All is not rosy in the controversial cord blood banking market, with one of Australia’s pioneers in the field exiting to focus on other businesses.

Cord blood — the blood that remains in the umbilical cord and placenta after birth — provides a rich source of stem cells that has been used in the treatment of cancers and blood disorders.

Parents can opt to cryogenically freeze their baby’s blood and tissue for future use if a child has a medical condition treatable with stem cell therapy.

Costs range from $3000 for cord blood storage only and $5250 for blood and tissue.

In Australia, the cord blood banking market has suffered over the past couple of years with the likes of Stemlife, a Brisbane-based cord blood bank, going into administration in March last year.

Now Sydney-based Cryosite (ASX:CTE) has decided to halt all marketing, selling, collection and processing of cord blood and tissue-banking.

“Although Cryosite has a long involvement with cord blood and tissue-banking, the demand for Cryosite’s collection and processing services has declined and this segment of the business has experienced downward pressure on profitability,” Cryosite chairman Stephen Roberts said in a statement.

The company is now seeking to license future collection, processing and storage of umbilical cord and tissue under the Cryosite brand and sell its cord blood and tissue banking assets to Cell Care Australia Pty Ltd.

The sale is conditional on Cryosite shareholder approval with a vote planned for September this year.

What it means for existing clients

Cryosite has assured existing clients their baby’s cord blood and tissue will continue to be safely stored by Cryosite at its existing cryogenic facility in Sydney.

For those who have purchased a contract but not yet had their baby, the company said it would continue to collect, process and store the baby’s cord blood and tissue until early September.

If a client’s baby is born after early September, Cryosite will arrange for Cell Care to collect, process and store the baby’s cord blood and tissue.

What it means for Cryosite shareholders

Mr Roberts says the Cell Care exit deal delivers attractive financial returns to Cryosite shareholders while retaining exposure to cash flows from royalties and earn-out payments.

“The transaction will support the deployment of additional capital into our higher margin clinical trials logistics and biorepository services which have established themselves over many years as high quality, customised and cost effective providers for clients,” he said.

“We see significant opportunities to build on Cryosite’s expertise in long term cold, frozen and cryogenic storage, logistics and distribution through acquisitions and organic growth initiatives.”

Stockhead has contacted the company for further comment.

Cryosite became the first biotech in Australia to be licensed for private cord blood storage in 2001.

Shares in the company were trading at 18c on July 28, down from a 52-week high of 25c in August 2016. The company’s market cap is about $8.4 million.


This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.