OREANDA-NEWS. OJSC HSCI – The Human Stem Cells Institute (“HSCI”, MOEX: ISKJ), one of Russia’s leading biotech companies, today announced its audited consolidated results for the full year 2014 under International Financial Reporting Standards (IFRS):
  • Consolidated revenue for the full year 2014 amounted to RUB 359.4 million compared to RUB 419.8 million in 2013.
  • Operating loss amounted to RUB 51.3 million compared to an operating profit of RUB 42.6 million in the previous year.
  • Net loss in 2014 amounted to RUB 16.6 million compared to net profit of RUB 16.7 million in 2013.

RUB thousands

2014

2013

% change, y-o-y

Revenue

359,371

419,770

-14.4%

Operating expenses, incl.

(410,630)

(377,107)

8.9%

Depreciation & amortization

(25,002)

(22,502)

11.1%

OIBDA

(26,257)

65,165

n/a

OIBDA margin, %

n/a

15.5%

n/a

Operating profit / (loss)

(51,259)

42,663

n/a

Operating margin, %

n/a

10.2%

n/a

Net profit/ (loss)

(16,602)

16,670

n/a

Net margin, %

n/a

4.0%

n/a

Total comprehensive income/ (loss)

(16,016)

16,734

n/a

Consolidated revenue and income generated by key products and services

Consolidated revenue for 2014 amounted to RUB 359.371 million – a year-on-year decrease of 14.4%.

The largest portion of the consolidated revenue – 55.9% - was generated by OJSC HSCI as well as its subsidiary Cryonix CJSC from cord blood stem cells isolation and storage services.

The decrease in consolidated revenue compared to 2013 is primarily attributable to lower revenues received from the sales of Neovasculgen® to distributors. In 2013 they amounted to RUB 166.680 million compared to RUB 86.083 million for 2014.

Patient access to the drug and respectively Neovasculgen® sales on the Russian market are highly influenced by the absence of this first-in-class innovative drug in the list of Vital and Essential Drugs (VED) and state drug reimbursement programs. This strongly constrains the accessibility of Neovasculgen® for all patients suffering from PAD – 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 published data, the therapeutic effect following a treatment course of Neovasculgen® continues for up to 3 years. It is suggested that the drug's mechanism of action can provide an even longer effect – observation of patients participated in clinical trials and received the treatment will continue.

According to a pharmacoeconomics research study issued in July 2014, the cumulative cost-saving effect for Russia’s Healthcare Budget from the application of Neovasculgen® will amount to nearly RUB 4 million per patient. The cost-saving aggregate gain of RUB 3.93 million (calculated from analysis of the drug’s cost-effectiveness data) per patient includes gains from lower cost of treatment with Neovasculgen® as well as benefits from quality-of-life improvements. The researchers concluded that a wide application of the drug in a public hospital delivers clinical and economic advantages.

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

Revenues from the sale of HSCI’s own innovative drug Neovasculgen® to distributors in Russia in 2014 amounted to RUB 86.083 million (24.0% of the Company’s consolidated revenue) – a decrease of 48.4% year on year.

Neovasculgen® received marketing authorization on December 7, 2011 (registration decision RU № LP-000671). After industrial production of the first batches of Neovasculgen was launched and certified (in late-September 2012), the drug went on sale in Russia in the form of a ready-to-use drug (lyophilisate to prepare an injection solution; the treatment course comprising 2 sequential injections /i.e. 2 vials/) offered through distributors.

Due to the fact that this drug is innovative and expensive, the dynamics of sales to end-customers is highly dependent on its inclusion in state pharmaceutical assistance programs. Therefore, one of the Company’s key objectives is the inclusion of Neovasculgen® in federal and regional drug reimbursement programs. An important step in this direction would be the inclusion of Neovasculgen® in the list of Vital and Essential Drugs (VED). However, in the VED list for 2015 approved in December 2014 Neovasculgen® was not included. In the end of March, 2015 the Company submitted a new application to the Ministry of Healthcare for the inclusion of Neovasculgen® in the VED list which will be formulated for 2016.

In late December 2014, the expert panel of the Agency for Strategic Initiatives (the autonomous non-profit organization established by the Government of Russia in order to implement set of measures in economic and social spheres) has reviewed and approved HSCI’s program “The production and marketing of the innovative pharmaceutical drug Neovasculgen®”. According to decision of the expert panel the program was recognized as critical and important and the Agency for Strategic Initiatives will widely promote the project providing administrative and methodological support on federal and regional levels with the aim to confront PAD problem employing this innovative Russian drug.

Neovasculgen® is an innovative, first in class, drug. Its 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. For this reason HSCI aims to implement new pre-clinical studies and clinical trial protocols in order to expand the range of indications for applying the drug. HSCI starts to work for the therapy of IHD (Ischemic Heart Disease), and also reviews the opportunities for applying Neovasculgen® for Diabetic Foot Syndrome and for treatment of trauma-induced peripheral nerve damage. Also, the R&D is in progress for the creation of tissue-engineered products based on Neovasculgen®.

In addition to the Russian market, HSCI intends to make Neovasculgen® available on other markets.

In 2013 marketing authorization for Neovasculgen® was received in Ukraine, but HSCI cannot expect the planned sales because of political and economic situation in this country.

Taking into consideration the safety and efficacy data for Neovasculgen®, received during clinical trials and after launch on the market (extended post- market authorization studies), HSCI has decided to start the process of development, FDA clearance and launch of Neovasculgen® in the United States and China. At the moment the Company is negotiating with potential co-development partners as well as working on attracting required funds from Russian / international investors, and also grants.

In addition, the talks to potential partners and reviewing of opportunities to license the drug manufacturing and marketing on other foreign markets are underway.