OREANDA-NEWS. The Human Stem Cells Institute, one of Russia’s leading biotech companies, today announced its unaudited unconsolidated results for the first quarter of 2016 in accordance with the Russian Accounting Standards (RAS):

  • HSCI’s revenue in Q1 2016 amounted to RUB 36.3 million1 compared to RUB 61.9 million in the same period of the previous year.

  • Gross profit amounted to RUB 21.2 million representing gross profit margin of 58.5%, compared to RUB 2.1 million and 3.4% in the same period of the previous year respectively.

  • OIBDA2 amounted to RUB -0.5 million compared to RUB -11.8 million in the same period of previous year.

  • Operating loss was RUB 3.2 million, as opposed to operating profit of RUB 15.3 million in the same period of the previous year.

  • HSCI’s net loss in Q1 2016 amounted to RUB 7.3 million.

HSCI’s total revenue and revenues generated by key products and services

Revenue, generated by PJSC HSCI (hereafter – “HSCI”, “the Company”) in Q1 2016 amounted to RUB 36.278 million – a year on year decrease of 41.4% (if adjusted by including revenues from cord blood stem cells isolation and cryopreservation services, which starting Q4 2015 has been rendering through 100%-subsidiary IMCB LLC, the total revenue is RUB 64.696 million, a year on year increase of 4.6% - seefootnote 1).

It should be noted, that revenues from the provision of genetic diagnostic and consulting services as well as Reprobank® services starting Q2 2013 have been reflected in the revenue of GENETICO LLC – a subsidiary of HSCI, and, therefore, are reported in the consolidated IFRS statements.

In order to present regular comparative information on the development of the Genetico project HSCI RAS results press-releases include information on the RAS revenues of GENETICO LLC received from aforementioned services for the period under review (see the Genetico section below - page 4).

Consolidated Q1 2016 report under IFRS will be published in the beginning of June, 2016.

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

In Q1 2016 the reporting quarter revenues from the sales of Neovasculgen® amounted to RUB 0.0, similarly to the 1st quarter of the previous year.

In Q1 2015 the distributors were yet offloading the rest of stock supplied by the Company in 2014. In the Company did not supplied the distributors due to the ongoing process for registration of cap price limit following inclusion into VED list for 2016.

Neovasculgen® is an innovative drug, mostly intended for the treatment of patients in stationary (hospital). Therefore, Neovasculgen’s sales are highly dependent on its inclusion in the state public medicine subsidy programs (state drug reimbursement), and the Company began this work already in 2012, when Neovasculgen® went on sales in Russia.

In order to facilitate patients' access to Neovasculgen®, the Company carries out a significant work on the interaction with the professional medical community and regulatory authorities. One of the first sound results of this work was the inclusion of Neovasculgen® in the list of vital and essential drugs (VED), which enables a significant increase in hospital purchases.

The Government directive on inclusion of Neovasculgen® into the VED list for 2016 (# 2724-р.) was published on December 26, 2015and in mid-March 2016, following the obligatory rule and procedure for all drugs included into the VED list, the cap price limit for manufacturer’s wholesales was set for Neovasculgen® in the amount of RUB 120,000 (VAT excluded).

Consequently, the drug’s sales volumes are expected to notably increase in 2017 upon the placement of Neovasculgen® in hospital’s procurement plans budgeted by the State.

As of today, dozens of healthcare centers (hospitals) across the Russian Federation have positive track of Neovasculgen® clinical administration. The Company continues to work on further promotion of the drug within medical community as well as on increasing vascular surgeons’ and angiologists’ awareness of this new therapy approach (therapeutic angiogenesis). The data on efficacy of Neovasculgen® for 5 years after the course of treatment was presented at professional conferences, and publication of relevant papers is expected in near future.

In order to start working with regional key opinion leaders and health facilities as well as to support distributors in the formation of proposals and tender procurement, the Company has started to form its own specialists staff in regions.

International development and licensing of Neovasculgen® can have a significant impact not only on the value of intellectual property, but also on the valuation of the company itself. Therefore, in addition to promoting Neovasculgen® in the Russian market, HSCI is working on the development of Neovasculgen® on the foreign markets.

Thus, as for the development of the drug candidate based on IP connected with the Russian drug Neovasculgen® in the United States – the partners have been selected and preparation of the agreements to be announced upon signing are under way. In the course of 3 years from the project start, the contract manufacturing are planned to be set up on the U.S. grounds and pre-clinical studies and the Phase I clinical trials are expected to be completed.

The work with potential partners for the registration of the drug in China is also in progress. For the development of the drug in the USA and China, HSCI’s partners plan to raise necessary funds.

In addition, the work is proceeding to conclude distribution agreements in respect of Neovasculgen® sales in Latin America (our partners conduct activities to register the drug in several countries of these regions).

Peripheral Arterial Disease (PAD) is a serious, incapacitating disease, which is exceeded in frequency (amongst cardiovascular diseases) only by ischemic heart disease (IHD) and brain stroke. In Russian Federation the number of patients with critical form of the disease (CLI, Critical Limb Ischemia) annually amounts up to 145,000, of which 35,000 - 40,000 undergo amputations, while around 25% of patients die. A part of patients diagnosed with CLI is inoperable, and for them Neovasculgen® could be the only treatment, allowing the opportunity to evade amputation as well as to significantly improve the quality of live.

According to the drug’s clinical trial results and its use in practical healthcare starting autumn 2012, Neovasculgen® increases the functioning capillaries number in ischemic tissues, improves the blood supply, reduces the rate of amputation and mortality in patients with lower limb ischemia, especially in those who are inoperable.Containing the gene of the Vascular Endothelial Growth Factor (VEGF) embedded in a plasmid vector (carrier), Neovasculgen® stimulates the growth of collateral blood vessels (аngiogenesis) and, as a result, promotes a long-term therapeutic effect and improves patients’ quality of life, first of all manifested in a substantial increase of Pain Free Walking Distance.

As the drug’s action mechanism – therapeutic angiogenesis – introduces a new approach to the treatment of ischemia (the use of an evolutionarily 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®. HSCI aims to work in the therapy of IHD (Ischemic Heart Disease), Diabetic Foot Syndrome, trauma-induced peripheral nerve damage. Also, the R&D is in progress for the creation of gene-activated bone grafts based on Neovasculgen®.