Donnie.....keep an eye on this company...no telling what it does short term in this market, but long term, she could be a huge winner....do yourself a favor and at least do some DD on them.....
Hornblower & Weeks, Inc. Initiates Coverage of CRYO-CELL International, Inc. (Nasdaq: CCEL) With a Strong Buy
NEW YORK, Aug. 17 /PRNewswire/ --
CRYO-CELL International, Inc. (Nasdaq: CCEL) Recommendation: Strong Buy* John Rooney 12 Month Price Target: $18.00
*Follow up to verbal recommendation
* Market Price $9.00
* Common Shares Outstanding (MM) 10.26
* Market Capitalization (MM) $92.34
* 52 Week Range: $1.93- $9.94
CRYO-CELL International, Inc. is engaged in cryogenic cellular storage and the design and development of cellular storage devices. The Company's current focus is on the processing and preservation of umbilical cord (U-Cord) blood stem cells for autologous/sibling use. CRYO-CELL has pioneered several technologies that allow for the processing and storage of specimens in a cryogenic environment. These technologies include a process for the storage of fractionated (separated) U-Cord stem cells and the development and patenting of a computer controlled, robotically operated cryogenic storage system.
STEM CELL OVERVIEW
Stem cells are the basic building blocks of the human body. They are what many refer to as "master cells," because of their ability to divide for indefinite periods and give rise to specialized cells. Therefore, by their nature, stem cells replicate themselves and this process results in the production of any of the 210 individual cell types in the human body, including blood cells, brain cells, nerve cells and heart cells. One of the best understood stem cell types is the blood stem cell. Blood stem cells reside in the bone marrow of every child and adult, and can be found in very small numbers circulating in the blood stream. Blood stem cells perform the critical role of continually replenishing the body's supply of blood cells (red blood cells, white blood cells, platelets) and the immune system throughout life. Without this constant replication of the blood stem cells and the consequent continuous replenishment of the body's blood supply the individual would be unable to survive.
UMBILICAL CORD (U-CORD(TM)) BLOOD
In adults, the largest concentrations of stem cells are found in the bone marrow. When a patient needs a bone marrow transplant, a suitable donor must undergo a lengthy process including the dangers of anesthesia and the painful, invasive extraction procedure. In addition, approximately 60% of bone marrow transplants result in graft versus host disease (GVHD). In an effort to solve some of these problems scientists have focused upon alternate sources of stem cells for use in transplant. Research performed in the 1980s indicated that umbilical cord blood should be comparable to bone marrow for use in transplantation. In late 1988, the first umbilical cord blood stem cell transplant was performed for a child with a genetic disease. In 1991, the first umbilical cord blood stem cell transplant was performed for a child with cancer. Both of these transplants were successful and generated much interest in using cord blood stem cells as an alternative to bone marrow. The initial transplants were encouraging in that the incidence of GVHD was significantly reduced as compared to bone marrow transplant. Today, cryopreservation of U-Cord stem cells gives expectant parents the opportunity to take advantage of evolving cellular therapies and other medical technologies by freezing and preserving their child's U-Cord stem cells for possible future use by the child or other family members. As stem cell research continues to rocket ahead and the worldwide interest in the benefits of stem cell therapy continues to grow, a great demand has been established for the dependable and affordable storage of U-Cord stem cells. Incorporated in 1989, CRYO-CELL International, Inc. has established itself as the largest, exclusive autologous (self)/sibling cell bank in the United States.
CRYO-CELL INTERNATIONAL, INC.
CRYO-CELL International, Inc. (CCEL) is a cellular storage company specializing in preserving newborn babies' U-Cord stem cells. Since its inception, CCEL has dedicated its efforts to providing an affordable means for parents to store their newborn child's stem-cell-rich umbilical cord blood for potential future use. CCEL has developed multiple, patented technologies for use in their proprietary cellular storage units, which cryogenically freeze cells in liquid nitrogen at temperatures of up to -196 degrees Celsius. At these temperatures, all cellular replication ceases and cells can be stored for significant periods of time. While it is too early in the research process to establish how long stem cells may be stored in this manner, scientists are confident that with current cryogenic storage units the cells should remain in useable condition for much longer than the average human lifespan. After thawing, these cells can be reactivated with the addition of plasma and are viable for use in transplantation and for various therapeutic purposes.
THE CCEL II STORAGE SYSTEM
CRYO-CELL has developed and patented the world's first computer controlled, robotically operated, long term cellular storage machine. The cornerstone of CRYO-CELL's cellular storage technologies is its CCEL II unit. The CCEL II is a patented, computer controlled, robotically operated, cellular storage system. It also has the capacity to store 30,000 5ml vials. The Company believes that the CCEL II offers cryogenic storage superior to that of any other worldwide. CCEL's storage units are controlled by a central computer system, which robotically inserts vials into pre-selected storage areas inside the machine's main chamber. Stored cells can be robotically inserted or retrieved by computer on an individual basis without all of the other stored specimens being exposed to ambient temperature. This efficient use of storage space, coupled with the Company's proprietary dual identification system for inventory control is a significant competitive advantage. Other cryopreservation systems are manually operated and can expose the laboratory technician to dangerous liquid nitrogen when inserting or receiving specimens. Moreover, the use of these units exposes the remaining stored specimens to ambient temperature each time a specimen is either stored in or received by the unit. CCEL has designed and patented a system, which utilizes cutting edge computer, bar code and laser scanning identification technologies to provide a cellular storage system which is unsurpassed in efficiency, reliability, safety and performance. All CCEL II units are assembled by an independent manufacturer utilizing the Company's patented designs.
CCEL'S BUSINESS MODEL
Given the potential benefits of U-Cord stem cell preservation, the number of parents of newborns participating in stem cell preservation is relatively small compared to the number of births (4,000,000 per year in the United States alone). Critical assessments of this low level of market penetration are the misperception of the high cost of stem cell storage as well as a general lack of awareness of the benefits of stem cell preservation programs. It is CCEL's mission to make expectant parents aware of the potential benefits of stem cell preservation while simultaneously providing them with a means of collecting and storing these cells at an affordable price. Currently, more than 16,500 medical caregivers and OB/GYNs support their patients decision to store their newborn's blood with CRYO-CELL.
CCEL'S FEE STRUCTURE
The majority of the Company's revenues are driven from the fees associated with the collection and storage of the U-Cord blood by the parents. Yet, the Company recognizes that these fees are seldom covered by basic medical insurance. While public storage facilities are forced to test all deposits in order to determine their possible compatibility with a second party, CCEL stores blood only for the depositing baby's use (always a match) and for the use of the baby's siblings (a 1 in 4 match). This enables the Company to avoid the expensive testing process and the savings flow directly down to the customer. This business model has streamlined the Company's operations to such an extent that it is able to offer its stem cell collection and storage services at a fraction of competitors' costs. The high fees of competitors such as CorCell, (cell collection and first year storage fees of $1,350 and annual fees of $95), Cord Blood Registry, Inc. ($1,385 and $95), California CryoBank ($700 and $150) and Viacord ($1,500 and $95) contribute to the inaccurate, but widely held opinion that all stem cell storage facilities are exorbitantly expensive. CCEL is actively dispelling these rumors with its collection and first year storage fees of only $275 and its locked-in annual fee of $50. Therefore, the CCEL collection and first year storage fee is 78% less costly than the industry average, and its annual fee is 54% less costly than the industry average. By positioning itself so significantly below the market average, the Company has made the collection and storage procedure affordable and within financial reach of most families without jeopardizing its final profit margins.
CCEL'S LICENSING AGREEMENTS
EUROPE: On April 6, 2000, CCEL entered into a licensing agreement with Coltec, Ltd. for the exclusive license to market its U-Cord program in Europe. The marketing rights allow Coltec to directly market the U-Cord program, sell revenue sharing agreements and further sub-license the marketing rights throughout Europe. In accordance with this agreement, CCEL received $1,400,000 in cash up front and will receive licensing fees of 10.5-20% of all processing and storage revenues for the duration of the agreement.
MEXICO: On June 26, 2001, CCEL entered into a licensing agreement in Mexico and Central America. Under the terms of this agreement the licensee will have the right to the exclusive license to market its U-Cord program in Mexico and Central America. CCEL is to receive $600,000 in licensing fees over the initial two years, plus 15% of all processing fees and 25% of all annual storage fees and for the duration of the 30-year agreement.
ISRAEL & THE MIDDLE EAST: On July 20, 2001, CCEL entered into a licensing agreement in Israel and the Middle East. Under the terms of this agreement the licensee will have the right to the exclusive license to market its U-Cord program in these areas. In exchange for these rights, CCEL will receive a licensing fee of $1,000,000 in cash over the initial three years and 18% of all annual storage fees and 10.5% of all processing fees for the duration of the agreement.
"FROM THE DELIVERY ROOM ... TO THE WORLD(TM)"
The Company's initial vision, "From the delivery room ... to the world(TM)" is one which clearly resonates in its business today. With its current customer base of 20,000, the Company estimates the storage of more than 40,000 over the next year. Its eight successive monthly sales records look to continue well into the next fiscal year as worldwide interest continues to increase exponentially. CCEL's marketing agreements with Lamaze Publishing, its Spanish-speaking affiliate Lamaze para-Padres, American Baby, Fit Pregnancy and BabyCenter.com have ensured that the CRYO-CELL message will reach roughly 90% of all first-time mothers. Through its agreement with a Vatican-owned hospital in Milan, Italy and CRYO-CELL Europe, the Company is to provide the hospital with its own CCEL II storage machine. The Company will surely benefit from the fact that while the Catholic church has continually condemned the use of fetal or embryonic stem cells, they have stated they have no objection to the preservation of umbilical cord blood for the future medical well being of the donor or their families. This approval is given because the umbilical stem cells contain cord blood from babies that have been brought to full term.
Looking forward, the growth and profitability of the Company should come from increases in stem cell specimen storage volume driven by its marketing approaches, resulting in an increased base of annual stem cell storage renewal fees. It is expected that eventually the Company's customer base will reach the point at which its accumulated annual storage fees will exceed the cost of operations. The Company also plans to branch off into the storage of adult stem cells with an Initial Public Offering of its wholly owned subsidiary, Stem Cell Preservation Technologies, Inc. of which the Company will retain 20% ownership. CRYO-CELL shareholders will receive 3 shares of Stem Cell Preservation for every 4 shares of CCEL they own as of August 31, 2001. The Company's potential to sell additional licensing agreements remains limited only to the remaining countries and geographic regions of the world. It provides a means of receiving significant capital through the sale of licenses and revenue sharing agreements at very little overall cost to the Company. A 40% ownership of Saneron CCEL Therapeutics also enables the Company to benefit from developments in the field of cellular therapy treatments for diseases such as Alzheimer's and Parkinsons and the treatment of stroke.
CCEL Financials
2001
* Year End 2000A February 28A May 31A
Revenues 2,109,342 761,618 1,870,871**
Expenses
Cost of Sales 859,357 264,448 395,064
S. G. & A. 2,853,776 808,948 941,219
R. & D. 275,803 17,591 1,500
Depreciation/Amortization 281,457 68,555 79,629
Total: 4,270,393 1,159,542 1,417,412
Operating Income [Loss] [2,161,051] [397,942] 453,460
Other Income
Misc. Income 0 175,000 195,142
Interest 119,623 35,614 24,839
Sale of Marketing Rights 465,000 0 0
Sale of Marketable Securities 85,750 [100,474] [31,425]
Total: 670,373 110,140 188,556
Net Gain/Loss [1,490,678] [287,784] 642,016
Net Income [Loss] Per Share [0.15] [0.03] 0.06
Number of Shares Outstanding 9,757,789 9,895,148 10,194,831
2001
August 31E November 30E Year End 2001E
Revenues 1,490,758 2,057,246 6,180,493
Expenses
Cost of Sales 521,128 698,100 1,878,740
S. G. & A. 1,082,402 1,164,173 3,996,742
R. & D. 3,500 3,500 26,091
Depreciation/Amortization 91,573 104,393 344,150
Total: 1,698,603 1,970,166 6,245,723
Operating Income [Loss] [207,845] 87,080 [65,230]
Other Income
Misc. Income 320,000 200,000 890,142
Interest 25,000 31,000 116,453
Sale of Marketing Rights 0 0 0
Sale of Marketable Securities 0 0 [131,899]
Total: 345,000 231,000 874,696
Net Gain/Loss 137,155 318,080 809,467
Net Income [Loss] Per Share 0.01 0.02 0.06
Number of Shares
Outstanding 11,600,000*** 11,800,000*** 11,800,000***
* Cryo-Cell is on a fiscal year ending November 30.
** In this quarter, the Company received a one-time licensing fee of
750,000.
*** Additional shares outstanding are due to the exercise of options.
Information contained herein is based on data obtained from recognized statistical service, reports or communications, or other sources believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to its accuracy or completeness. Any statements non-factual in nature constitute only current opinion, which are subject to change. Hornblower & Weeks Inc., or their officers, directors and their clients may have very substantial positions in the securities referred to herein, and may as principal or agent, buy and sell such securities. Neither the information, nor any opinion expressed, shall be construed to be, or constitute an offer to sell or a solicitation of an offer to buy the securities mentioned herein. This firm may from time to time perform investment or other services for the companies mentioned in this report.
For more information, please contact John Rooney at 212-361-2266.
Hornblower and Weeks, Inc, is a member of the National Association of Securities Dealers, CRD number 4683.
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SOURCE Hornblower & Weeks, Inc.
CO: Hornblower & Weeks, Inc.; CRYO-CELL International, Inc.; Coltec, Ltd.; Stem Cell Preservation Technologies, Inc.
ST: Israel, Mexico, New York
IN: FIN HEA MTC
SU: RTG
08/17/2001 14:51 EDT prnewswire.com |
