Cryosite's IPO closes oversubscribed

Cryogenic storage of umbilical cord blood has been given the thumbs up by Australian investors, with today's announcement that Cryosite's IPO closed early and oversubscribed.

Cryosite's managing director, Gordon Milliken, said the $3.44 million raised in the IPO would go toward setting up interstate offices for its cord blood collection service. Each state will transfer samples to the storage facility in Sydney.

For storing cord blood from newborn babies, Cryosite plans to charge $2004.75 with an ongoing fee of $151.25 per year, or the company has an 18-year storage contract for $4273.50. "We thought the offer would be oversubscribed," Milliken told Australian Biotechnology News. "There was huge investor interest from the very beginning."

The cord blood collection service was made commercially viable in December 2001 after the concept was initially developed by St Vincent's Hospital's Centre for Immunology.

Cord blood is rich in adult stem cells that may be developed into a range of cells and possibly tissue types. These have already proven successful in fighting blood cancers, and have the potential to be used in treating a range of other diseases in the future.

"We did not start out to store cord blood, but it was a perfect fit," Milliken said.

The original plan for Cryosite's business was to provide the ultimate storage facility for pharmaceutical companies, so if their generators failed and the power went down, they had an alternative facility for back-up storage for their biological research material.

As well as storing cord blood, Cryosite now provides a range of services to hospitals and biotechnology companies allowing them to store and archive their precious biological materials and products such as tissue, DNA and clinical drugs in a stable, low-temperature environment.

Since early this year, the company has also been the exclusive distributor of American Type Culture Collections and other microbiological lines in Australia and New Zealand. Deutsche Bank analyst Kiara Bechta-Metti said Cryosite was a service company that would have to grow fast to prevent its competitors from taking its business away.

"There are other organisations interested in starting up a similar company in Australia," she said - there were no barriers to entry, and one German company had already shown interest.

Overseas, cell storage services like Cryosite's are well established. Bechta-Metti said Cryosite's market was very much Australian, and that it would be unlikely to go global because of the competition overseas and also because of its lack of intellectual property.

"One big limitation for the company in the long term is that they have no intellectual property to allow them to go global," she said.

On the positive side, she said, Cryosite was the only Australian company that offered commercial storage of cord blood for corporates and consumers for treating leukaemia.

Public services in NSW, Victoria and Queensland take cord blood samples and bank it for public use, but this public service only provides the closest tissue match, whereas Cryosite provides a perfect match, with your own tissue.

"I expect Cryosite will expand outside of storing cord cells and store other autologous tissues too," Bechta-Metti said - ovarian tissue for use in IVF, for example.

Cryosite lists on the ASX on May 14, with 35,000,000 shares and a market capitalisation of $14 million. The public offer was underwritten by Southern Cross Equities.