The global cord blood and tissue banking market is consolidating, driven by the emergence of holding companies and aggressive M&A activity. This is creating risks for cord blood market participants, as well as new opportunities.
Serious threats to the industry include:
- Low rates of stored cord blood utilization
- Utilization of bone marrow and peripheral blood stem cells as alternative sources of stem cells for HSCT
- Growing prevalence of haploidentical transplantation
- Expensive transplant procedures, ranging from $200-300K
- Difficulty educating Obstetricians about the future value of cellular therapies
- Low rates of market penetration
- Low rates of cord blood awareness among expectant parents
Digital Competition for Cord Blood Banking
Digital competition for cord blood has been growing increasingly competitive, with cord blood banks competing for online ads, website viewership, and ultimately, clients. Most cord blood banks use Google Adwords to display advertisements within Google Search as a method of acquiring targeted traffic.
The term “cord blood” is become one of the 20 most expensive search terms on Google. Winning online traffic through Google AdWords for the search phrase “Cord Blood” now costs $45.87 in the United States, which is a shocking price-per-click (PPC), because it is similar to the cost of winning traffic for terms such as “lawyer”, “insurance” and “mortgage”.
The cost for acquiring traffic through Google AdWords for the phrase “Cord Blood” is $32.91 when all geographies are allowed. Industry leaders are also publishing enormous quantities of industry-relevant content to dominate in organic (non-paid) online search.
Price Competition for Cord Blood Banking
Among the market leaders in the U.S., discount offers for $125 to $500 off cord blood collection and processing are common. Globally, discount offers are also frequently used, because subscription revenue from storage fees can be worth several times the initial collection and processing fee over an 18-year storage term.
For example, Cord Blood Registry charges $1,500 up-front for cord blood collection and processing, but $150/per year for storage. Over an 18-year term, the storage revenue is worth $2,700 ($150/year x 18 years), making it 1.8X more valuable than the collection and processing fee of $1,500 ($2,700/$1500 = 1.8). When cord tissue storage is introduced, this is effect is further multiplied.
When cord tissue storage is introduced, this is effect is further multiplied. On average, most industry competitors price cord tissue collection and processing at two-thirds (2/3rds) of the price of cord blood collection and processing, but charge annual storage fees that are the same.
This results in twice the annual storage revenue if both cord blood and tissue are preserved within a private bank.
Opportunities for Cord Blood Banking
There are also emerging opportunities for the cord blood industry, such as accelerated regulatory pathways for cell therapies in leading countries worldwide, including the U.S., Japan, and South Korea.
Additionally, cord blood banks are diversifying into new types of perinatal stem cell storage, to include umbilical cord tissue, placental blood and tissue, and amniotic fluid and tissue. LifeBankUSA and Americord now offer placental stem cell storage.
Amniotic stem cell can also be sourced from the amniotic fluid or the placenta after a live, healthy birth. These cells possess a unique blend of multipotency and lack of tumorigenicity. The Amnion Foundation isa non-profit organization that has the mission to build a genetically diverse public cell bank that can provide an immunological match to the majority of the population. It is pursuing amniotic stem cell banking as an extension of the cord blood banking model.
Because cord blood utilization is mostly limited to use in pediatric patients, growing investment is also flowing into ex vivo cord blood stem cell expansion technologies.
Cord Blood Expansion Technologies
Strategies being explored for ex vivo expansion of cord blood include Nicotinamide-mediated (NAM) expansion, Notch ligand, UM171, SR-1, and many others.
Currently, the following companies have clinical trials underway to explore methods of cord blood stem cell expansion:
- Gamida Cell – Phase II clinical trial
- Nohla Therapeutics – Phase II clinical trial
- Excellthera – Phase II clinical trial
- Magenta Therapeutics – Phase I trial
These clinical advances make it an exciting time for the industry. If commercialized, these cell expansion technologies could represent a major breakthrough.
Cord Blood Banks as Intergrated Therapeutics Companies
Cord blood banks are also investigating means of becoming integrated therapeutic companies. In one example, LifebankUSA became an asset of the augmented immunity and longevity company Celularity. Celularity, a spin-out company from global biopharmaceutical giant Celgene, raised $250 million in February to support development of revolutionary placental-derived products, including T-cells that will be immune advantaged because of their derivation from the placenta.
Americord also announced in a February 6, 2018, that it “intends to launch its first therapeutic product offering sometime in 2018.”
In India, LifeCell International is the largest cord blood bank with 270,000 units in storage. It announced in January 2018 that it is opening up a mesenchymal stem cell (MSC) manufacturing facility in Jhajjar, Haryana. This facility will specialize in the large-scale manufacturing of MSCs, with the goal to achieve low costs per dose and improved therapeutic benefits. In its press announcement, LifeCell stated that it would “initiate clinical trials after procuring necessary regulatory approvals.”
LifeCell also pairs preventive healthcare and diagnostic testing services with its stem cell storage services.
M&A Activity within the Cord Blood Industry
Growing numbers of investors are entering the cord blood banking marketplace, supporting increased M&A activity, both in the U.S. and abroad.
In June of 2018, GI Partners, a private equity investment firm, announced it is simultaneously acquiring CBR and California Cryobank (CCB) to merge the companies into a single entity that will be the global leader in stem cell storage and reproductive tissue services. The deal was valued at $530 million.
U.S. market leader Cord Blood Registry controls more than 700,000 cord blood and tissue units. Cryo-Cell International controls more than 500,000 units across the U.S and other member countries. ViaCord (owned by PerkinElmer) is another dominant cord blood bank in the U.S. market. Although it hasn’t released recent storage metrics like its competitors, it reported a storage count of 350,000 units in 2016, so it likely controls over 400,000 units today.
Additionally, mid-sized cord blood banks within the U.S. have been acquiring smaller industry players to achieve inorganic growth. Examples of this trend include:
- AlphaCord’s acquisition of five smaller cord blood banks
- FamilyCord’s acquisition of Southern Cord (April 2016) and Cord Blood America’s assets (February 2018)
FamilyCord is also a dominate market player in the U.S., recently announcing that it has nearly 100,000 units in storage.
Cord Blood Banking in Europe
Similarly, most of the cord blood industry growth in Europe is inorganic, with the number of cord blood banks in Europe dropping by approximately one-third (1/3rd) over the past ten years.
The industry leaders in this market segment are FamiCord Group, who has executed over ten M&A transactions, and Vita34, who has executed more than five. Stemlab has also done more than three transactions.
Together, these companies are controlling the European market through an inorganic growth strategy.
Cord Blood Banking in Asia
Globally, networks of cord blood banks are also commonplace, with Sanpower Group controlling 1.2 million cord blood units in Asia.
Although Sanpower has been relatively quite about its operations, its website states: “It has reserved over 900,000 cord blood samples [in China], and the associated reserves amount to almost 1,200,000 when counting in the Cordlife reserves across Southeast Asian countries and regions. This means that Nanjing Cenbest has emerged as the world’s largest cord blood banking operator.”
Cord Blood Banking in Latin America
Cryoholdco has also established itself as a holding company for cord blood banks in Latin America. A portfolio company of ACON investments, CryoHoldco is a stem cell bank holding company that is the market leader in Latin America and one of the largest cord blood banks worldwide. To learn more about Cryoholdco, view our interview with James Alexis Mendez, CFO of Cryoholdoc.
It now owns six cord blood banks within Mexico, Columbia, and Peru, as well as a dental stem cell storage company (DentCell) in Mexico.
While market factors can vary by geography, it is crucial to have a global understanding of the market. Research advances, clinical trial findings, and technology advances do not know international boundaries. The cord blood market is global in nature and understanding dynamics limited to your region is not sufficient for making strategic, informed, and profitable decisions.