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WideCells offers landmark stem cell cover to open up booming market- can it turn this into profit? (WDC)

More than four million people around the world have stored away stem cell-rich umbilical cord blood samples that can potentially be used by both them and their families in future medical treatments. However, many do not fully understand what these stem cells can do and are unaware that treatment typically costs around £300,000. WideCells Group (LSE:WDC) was founded in 2012 to create an end to end stem cell service solution, which includes the world’s first cord blood stem cell insurance plan, to increase awareness of cord blood treatments and to make it more affordable. The firm is already generating revenues and has a defined development path with international ambitions in a rapidly growing market. Will first-mover advantage see shares its soar from their current 11.8p price?

Changing space

Stem cell technology was first used to treat leukaemia in 1956. Today, the technology can be used to treat many life-threatening diseases, including more than 80 blood disorders. This scope is expanding, and trials are now looking at using stem cells to treat things like cerebral palsy, autism, diabetes and strokes.

The global stem cell market is currently valued at $96bn and is predicted to grow to $170bn by 2020 and $270.5bn by 2025, a CAGR of 13.8pc. As chief executive, Joao Andrade, put it to us: ‘The stem cell industry has moved from the research and technology stage into a commercial reality.’

WideCells Group focuses on stem cells captured from blood that remains in the placenta and umbilical cord following the birth of a child. Unlike alternative stem cell sources like bone marrow, cord blood is conveniently sourced and does not require a 100pc genetic match for a transplant. In fact, transplants are typically matched between 25-50pc. In many instances, this provides families with the best chance of securing usable stem cells.

A global market is developing, with around 250,000 new cord blood samples being stored globally every year, with this number growing. But the treatment still has its challenges. Although it only costs around £2000 to store cord blood, families will often be unable to pay for treatment. Stem cell therapy may cost up to £300,000, with treatment for leukaemia in the US costing upwards of £800,000. Also, they are often only available in very specific locations and are not fully understood by many professionals or members of the public.

As Andrade puts it: ‘Over the past 10 years, we have seen a 300pc increase in the number of diseases that can be treated using umbilical blood stem cells. Cord blood stem cells are the most effective option so it is a shame to see so many go to waste because many families are unaware that treatment is available or cannot afford it.’

End-to-end service

WideCells Group was established to address these issues with an end-to-end service in the umbilical cord blood stem cell market. It is headed up by Andrade, who has more than eight years senior experience in the stem cell market and chairman Peter Presland, who has led a number of pharmaceutical, healthcare and insurance companies including international insurance group C E Heath PLC.

The organisation is split into three arms: WideCells, CellPlan, and Wideacademy. CellPlan is the healthcare cover side of WideCells. It provides customers with access to stem cell specialists and hospitals and covers a whole family for up to £1m worth of medical, travel, and accommodation expenses.

WideCells is responsible for storing and processing stem cells. It is developing an international portfolio of facilities and already has sites in Manchester, UK and Sao Paulo, Brazil. Last month, it received a licence from the UK’s Human Tissue Authority to import, export, process, store and distribute umbilical cord blood and umbilical cord tissue across the UK and Europe from Manchester. This arm also carries out in-house R&D of stem cell products at its Institute of Stem Cell Technology (ISCT).  The facility has an agreement with US-based clinical stage medical device firm Qigenix to undertake paid-for research and most recently was awarded a government-backed Knowledge Transfer Partnership (KTP) from Innovate UK to develop clinical grade induced pluripotent stem cells with Manchester Metropolitan University.

The third arm of the business is Wideacademy. It was launched last month and is spearheaded by Alan Greenberg, the former director of Apple Education. It will provide a platform to teach the medical industry and public about stem cell treatment and will provide accreditation to medical professionals and the insurance industry through short courses.

Andrade told us: ‘Firstly, we have Wideacademy bridging the current information gap in the market, as we believe that if more doctors recommend stem cells to families then more people will use them. Then we have our own stem cell bank where we can process and store cells in the UK and across Europe. Finally, we have the insurance plan that ensures families have appropriate cover if they need treatment in the future. That’s what we call an end-to-end service.’

Revenue plans

WideCells Group is already generating revenues and intends to significantly increase turnover over the next three years.

CellPlan has been generating revenues since June 2017 and is currently being rolled out throughout the UK. The plan costs an average of £170 a year. Of this, £50-£75 is kept by WideCells as revenue. If a client uses the plan for 20 years, which qualifies them for a 50pc discount, WideCells put their lifetime value of around £500.

The business is targeting 100,000 CellPlan clients in three years; 10,000 in 2018, 30,000 in 2019, and 60,000 in 2020. In theory, if all these clients reached lifetime value, CellPlan’s revenues could hit £50m over this period in the conservative case scenario. Andrade is confident lifetime value will usually be achieved. He describes CellPlan as a ‘sticky’ product, putting its potential retention rate at above 90pc.

CellPlan will grow by selling directly to families and building its ‘extended provider network’ of stem cell storage facilities that meet its standards. These will offer a larger margin as WideCells Group will not have to pay commission. It also wants to partner with insurers, is launching in Spain, Europe’s largest stem cell market, and has unveiled an e-commerce platform.

Andrade said CellPlan will look to include treatments for new diseases and disorders as and when they are developed to widen the plan’s appeal. He said: ‘If these treatments become available they will be very expensive. We will try to include them in the cover that means we will be able to sell more insurance if we are able to provide more treatments in regenerative medicine.’

Moving on, WideCells’ storage division charges an average of £2,000 to store cord blood in the UK, with the firm holding on to around £1,200 as revenue. WideCells believes there is plenty more turnover to be made here. There are around 500,000 births each year in the company’s initial target markets of the UK, Portugal, Spain, and Brazil. It believes that around 10pc of these babies will have their umbilical cord blood samples stored.

The storage arm’s goal is to reach 5,000 clients in three years. If its estimations of the wider market are correct, it could achieve well beyond this. WideCells also generates revenues by carrying out two or three research projects a year and selling a synthetic bone substitute. It is also developing two further products: LipoCells, which will collect tissue and TeethCells, which will process dental pulp.

Wideacademy is expected to begin generating three revenue streams this quarter. It will charge £120 a year to subscribe, £200 to study each accredited module, and £250,000 a year with a minimum three-year contract to white label the platform. WideCells hopes to get 6,000 doctors subscribing to the service within three years of launch and 2,000 study modules sold by the end of 2018.

Inflection point

In its last results, which covered the six months ended June 30, WideCells Group reported a loss of £880,397 against revenues of £25,000 and the company has a current market cap of £7.6m. This does not concern Andrade, who told us the firm is now at an ‘inflection point’ after getting the business to a point where it can start generating revenues.

‘Since we floated we have completed product developments, obtained a licence, established our bank, and started to roll out the products. I am glad to say that we have done that now. We are in a good position now to start generating revenues and to increase the company valuation on the market,’ he told us.

With a clear plan for increasing revenues, and the weight of a growing international market behind it, WideCells Group could be on the path to profit. It may be worth a punt before the wider market catches on.

Author: Daniel Flynn

Disclosure: The author of this piece does not own shares in the company mentioned

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