Regulate industry, says StemLife

TheEdge: The stem cell banking industry is likely to be regulated following controversies over licensing issues surrounding the players.
At present, local stem cell storage companies, including StemLife Bhd do not need additional licences to operate a stem cell banking business.
However, this will soon change as the government is likely to come up with an Act to govern the stem cell industry.
"There is an urgent need for the industry to be regulated. This will ensure that only genuine companies are allowed to operate," StemLife finance director Michael Lim tells The Edge.
The issue of licensing arose when StemLife was directed by the Medicine Advertisement Board (MAB) to withdraw all its advertising materials as they did not comply with the approved contents for advertisement purposes.
The MAB is part of the Pharmaceutical Services Division, which is within the ambit of the Ministry of Health. MAB reviews applications for advertisements relating to services, appliances and remedies that have medical claims.
"MAB visited our office following complaints about our advertisements on certain claims. There is content, which falls under the MAB's 'ban list' such as claims on cancer treatments, that is not allowed on advertisement materials, unless they are for educational purposes," he adds.
StemLife, which collects and preserves umbilical cord blood stem cells from newborns, claims that stem cells are able to replace damaged cells and have been used in the treatment of such illnesses as heart disease, thalassaemia, blood cancers and chronic wounds.
"We then removed our advertising materials and submitted to the MAB our new materials but did not get approvals as we were told we did not have the licence to operate. As far as we are aware, we don't need a licence for our banking of stem cell business," he adds.
However, in order to obtain the relevant approvals from MAB, Lim says StemLife applied recently for a licence under the Private Healthcare and Facilities Services Act, which came into effect last year.
Its application is still pending as the government is in the midst of determining which Act the stem cell banking industry falls under, Lim says.
"These licensing and advertisement issues are not unique to StemLife as other industry players are affected too," he says.
The other stem cell storage companies are privately owned Cyrocord Sdn Bhd and CellSafe International Sdn Bhd. CellSafe is the newest kid on the block and aims to raise as much as £15 million from a proposed listing on the Alternative Investment Market in London.
Nevertheless, Lim says that StemLife will continue to advertise using new materials, which have been given the verbal go-ahead by the MAB.
Licensing and advertisement issues are not the only problems faced by StemLife.
Last week, StemLife was put under the spotlight following allegations of improprieties. The company had lodged a police report against the blogger who made the allegations and is also considering taking legal action.
StemLife says the allegations in the blog article were malicious and defamatory.
As competition intensifies, it is common for companies to fall victim to vicious rumours and allegations.
Understandably, many players are looking at setting up stem cell banks as the industry is still in infancy.
According to CellSafe corporate affairs director Lau Kin Wai, the stem cell banking industry has room for more players as the local birth rate shows growth of 5% annually, with 500,000 babies born last year. "More competitors essentially help to create awareness," he says.
He says CellSafe is also looking at venturing into China as the country registered some 16 million newborns last year.
StemLife has been successful in this business, based on its financial performance since listing on the Mesdaq Market last October.
For the six months ended June 30, 2007, StemLife's net profit ballooned to RM3.95 million, which is more than the whole year's net profit of RM3.77 million in FY2006. For the first-half period, its revenue doubled to RM10.9 million from RM5.6 million a year earlier.
Nevertheless, StemLife's share price appreciation appears to have outpaced its earnings growth.
Based on its share price of RM4.12, the group's stock is trading at a historical 127 times its FY2006 earnings per share of 3.23 sen. Bloomberg data shows that StemLife is trading at a forward price earnings ratio (PER) of 105 times FY2007 earnings.
But that has not deterred institutional investors from putting their money into StemLife. Big names like Capital Group International Inc, Goldman Sachs International and Berjaya Corp Bhd have bought substantial stakes in StemLife. Capital Group has an indirect stake of 5.82% while Goldman Sachs holds 9.03%. Berjaya Corp holds a 13.56% stake via its wholly owned Juara Sejati Sdn Bhd.
Some StemLife directors have reduced slightly their shareholding in the company but still remain substantial shareholders.
In a market where stem cell banking is still largely untapped, more players mean better awareness. On the other hand, it is important that the industry be regulated to weed out fly-by-night operators.