STEM CELL THERAPY RUSSIAN IPO – CERTAIN CONSIDERATIONS

 THIS POST WAS ORIGINALLY PUBLISHED FEBRUARY 04, 2007

BRIEF OVERVIEW OF THE RUSSIAN STEM CELL THERAPY MARKET
In Russia the stem cell therapy is not developed as it should be. This is the result of the following reasons:
- a weak regulatory environment;
- methodological and technical level is not appropriate.
The market volume in Russia is far less than in the United States and in Europe. Human body and animal stem cell transplantations are done in a number of clinics and medical centers aimed at physical revitalization and correction of the hormonal status. However, the most widespread are the services associated with cord blood banking - collection and storage of the stem cells that are found in newborn's umbilical cord. Some statistical data available tell that in 2005 about 1,000 families used this service. Presently only 10 companies are officially licensed for such activity. Basically these are small entities that usually are set up at different medical institutions. These companies are typical Russian ones that are run in majority by the doctors themselves and lack international business vision. Thus the following are characteristic for them:
- the companies that perform stem cell therapy per se are very scarce;
- absence of transparent business structure;
- a vague ownership structure;
- complicated financial reporting;
- extremely tight budget;
- although there are no official data on profitability, but according to some estimates it is rather low.

As of mid-2006 the government regulatory body, Roszdravnadzor, issued as much as 5 permits for comprehensive clinical trials valid for one year. The permits require mandatory patient’s consent, while the trials shall be made free of charge. Generally speaking, stem cell clinical trials are conducted in 9 institutions:
- State Scientific Research Institute of Transplantology and Artificial Organs of Minzdravsotsrazvitiya of Russia,
- Center of Medical and Biology Technologies,
- N.N. Blokhin State Russian Oncology Scientific Center
- “Neurovita” LLC “Clinic of Revitalizing and Invertional Neurology and Therapy;
- Russian Medical Academy of Sciences Hematology Scientific Center,
- “Institute of the Stem Cell” LLC,
- “Pyramida Clinical group”,
- Russian Medical Academy of Sciences “Scientific Center of Obstetrics, Gynecology and Perinatal Medicine”,
- N.F. Gamaleya State Scientific Research Institute of Epidemiology and Microbiology.

From the commercial point of view only one company is public and has more or less proper structure of business - listed on the RTS stock exchange – OJSC “Institute of Stem Cells”. However, this shows the typical approach of the Russian investment community. Although the company is officially listed, there was not a single transaction during the last 52 weeks.
Summarizing the brief overview from the investment point of view:
- existing Russian companies are not that developed as compared to their peers internationally;
- investments in these companies are scarce;
- profitability is very low;
- the chances for successful IPO in Russia for stem cell therapy companies currently are very low.