When Real Madrid striker Cristiano Ronaldo was injured in the run-up to the European Championship last summer, stem cells came to his rescue. After an injury to his thigh, a muscle graft provided the catalyst to a speedy return, and Portugal took home the trophy.
Success stories like this bring attention and business to stem cell treatment, even if it is still in the experimental phase. The hope is that stem cells will one day serve as the miracle cure for those suffering from ailing joints, organs, or nerve cells. Their ability to regenerate holds much promise.
Since the discovery that stem cells can be harvested from the umbilical cord, business is booming.
Roughly 145,000 umbilical cord specimen, originating from all over Europe, lie waiting in the giant nitrogen tanks at Vita 34.
Thousands of parents around the world are freezing the stem cells of their newborns, as hope grows that one day these cells may hold the key to curing diseases like osteoarthritis, dementia, or the after-effects of heart attack – at least that’s what stem cell bank operators are promising.
One of the leading facilities for stem cells can be found in the east German city of Leipzig. Compared to the five U.S.-based cord blood banks that top the international list, Germany has just one: Vita 34.
Eberhard Lampeter founded Vita 34 back in 1997, and has since built up a sophisticated logistics system that is able to securely deliver blood from the umbilical cord back to his site. The stem cells are then isolated from each other and processed to stay viable for several decades, stored at negative 196 degree Celsius in cooled nitrogen. The cells remain on standby, thawed only when a need should arise from the family that harvested them, or for donation. Roughly 145,000 umbilical cord specimen, originating from all over Europe, lie waiting in the giant nitrogen tanks at Vita 34, with 30,000 of them already going to use.
But Germany has some of the toughest policies governing stem cell research, and with the kinks of the treatment not yet worked out, the stock market is betting less on the therapy than Ronaldo did. Buying shares of Vita 34 is good for investors looking for a reliable but modest return. Although classified as a biotechnology company, Vita 34 chief executive André Gerth admits that his company – unlike many other biotech companies – is foremost a solid logistics provider.
The Leipzig based-company has for many years shown earnings that most German biotech companies would only dream about.
The company’s success in this regard is due to its business model: it doesn’t perform research itself on potential new therapies, which could potentially open up a billion-dollar market, it just stores the cells. The cost of storage is paid for regularly by the families that harvested the cells, just as with a typical storage facility. Correspondingly, the Leipzig based-company has for many years shown earnings that most German biotech companies would only dream about.
Stable earnings have however not spurred on share performance. The company went public on the stock exchange in 2007 at €15 ($16) per share, but today the price remains at just one third of that. After all, it was only just last year that shareholders saw a dividend for the first time, which in 2016 has slightly increased another 16 cents per share.
The fact that the profit increased at all, however, was primarily due to a one-off. Last year, Vita 34 acquired several smaller companies, such as the insolvent Austrian stem cell bank Vivocell and the Danish StemCare. In both cases, the purchasing prices were below the value of the acquired net assets, meaning that Vita 34 bought a euro worth of assets for less than a euro. The company recorded this difference as profit. A total of €3.1 million was therefore net in the last financial year, with profits of €1.7 million (67 cents per share) – significantly more than in 2014.
What remains is the hope that stem cell treatment's big breakthrough is imminent.
Without these special effects, Vita 34 would have seen a loss of over €1 million. In the current year, Oddo Seydler analyst Brigitte Thomalla is expecting only 12 cent earnings per share – less than the company currently distributes as a dividend. Investors should brace themselves for the possibility that the payout could be reduced.
What remains is the hope that stem cell treatment’s big breakthrough is imminent, and with a return of currently about 3 percent, the Leipzig plant is more lucrative than a savings account. Parents who have stored umbilical stem cells at Vita 34 and subscribe to the company’s shares can at least take home the good feeling that they have invested in their child’s future.
This article originally appeared in WirtschaftsWoche. To contact the author: firstname.lastname@example.org