Company Overview
Cryo-Cell International, Inc. (CCEL) is a leading provider of cord blood and cord tissue cryopreservation services, with a rich history spanning over three decades. Founded in 1989, the company has established itself as a trailblazer in the industry, offering innovative solutions and maintaining a steadfast commitment to advancing the field of stem cell preservation.
Origins and Early Milestones
The company’s origins can be traced back to September 11, 1989, when it was incorporated in Delaware as the world’s first private cord blood bank. In 1992, Cryo-Cell made a significant breakthrough by becoming the first private entity to separate and store stem cells derived from umbilical cord blood. This pioneering achievement laid the foundation for the company’s growth and recognized its position as a leader in the industry.
Facilities and Operations
Cryo-Cell’s U.S.-based business operations, including the processing and storage of specimens, are handled from its headquarters facility in Oldsmar, Florida. The company’s state-of-the-art facility is a testament to its commitment to quality and compliance. The nearly 18,000 square-foot facility is designed to meet the stringent requirements of current Good Manufacturing Practice (cGMP) and current Good Tissue Practice (cGTP) standards, as mandated by the U.S. Food and Drug Administration (FDA). This ensures that the company’s processing and storage procedures adhere to the highest levels of safety and quality, and Cryo-Cell believes it was the first private bank to process cord blood in such an advanced cGMP/cGTP-compliant facility.
Services and Expansion
Over the years, Cryo-Cell has continued to expand its capabilities and offerings. In August 2011, the company introduced its advanced cord tissue service, which allows for the cryopreservation of a section of the umbilical cord tissue. This service taps into the rich source of mesenchymal stromal cells (MSCs) found in the cord tissue, which have numerous potential applications in regenerative medicine. The company offers this cord tissue service in combination with its umbilical cord blood service, providing a comprehensive preservation option for its clients.
Strategic Acquisitions and Growth
In June 2018, Cryo-Cell made a strategic move by acquiring the assets of Cord Blood Bank, Inc., a Florida-based company. This acquisition allowed Cryo-Cell to expand its public cord blood banking operations, creating a large, ethnically diverse inventory of available cord blood stem cell units for those in need of life-saving therapy.
More recently, in July 2022, Cryo-Cell completed the purchase of a 56,000 square-foot facility in Durham, North Carolina. This new facility not only provides additional space for the company’s internal storage needs but also offers the opportunity to expand its cryopreservation and cold storage services to third-party pharmaceutical companies and medical institutions through the ExtraVault service.
Financials
Cryo-Cell’s financial performance has been mixed in recent years. For the fiscal year ended November 30, 2023, the company reported total revenue of $31.34 million, a 3.2% increase from the prior year. However, the company experienced a net loss of $9.52 million, primarily due to a one-time impairment charge of $13.11 million related to the Duke License Agreement. The company generated operating cash flow of $8.92 million and free cash flow of $1.28 million for the fiscal year.
In the third quarter of fiscal 2024 (ended August 31, 2024), the company reported revenue of $8.07 million, a 2.5% increase compared to the same period in the previous year. The company’s operating income for the quarter was $1.39 million, representing a 19.8% increase year-over-year. Net income for the quarter was $1.05 million, with operating cash flow of $2.44 million and free cash flow of $2.12 million.
The increase in revenue for Q3 2024 was primarily driven by a 5% increase in recurring annual storage fee revenue. However, this was partially offset by a 14% decrease in the number of new domestic cord blood specimens processed compared to Q3 2023.
Segment Performance
Cryo-Cell operates three main business segments: Cellular Processing and Storage Services, PrepaCyte-CB, and Public Cord Blood Banking.
The Cellular Processing and Storage Services segment is the company’s core business, focusing on the collection, processing, and cryogenic storage of umbilical cord blood and cord tissue stem cells. For the nine months ended August 31, 2024, this segment generated $23.72 million in revenue, accounting for 99% of total revenue. The segment saw a 3% year-over-year increase in processing and storage fees revenue, driven by a 4% increase in recurring annual storage fee revenue. However, this was offset by a 4% decrease in the number of new domestic cord blood specimens processed. The segment’s operating profit margin was 17.4% for the nine-month period, compared to 18.8% in the prior year period.
The PrepaCyte-CB segment, which focuses on the manufacture and sale of the PrepaCyte-CB cord blood processing system, generated $39,470 in revenue for the nine months ended August 31, 2024, a 36% decrease compared to the prior year period. The segment’s operating profit was $18,450, representing an operating margin of 46.8%.
The Public Cord Blood Banking segment, which involves the collection, processing, testing, and storage of public cord blood units, generated $205,800 in revenue for the nine months ended August 31, 2024, a 48% decrease compared to the same period in the prior year. This decrease was attributed to volatility in customer demand.
Liquidity
As of August 31, 2024, Cryo-Cell’s key financial ratios paint a mixed picture. The company’s current ratio stands at 0.61, while its quick ratio is 0.57, indicating potential liquidity concerns. However, the company’s debt-to-equity ratio of -1.12 suggests a relatively low level of leverage.
In terms of cash position, Cryo-Cell had $197,000 in cash and cash equivalents as of August 31, 2024. The company also has access to a $10 million revolving credit facility, of which $2.22 million was drawn as of the end of Q3 2024.
Profitability and Margins
Cryo-Cell’s gross profit margin for the third quarter of fiscal 2024 was 73.6%, a slight improvement from the previous year’s 73.5%. The company’s net profit margin, however, remains negative at -28.0% due to the aforementioned impairment charge and other operating expenses.
Future Prospects and Challenges
Cryo-Cell’s future growth prospects are tied to several key factors, including its ability to expand its cord blood and cord tissue banking services, increase market penetration, and successfully navigate the regulatory landscape. The company’s recent acquisition of the Durham facility and the launch of its ExtraVault service demonstrate its commitment to diversifying its revenue streams and enhancing its overall business model.
Additionally, Cryo-Cell’s strategic partnership with Duke University, as outlined in the Duke License Agreement, holds the potential to unlock new opportunities in the field of cellular therapies. However, the company’s ongoing arbitration dispute with Duke University poses a significant risk that could impact its future plans and financial performance. On October 4, 2024, CCEL filed an arbitration demand against Duke University alleging breach of a licensing agreement and fraudulent inducement. The company is seeking damages which it estimates exceed $100 million. The outcome of this arbitration is uncertain at this time.
It’s worth noting that Cryo-Cell has faced some challenges over the years. In 2005, the company began providing its customers a payment warranty, under which it agrees to pay up to $100,000 to its client if the umbilical cord blood product retrieved is used for a stem cell transplant for the donor or an immediate family member and fails to engraft. This warranty has been an added cost and risk for the company.
Additionally, the stem cell preservation market has become increasingly competitive, with Cryo-Cell facing competition from other operators of stem cell preservation businesses and providers of stem storage services. However, the industry as a whole has seen a compound annual growth rate (CAGR) of approximately 8% over the past 5 years, driven by increasing awareness and adoption of cord blood banking services.
Legal Issues
On January 6, 2023, a lawsuit was filed against Cryo-Cell alleging that the company’s advertising does not accurately represent the value and efficacy of its services. The company believes the claims are without merit and is vigorously contesting the lawsuit.
Conclusion
Despite these challenges, Cryo-Cell has maintained its position as a leader in the cord blood banking industry. The company currently stores over 235,000 cord blood and cord tissue specimens for the exclusive benefit of newborn babies and possibly other members of their families. Cryo-Cell’s facilities, processing methods, and storage environment have allowed it to provide a high-quality, high-value service to its customers over the past three decades.
Cryo-Cell’s cord blood stem cell preservation services are provided to customers through annual, 21-year, and lifetime storage contracts. As of August 31, 2024, deferred revenue related to these storage contracts totaled $55.03 million, of which $9.83 million is expected to be recognized as revenue over the next 12 months.
The company’s public cord blood inventory totaled approximately 6,000 units as of August 31, 2024. These units are valued at the lower of cost or net realizable value, with costs including collection, transportation, processing, and storage.
In conclusion, Cryo-Cell International, Inc. (CCEL) is a pioneering company in the cord blood banking industry, boasting a rich history and a steadfast commitment to innovation. While the company has faced some financial challenges in recent years, its strategic initiatives, such as the expansion into public cord blood banking and the launch of ExtraVault, suggest a continued focus on diversifying its revenue streams and positioning itself for long-term success. Investors should closely monitor the company’s progress, particularly in navigating the Duke University dispute and ongoing legal challenges, as these could have a significant impact on Cryo-Cell’s future trajectory.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.