STEM CELL THERAPY RUSSIAN IPO – CERTAIN CONSIDERATIONS – PART I

THIS POST WAS ORIGINALLY PUBLISHED JANUARY 31, 2007

WHY FINANCE?
Global Market. Stem cell therapy statistics makes possible to evaluate market situation in the nearest future. Globally, the 2005 cell therapy market was estimated at $ 26.6M, in 2010 it is expected to amount $ 56.2 M and in 2015 - $ 96.3M. Actually these numbers are much higher when we take into account beauty preparations, supplementary bio complexes and veterinary.
In the USA about 20,000 stem cells transplantations take place. Globally (esp. in Europe) – about 40,000. World market of stem cells technologies dealing with the bone marrow operations is estimated to be more than $ 400M. Stem cell therapy market varies in the USA and Europe from $ 100M to 150M, making totally $ 200-300M.
Stem cell therapy companies have basically the same business risk factors as the bio-tech industry:

1. Changes in regulatory restrictions, made by the governments of the countries where the companies are located (especially regarding the issues of stem cells provision)
2. Ethic and other considerations regarding application of stem cells; this may result in decline of the demand
3. Time-consuming process of development of preparations
4. Time, effort and expenses required for the certification of products
5. Success in clinical research
6. Readiness of the market to the commercial success of each company’s products
7. As a rule companies working in this sector do not have possibilities to organize sales, marketing and distribution
8. Dependency on the third parties in the production of components and provision of raw materials
9.  Competitiveness: the necessity to timely and fast developments and responses to the changes going on in the technologies and on the market
10. Safety in IP and copyright
11. High possibility of legal claims.

Recently the number of the world companies involved in stem cell therapy has multiplied in manifold – about 500. It is obvious, as the part of bio-tech industry, cell therapy is extremely money-consuming, the one that requires constant flow of financing. Currently the sector is fragmented and relatively low financed. As the rule the proceeds are used for the following purposes:
-scientific R&D of new products and clinical trials;
- acquiring regulatory approvals;
-R&D on commercial production of preparations;
-establishment, commencement and operations of facilities for clinical trials and for subsequent sales;
-purchasing essential technologies, proprietary rights, and/or business;
-expansion of the sales list by means of licensing, cooperation or acquisitions;
-IP support and protection;
Generally the companies of this sector are financed by:
-government’s programs;
-private funds and grants;
-initial public offerings – IPOs