – a year-on-year increase of 48.6%.

The services that accounted for the biggest share of revenues in the reporting period were non-invasive prenatal testing (NIPT) and preimplantation genetic diagnosis and screening (PGD/PGS). The third main revenue generator in 1H 2017 was Reprobank® (HSCI’s reproductive cell and tissue bank offers services of sperm and oocytes donation as well as their personal storage as a form a bio-insurance).

Genetico® is HSCI’s socially significant project for the development of personalized medicine in the field of early detection, prediction and prophylactic treatment of genetic disorders, including reproductive system diseases (via HSCI’s own Medical genetics center & lab providing a wide range of genetic testing and counseling services).
In addition, the project entails the development of Reprobank® – reproductive cell personal storage and donation.

The project is implemented by HSCI in partnership with RVC BioFund (a Russian state investment fund), and with a support from IDF (the Russian State Industrial Development Fund). The services are provided by GENETICO LLC – a subsidiary of HSCI, in which RVC BioFund obtains a 20.01% stake as of now.

Genetico® services were introduced in the Russian market starting 2013, and their range is continually expanding with a sustainable revenue growth. Genetico® center & molecular diagnostic lab is striving for leadership in the Russian market of reproductive genetics offering a wide range of services relating to different human reproduction stages starting from pregnancy planning and up to a newborn health.

The genetic testing labs and Reprobank® facilities are located in HSCI’s new laboratory and production complex opened in 2013 in Moscow. As of today, Genetico® Molecular Genetics Laboratory consists of a Microarray Lab, including NIPT Lab (see below), NGS Lab and Genotyping Lab to provide a wide variety of medical genetics services based on different testing methods and techniques (including NGS, DNA microarrays; microfluidic PCR, CMA, СGH, Karyotyping, etc.).

In 2017 the Company has made a technology transfer and localization of production of NIPT (Ariosa Diagnostics’ Harmony™ Prenatal Test) in Moscow. The GENETICO’s NIPT lab was launched in early June 2017 and became the first in Russia and the CIS equipped by Roche (who acquired Ariosa Diagnostics Inc. in 2015) to perform the Harmony™ Prenatal Test locally.

From 4Q 2013 to 2Q2017, NIPT (under Prenetix® brand) name was offered by HSCI in Russia as a send-out test. Opening NIPT lab in Moscow gives opportunity to reduce the ready time and costs – to make the test more affordable for customers and proper for inclusion in the CHI state program (for details see the press-release).

NIPT (Prenetix®  / Harmony™ Prenatal Test) is a non-invasive prenatal testing for fetal chromosome aberrations using maternal venous blood, which can be performed as early as 10 weeks in pregnancy to assess the risk of having a child with Down syndrome and other severe genetic conditions.

The analysis is elaborated in the USA – Ariosa Diagnostics’ Harmony™ Prenatal Test that delivers a high level of accuracy on the back of a proprietary cell-free DNA technology (AcfS) including precise measurement of fetal fraction found in maternal blood and individualized results scoring. Having detection rate greater than 99% for trisomy 21 and a false positive result of less than 0.1% (conventional first trimester screening returns false positive results up to 5% of the time), Harmony® may minimize anxiety and follow-up invasive procedures by delivering clear information. Moreover, it is a trusted technology – blinded clinical studies in >23,000 women of all ages and risk categories have been conducted; 1,000,000 pregnancies have been tested worldwide since Harmony® initial introduction in 2012.

In August 2017, the newest powerful sequencer of the latest generation NovaSeq 6000 (produced by Illumina Inc.) was started. Thus, the Company has completed the launch of its own NGS laboratory (Genomic sequencing laboratory of the next generation), where, the latest equipment with high performance provides and extends the range of genomic analysis services for research and medical purposes (effective diagnosis and targeted treatment of diseases / panels «Full Exom» «Clinical Exom», «Exones Examination of Genes by Disease Classes» /, provision of CBC services, in-house development in oncogenetics, T, etc.).

Operating expenses, OIBDA, Operating profit/ (loss)

Consolidated operating expenses in 2017 increased by 3.7% year on year to RUB 552.584 million.

The increase in operating expenses is associated with the development of business projects, the launch of new laboratories of GENETICO LLC, the hiring of new employees, including commercial staff and top management, for subsidiaries to meet corporate restructuring needs.

The Company is finalizing separation of business by projects to subsidiaries in order to increase operating efficiency and facilitate proper valuation and PE investments.

The creation / expansion of in-house sales and marketing teams as well as strong management teams for each company of HSCI Group as part and parcel of ongoing corporate restructuring resulted in the surge of staff costs.

It is necessary to note the increase in operating costs associated with the investment period of the fast growing Genetico® project (the market, the brand are under developed, capital investments are made in the production base (the opening of new genetic testing laboratories — see above), and R & D is carried out.


As there was no such revenue increase to compensate rather high operating expenses necessary as of now to promote a range of promising products and services, in 2017 the Company demonstrated negative operating profitability and margins (see Appendix I below).

Operating expenses before depreciation and amortization amounted to RUB 512.124 million, resulting in a negative OIBDA of RUB -17.683 million.

The Company’s operating loss amounted to RUB 58.143 million in the reporting period.

Net other gain/ loss, Profit / (loss) before income tax

In 2017, the Company’s consolidated net other loss (loss from associates + net interest expense + net other non-operating income + net foreign exchange gain) amounted to RUB 69.036 million – compared to consolidated net other loss of RUB 6.043 million in 2016 (see Appendix I below).


As a result of operating and non-operating loss in the reporting period the Company recognized loss before income tax in the amount of RUB 127.179 million (comparing to RUB 149.714 million in 2016).

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

Due to the reasons mentioned above, in 2017 the Company demonstrated a consolidated net loss totaling RUB 109.975 million, which is fewer than the net loss for 2016 by 16%).


The consolidated financial statements for 2017 include the operating results of HSCI PJSC and its subsidiaries – IMCB LLC, GENETICO LLC, NextGen LLC, Vitacel LLC, Cryonix JSC, Cell Technologies Laboratory LLC, NVG-cardio LLC, “Angiogenesis” LLC, and also Reprolab LLC – a subsidiary of GENETICO LLC, created in April 2017 in order to separate the business of Reprobank® from other Genetico® services), and HSCI’s share in the loss of its associated company IceGen LLC (see Notes 3 and 15 to HSCI’s condensed consolidated interim financial statements as of and for the 2017 under IFRS). 



  1. Condensed consolidated interim statements of profit and loss and other comprehensive income for 2017 – in RUB thousands (extended).
  2. Condensed consolidated interim statements of financial position as of December 31, 2017 and December 31, 2016 –
    in RUB thousands.


HSCI’s condensed consolidated interim financial statements in 2017 prepared in accordance with IFRS (with an auditor’s review) can be viewed on the Company’s corporate website under “For Investors” (Financial Reports -> 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.