ThermoGenesis: A Stealth Stem Cell Play

Posted on Saturday, January 31st, 2009 | In Exchange Traded Funds

Contributed by: ETF Innovators (http://etfinnovators.com) -

For investors in search of a play on stem cells and regenerative medicine who are unsure about committing capital to stocks which have already soared over the past few weeks such as StemCells (STEM), Geron (GERN), Osiris Therapeutics (OSIR), and Cytori Therapeutics (CYTX); ThermoGenesis (KOOL) represents an under-the-radar name which already has products on the market and in late-stage development.

As illustrated in the accompanying chart (click to enlarge), KOOL has significantly lagged behind its peer group in terms of stock price performance over the past year despite having a strong balance sheet with a goal of achieving profitability by 4Q09.

KOOL recently embarked on a reorganization which includes a management transition plus financial goals for achieving 10%-20% revenue growth in FY09 and profitability by 4Q09 with gross margins of at least 40%. Key milestones for the year include adding new AutoXpress Platform (AXP) customers, controlling operating expenses, receiving FDA okay for the correction of manufacturing issues which led to an AXP bag set recall, initiating shipments of MarrowXpress (MXP) system + disposables this quarter through a new distribution agreement with Spine Smith, and the marketing of Res-Q for bone marrow + platelets during 3Q09 (veterinary applications in horses) and 4Q09 (human applications).

In the past three months, insiders have been heavy buyers of KOOL stock, accumulating 301,000 shares within a price range of $0.50-$0.56 per share. KOOL achieved 31% revenue growth for FY08, with more than half of their sales coming in the form of recurring disposables used in conjunction with the Company’s systems and devices. KOOL enjoys a strong balance sheet, which includes $22.3M in cash + investments with zero debt, compared to a market cap of $43M at the end of January, trailing 12-month revenue of $22.8M, and a $9.6M net loss over the past year.

KOOL provides systems to process a patient’s or an animal’s own adipose (fat) tissue, bone marrow, and peripheral blood for a wide variety of medical applications, including:

- wound care applications (CryoSeal Fibrin Sealant, Thrombin Processing Device)
- stem cell and tissue banking (BioArchive)
- cord blood stem cell transplants
- regenerative medicine applications (click to enlarge table below from KOOL presentation)
- the veterinary market (horses – Vantus brand) (MarrowXpress or MXP, Res-Q)
- stem cell processing (AXP: including Res-Q + MXP – bone marrow, Res-Q – peripheral blood, APS – adipose tissue)

While its stock price has lagged behind other stem cell companies over the past year, the strong balance sheet, robust product + development line-up, and the favorable outlook on stem cell research by the new administration bode well for KOOL in the coming year – especially if the Company can deliver on its goal of achieving profitability.