The mounting NPAs of India’s stem cell banks

Now, six years later, Stemade claims to have 5,000 units stored but almost everything else is elusive. The company grossed Rs 3.4 crore in revenue for the year ending March 31, 2015, and booked a loss of Rs 3 crore. Most of the other stem cell banks, even though an established business in other parts of the world, aren’t in good shape either. LifeCell International, India’s largest cord blood bank, has seen a steady decline in profitability in the last five years, it recorded a loss of Rs 55 crore on revenues of Rs 141 crore in FY15.

Even if in fits and starts, these banks have been adding to their collection of cord blood units and dental pulp but they are at best non-performing assets. While Ghaisas would like to assign a good part of the mounting losses to the government’s withdrawal of service tax exemption to such banks since February 2013; the reality is a little more complex.

Is being ‘private’ the roadblock?

Storing umbilical cord blood in private banks is like ‘biological insurance’ against illnesses. That’s been a popular catchline for these banks. Parents who bank their children’s cord blood can use it for the family’s personal use. But the usage of these cells is so low that the need for this service is under question.

To set this in context, LifeCell, which its vice chairman Mayur Abhaya claims, has 200,000 units stored, is on its way to becoming one of the largest banks in the world. Abhaya says that it has supplied cord blood units to 45 transplants so far. That translates into 0.0225% use rate. Globally, for private banks, the rate ranges from 0.04% and 0.0005%.

Most of the uses are for blood-related disorders and are often expensive. Just to cite one case of thalassemia, which affects 35 lakh people in India. A child diagnosed with thalassemia can be cured if the bone marrow transplant happens within the first five years of age, beyond which the chances and complications of rejection are very high. Such a transplant would cost anywhere from Rs 12 lakh to 25 lakh. (Christian Medical College in Vellore charges Rs 8 lakh and provides the cheapest transplant.) Few children are diagnosed on time and fewer still can afford this treatment.

And this is why there are camps of medical professionals, which espouse public banks so that a wider pool of patients benefit from the science.

The use rate is distinctly higher, at 2.2%. In India, there is no overt support for public banks but in the US, the American Academy of Paediatrics and the American Society of Blood and Bone Marrow Transplantation have published guidelines encouraging parents to store these cells in public banks if they want to or have to. They do not recommend private banking as an insurance against an unforeseen future use of cord blood.

“In Singapore, Taiwan, South Korea and other Asian countries, what they have done is combine public and private banking and mandated certain expenses where it is reimbursed and where it is not. So it is extremely competitive as the rules are laid how the banks will work,” says Mahendra Rao, eminent scientist and former director of the NIH Centre for Regenerative Medicine in the US.

The changing environment

The moment you call Abhaya on his phone, Aishwarya Rai starts talking. Yes, she does. That’s Abhaya’s caller tune; of Aishwarya Rai Bachchan endorsing cord blood banking with LifeCell. The ads were all over on television when the company raised $4.6 million from Helion Ventures in 2013. An aggressive marketer, Abhaya first got Bollywood star Hrithik Roshan to be his brand ambassador when LifeCell introduced EMI for banking service seven years ago.

“We’ve created awareness in the country. We are in an investment phase,” he says, justifying his accumulating losses. “Moreover, it is an accounting thing, we are deliberately booking losses. We are cash flow positive but net worth negative,” he says. Most banks offer two options: One-time charge for 21 years of storage, in which case they count the processing fee as the revenue and the rest as deferred revenue over the remaining number of years; and annual subscription.

Ghaisas’ Stemade is planning to move towards similar pricing. “Our current pricing model is upfront for processing and future preservation till the child gets to 21 years. We also have an EMI scheme. Globally, people are moving on an annual subscription model for a fixed tenure. Umbilical cord guys have already moved on it. We may give that as an option. The idea is to get into the next economic level of parents and expand market reach,” he says.


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