China Cord Blood Comps
Group 2: Rachel Berry, Peter Fields, Bailey Gray, Ben Mitchell, Kendal Reed
October 26, 2009
The $64,000 Question – Is CBB a Comp for China Cord Blood? CBB – The Right Fit
Given the cord blood industry is still young and that many cord • Cord blood banking focus
blood companies are private, we feel that CBB is a viable • Asia-Pacific market
comparable for China Cord Blood for the following reasons: • Trades on a similar P/S ratio
• CCB has a wealth of publicly
On a broad perspective, both companies operate in the cord blood available information
banking segment and both are publicly traded, indicating we are
comparing similar companies in a very niche market. Adding to this
is that both companies focus on the Asia-Pacific market. CBB
currently generates 96% of its revenues from its Asia-Pacific market,
including Singapore, Hong Kong, India and the Philippines up from
90% the previous year, a trend we expect to continue.
It is easy to see the similarities in two key areas: revenues and P/S
ratio. We believe the most telling valuation metric comparison
between these two companies is the P/S ratio, as both companies
have just recently started generating positive bottom lines, and are
still trading on a P/S basis. In the future, we expect the companies to
trade on more of a PE or EV/EBITDA basis, and we expect to see a
likeness between these ratios in the future.
Not all is perfect in the world of comparables. The two things that
truly differentiate CBB and China Cord Blood are: (1) Each
company’s international focus (or lack thereof) and (2) Government
regulation. Addressing our first point of concern, CBB is focuses on
a more international basis than does China Cord Blood. This
diversification strategy will allow CBB to experience more markets
and allow for greater growth opportunities in the future. However,
since China does still mandate a one child per family policy, we
believe the demand for cord blood services will be higher here than
in other Asia-Pacific countries. Also, because of the way the
Chinese government issues permits, China Cord Blood experiences a
monopoly on their specific regions – a luxury not afforded to CBB.
Group 2 1
CordLife is the largest cord blood banking operation in Australasia, with storage facilities and operations in
Singapore, Hong Kong, Indonesia, India, Philippines, Thailand, and Australia. CordLife is traded on the
Australian stock exchange with the ticker, “CBB.” The company has been operating since 2001, and over
24,0001 families have used them to process and store their children’s cord blood. Families store their
baby’s cord blood in hopes that the stem cells will be able to be used later in life to prevent health issues.
In addition to being certified by the American Association of Blood Banks (AABB), CordLife has received
other quality distinctions and certifications, including through the Therapeutic Goods Administration
(TGA) and the International Organization for Standardization (ISO).
CordLife is the parent company and former majority shareholder of BioCell, which is a cord blood
banking business in Australia, and is synonymous with CordLife’s Australian segment. The company
has full cord blood operations, which include processing, testing, and long-term storage. Previously a
51%-owned subsidiary of CordLife, BioCell merged with CellSense in December 2008, decreasing
CordLife’s ownership to 28.4%2. The merger makes BioCell and CellSense, under the name
Australian Stem Cell Healthcare, the largest private cord blood bank in Australia. This will allow
CordLife to focus more on its expansion in the Asia Pacific region.
Revenues and Fee Structure for Each Company/Region:
Most of the regions that CordLife provides its services to offer a full payment structure
that is paid in one lump sum or through plans that are broken down on an installment
basis, usually monthly or annually.
For Biocell, the full payment option is broken into three options: Full Payment, Baby Bonus, and
Annual payments. The Full payment plan has one lump sum cost for both the collection and storage
The Baby Bonus plan has a slightly higher cost if parents that are eligible for the Baby Bonus use it to
pay for cord blood banking. Introduced by Australia’s government in 2002, the Baby Bonus is a
government payment to parents of a newborn baby or adopted child to assist with childcare costs. It
also aimed to increase Australia's fertility rate and to reduce the effects of Australia's ageing
The Annual Payments plan has a lump sum for the collection fee but breaks the storage fee into annual payments for
18 years. In addition, Biocell also offers two annual installment plans which break out the entire cost of the service
on an annual basis for 18 years.
Group 2 2
Biocell Courier Costs
To the left are the transportation costs Biocell charges its
customer’s to transport cord blood from the different regions
of Australia to its storage facility at the Sydney Adventist
CordLife - India
India offers two different styles of plans, an annual plan and an 18 year plan.
With the annual plan, customers pay a one time enrollment fee, a processing fee in either a
one time lump sum or monthly for 12 or 24 months, and a storage fee annually for 18 years.
With the 18 year plan, customers pay a one time enrollment fee and the processing and
storage fee is combined into either one lump sum or paid monthly for 12 or 24 months.
This results in a cheaper total cost due to more money being paid upfront.
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Singapore has 4 different plans: a basic plan, an annual plan, a 10 year plan, and a 21 year plan. Each
plan has an upfront cost and payments that are paid annually.
The basic plan has the lowest upfront cost, however, customers are only eligible for the basic plan for
deliveries that occur at the National University Hospital. In addition, annual payments are made for ages
1-20 of the child.
The Annual plan is paid through the upfront cost and annual payments through ages 1-20 of the child.
The 10 year plan has a large upfront cost and annual payments are deferred until ages 11-20 of the child.
The 21 year plan is completely paid upfront in one lump sum payment.
In addition, customers in Singapore can pay an additional fee to use the Sepax automated processing
Sepax is an automated cord-blood processing system that can harvest larger numbers of stem cells from
cord blood. Over 400,000 cord-blood units in 40 countries have processed using Sepax11.
Hong Kong breaks its plans into a one-time payment or installment structure. In addition, customers
can choose to pay for 1, 5, 10, or 18 years of storage. Under the one-time payment structure, the storage
fees for the varying lengths of contracts are paid completely upfront. In the installment plan, an initial
payment for each length of contract is made and then 6 monthly installments are paid.
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Indonesia has pricing plans for Singapore and Jakarta. For the Singapore plan, cord blood is collected
in Indonesia and then shipped to Singapore to be stored. For the Jakarta plan, the cord blood is stored
locally in Jakarta. Both of the plans have some initial upfront costs and then charge subsequent annual
The Philippines pricing structure consists of a one time upfront cord blood banking service fee and
annual subscription fees that begin to scale down after the 5th year of service.
All pricing information obtained from the respective websites (see Works Cited)
Size of Potential Market3
The companies are capable of storing blood from anywhere in these countries. Distance
from the bank only increases transaction costs for the customer.4
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Current Penetration Rate Target Penetration Rate
Cord Life: 16,000 total current units Cord Life: The company recently built new
stored / 33,690,675 total market size=0.047% storage facilities in India, and we expect strong
growth in the number of clients across the
Bio Cell: 0.5% - The total penetration rate for company’s Asian markets. For this reason we are
the cord blood banking industry is 1% of new forecasting 70% growth in new client sign up
births according to Cryosite’s annual report. through 2011. This would bring CordLife’s
Cryosite (another Australian bank) has penetration rate to 0.17% in 2011 (using CIA World
approximately 45% of market share according to Factbook estimates for pop. growth rate).
the same report. After merging with Cell Sense,
Bio Cell is the largest provider of cord blood
banking services in the country. There is one Bio Cell: Based on conversations with
other minor player so it is reasonable to assume a investor relations representatives at Crysosite and
50% market share for Bio Cell. Cord Life, we believe the Australian market for cord
blood banking services will not grow in the next five
years. This puts a cap on the company’s penetration
Historical and rate at 1% and it is more likely the penetration rate
Projected will remain near its current level of 0.5%.
Clients for CBB
CordLife is the sole private cord blood bank in Indonesia. This facility is a joint venture between
CordLife and the region’s largest pharmaceutical giant Kalbe Farma. Singapore, where CordLife is
headquartered, and Hong Kong both have two private banks other than CordLife, although
CordLife is the only AABB accredited bank in South and Southeast Asia. In Hong Kong, private
cord blood banks are only allowed to collect for births which take place in private hospitals.
Cryolife, a main competitior of CordLife, claims that over 90% of the OB/Gyn doctors practicing in
Hong Kong use their services and they have around 10,000 units in storage4. Due to the high birth
rate and lack of any strict government regulations, India has the most private banks with six, but
CordLife is the largest, most advanced bank, and the only bank in West Bengal licensed by the
Ministry of Health. According to Stem Cells Research Forum of India, India's stem cell market is
growing at a rate of 15% per year.
Group 2 6
Australia is home to three private banks, one of which is Biocell, who CordLife has a 28.4% ownership
in. There are strict government regulations and requirements to operate in Australia. Per a conversation
with an investor relations employee at Cryosite, cord blood banks in the country must follow Therapeutic
Goods Administration guidelines6. Also based on this conversation, we believe the competitive
environment in Australia is going to be stagnant going forward. Due to the government regulations and
important sociocultural factors, cord blood banking is not well-positioned for success in Australia. When
we spoke with an individual at CordLife, she said they are working to get out of the business in
Australia, which is also evidenced by the dilution of their ownership in Biocell to just 28%. The
individual at Cryosite stated that CordLife admitted they had, “misjudged the market in Australia.”
CordLife has storage facilities in many of the regions in which it operates. In Singapore, the company’s
facility is the largest laboratory in Southeast Asia, and has the capacity to store 60,000 cord blood units.
This facility is 7,500 square feet, features Sepax automation, and is AABB accredited.
Through Biocell (Australian Stem Cell Healthcare), CordLife operates the largest private blood bank in
Australia. It utilizes its processing lab at Sydney Adventist Hospital to efficiently serve its customers.
In Indonesia, CordLife’s storage facility can hold up to 30,000 cord blood units. The facility is located in
Jakarta, well positioned to serve all of Indonesia.
In India, CordLife has a storage facility capable of holding 150,000 cord blood units. The laboratory on-
site has full processing, testing, and preservation competencies. This facility has continuous power
backup and state-of-the-art security. CordLife has built this facility to withstand any natural disaster.
CordLife’s Indian facility is located in Kolktata, and is licensed by the Drug Controller General of India.
In Hong Kong and Macau, the company’s fully automated facility is well situated, near the private
hospital with the most deliveries in the country. In 2009, a new facility will be opened in Hong Kong
While CordLife has a presence in the Philippines, up until now families have stored their children’s cord
blood stem cells at the company’s Singapore location. By late 2009, the company plans to begin
working on a storage facility to better serve the market.
In Thailand, the company works with clients and hospitals, and ships cord blood samples to the
Singapore facility. CordLife is the number one choice for expatriates in Thailand1.
Group 2 7
Both CordLife and Biocell do not ever explicitly say what capital expenditures were necessary in order to
build cord blood storage facilities. However, we are able to get a better idea through their PPE numbers,
as well as through research on others in the cord blood banking industry. In 2008, CordLife as a whole
purchased PPE totaling A$885,000 and in 2007, A$330,000. The company’s PPE primarily consists of
leasehold improvements (7%), office equipment (46%), and plant and equipment (45%). PPE totaled
A$1,241,000 by fiscal year-end 20085. Also, in 2007, net cash outflows from operating and investing
activities totaled A$4,064,000 primarily due to expansion activities and capital expenditures. We believe
these capital expenditures may have been tied to the large facility that was recently completed in India,
which has the capacity to store 150,000 samples. For BioCell, it appears that they do not own their own
storage facility, but rather use a laboratory at the Sydney Adventist Hospital to process and store the cord
Most cord blood banking companies are either private or don’t provide detailed information of the costs of
their operations. Many also find it more cost effective to lease a building and then convert it to fit their
storage needs. Cord Blood America, Inc., is currently working on the completion of its 17,000 square foot
storage facility in Las Vegas. In May, the company obtained $2.3 million from private investors to lease or
build this facility7. Many variables would be different for CordLife, but this was one of the only examples
found that put a price tag on a cord blood storage facility.
In researching through the KU database, we were able to find an article on Canada’s interest in building a
national cord blood banking program that provided estimated costs of running a banking operation.
According to the article, the New York Center National Cord Blood program has total costs per unit stored
of $1,8008. This figure includes the cost of collection, processing, storing, and testing. Again, CordLife’s
operations in Australasia differ from those in the U.S. based on economic and cultural factors, but this does
provide a general ballpark figure of the cost per unit for cord blood banking businesses.
Historical and Projected Revenues for CBB & CNDZF
Relative Valuation – CBB.AX
We decided the best method of valuation for Cord Life was
a relative valuation. We estimate revenues to continue their
strong growth in the next five years, maintaining a rate of
70% for 2010 and 2011. We expect such growth to come
primarily, if not entirely, from the Asia market. In this
market, we expect Singapore and Hong Kong to make the
most significant contributions to Cord Life’s revenues
because they are in already established markets. This being
said, we believe there is great potential in the India and
Indonesia markets. India’s stem cell research market is
growing at a rate of 15% per year and is predicted to
generate USD$540 million by 2010. Cord Life is uniquely
positioned in Indonesia, being the only cord blood storage
company in the nation4. We feel this that CBB will secure a
first mover advantage in the region, further helping to
increase revenues. On the other hand, we believe Australia
to be a weak market and we don’t believe they will generate
significant revenues in the coming years.
Group 2 8
We predict CBB to experience economies of scale as
their subscriber base increases. We believe that
administration expense will steadily decrease (on a
percentage basis) from a current value of 37% of
revenues to a 2011 value of 20% of revenues. We also
attribute economies of scale to the decreasing margin of
cost of sales to revenues, falling from a current value of
28% to 22% in 2011. Revenue growth accompanied
with cost decline leads us to a significant NIBT margin
expansion, going from a current value of 23% to 40% in
2011. Although we don’t believe this level is
sustainable, we believe the high growth nature of the
industry will result in significant NIBT margin increases
over the next few years.
Using projected revenues for CordLife of $31.43
million and a comparable P/S multiple of 4.53, we came
up with a target price of $1.54 for the company, based
on its value in relation to other cord blood banks. When
we compared the company using a multiple of 3.89 and
used both cord blood banks and other stem cell
biopharmaceutical companies, our target price was
When valuing China Cord Blood, we used a P/E
multiple of 41.72 and 2010 earnings of $3.48 million to Cord Blood Comps used: Cord Blood
get a target price of $2.31 based on its comparable America, Cryo-Cell, ViaCord, Vita 34,
valuation with other cord blood companies. When using and Cryo-Save
a broader range of comps, the target price became
$3.11. Additional stem cell comps used:
ThermoGenesis, Geron, Amgen, and
A relative valuation of these companies can be difficult,
due to the lack of information and extreme volatility in
forecasted earnings. However, based on the information
we’ve compiled, we feel that CordLife is very
undervalued compared to its peers in the cord blood
Group 2 9
Other Potential comparables for CNDZF:
Below we have listed several companies that are potential comps for China Cord Blood. Some,
including Cord Blood America, Cryo-Cell, ThermoGenesis, and ViaCord participate in the cord
blood banking industry and would be comparable based on operations and risk. Many of the
other companies participate in the health industry, primarily as biopharmaceutical companies that
create technologies and products that utilize stem cells to prevent diseases and genetic issues.
Company summary information was based on each respective Yahoo! Finance page
Aastrom Biosciences Inc. ASTM
Price - $0.34
Market Cap – 57.23M
Founded in 1989 and located in Ann Arbor, Michigan, Aastrom Biosciences Inc. specializes in
proprietary technology that helps repair human tissues. Its adult stem cell technology uses a
patient’s own cells to treat a range of diseases and injuries.
AVI Biopharma AVII
Market Cap 146.59M
Founded in 1980 and located in Oregon, AVI BioPharma is a biopharmaceutical firm that uses
cancer immunotherapy technology to develop therapeutic products. The company aims to create
products that prevent deterioration of muscle functions, as well as cardiovascular diseases.
BrainStorm Cell BCLI
Market Cap- 21.82M
Founded in 2000 and based in New York, BrainStorm Cell Therapeutics, Inc. develops
therapeutic products based on bone marrow technology that enables them to use a patient’s own
bone marrow stem cells to provide treatment for issues like Parkinson’s disease, spinal cord
injuries, and lateral sclerosis.
Cord Blood America Inc. CBAI
Market Cap- 18.28M
Cord Blood America, headquartered in California, operates cord blood banks in the United
States. The company provides preservation of both tissue stem cells and umbilical cord blood.
Cord Blood America provides a full range of services, including collecting, processing,
transportation, testing, and preservation of cord blood and stem cells.
Group 2 10
Market Cap- 23.27M
Founded in 1989 and located in Oldsmar, Florida, Cryo-Cell is the world’s largest and oldest
cord blood stem cell bank. Cryo-Cell focuses on providing collection and preservation services
of umbilical cord blood for use by families. By November 2008, Cryo-Cell had performed
10,000 cord blood stem cell transplants and had stored 175,000 cord blood samples.
Cytori Therapeutics XMPA.F
Cytori Therapeutics specializes in proprietary therapeutics that use adult stem cells from fat
tissues for regenerative plastic surgery needs. The company’s Celution System has the capability
to locate and isolate a patient’s stem cells in around one hour.
Market Cap- 584.55M
Founded in 1990 and located in California, Geron Corporation focuses on developing therapeutic
products that help treat a range of health issues, including cancer, spinal cord injuries, heart
failure, and diabetes. The company has developed a number of anti-cancer therapies and has
licensing agreements with Merck & Co. and Sienna Cancer Diagnostics for two of its cancer
Market Cap- 6.28M
MultiCell Technologies, Inc. is a biopharmaceutical company that develops technologies to treat
degenerative diseases, in particular, multiple sclerosis and cancer. The company was founded in
1962, is based in Rhode Island, and uses its drug development programs to utilize adult stem
cells for therapeutic purposes.
PharmaFrontiers PFTR - OPXA is ticker; now name is Opexa Therapeutics
Formerly known as PharmaFrontiers, Opexa Therapeutics is a biopharmaceutical company that
develops cellular therapies to treat multiple sclerosis and diabetes. The therapies they develop
are based on adult stem cell use.
Stem Cells STEM
Market Cap- 163.42M
Group 2 11
Stem Cells, Inc. develops stem cell therapeutic technologies used to treat diseases that affect the
central nervous system as well as the liver. Current and past projects have focused on treating
rare degenerative diseases that affect children. The company has received 55 U.S. patents and
around 200 non-U.S. patents for its work.
Market Cap- 35.90M
ThermoGenesis manufactures automated devices for use by hospitals and blood banks to utilize
both adult and cord blood stem cells for therapeutic purposes. The company produces medical
devices that aid in processing stem cells. Their products help across the whole range of
operations, including collection, separation, storage, and delivery of stem cells.
ViaCord VIAC (owned by Perkin Elmer) ticker is PKI
Market Cap: $2.3B
Current Price: $19.73
ViaCord, a subsidiary of PerkinElmer, offers collection, processing, and storage services to
parents for their children’s cord blood stem cells. Using an FDA-approved collection bag and
boasting of a 100% quality product guarantee, ViaCord has stored over 20,000 cord blood units
for families in the United States. ViaCord is a part of PerkinElmer, a $2.0 billion technology
company that focuses on human and environmental health.
ViaCord’s payment plan involves an initial enrollment and processing fee of $1,920, a courier
fee of $150, and an annual storage fee of $125. Clients can store cord blood samples for longer
periods of time than at other banks, as they can store up for to 25 years. The company also offers
monthly payment plans, including a 6-month interest free plan.
Group 2 12
1. CordLife website
2. Yahoo! merger article http://au.biz.yahoo.com/081228/38/23ohw.html
5. The annual report citations for your penetration rate questions (the citation in the capex portion is
also from the CordLife annual report)
6. Phone conversation with Cryosite investor relations employee, 9/23/09
ulltext.jhtml;hwwilsonid=BGY4FGHETVCE3QA3DIMSFF4ADUNGIIV0 from KU
Databases, title of article was Umbilical Cord Blood Banking in Canada: Socio-ethical
and Legal Issues
9. Baby Bonus, Australia, http://en.wikipedia.org/wiki/Baby_Bonus
10. Sepax Automation,
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