On Monday, Cord Blood America Inc. announced that it had signed a Letter of Intent to process and store cord blood specimens for BioCells, Inc., headquartered in Argentina, and its affiliates in Peru, Colombia, Bolivia, Panama and Puerto Rico. This is seen as one of several key developments for the company which has a big forward looking news event later this month.
We had an exclusive opportunity to speak to Matthew L. Schissler, the CEO of the company and what follows is a transcript of that conversation:
BioMedReports: Let’s start by having you tell us about your company, for those who may not be too familiar with what you do.
CEO Matthew L. Schissler: Sure. At Cord Blood America we privately bank umbilical cord blood stem cells for families. We started the company in 2003 and began trading publicly in January of 2005, so we’re celebrating almost five years of being a fully reporting company on the OTCBB. Same company since 2005, so there is a lot of history and information on Cord Blood America. Since that time, in January of 2005, we’ve raised approximately $30 million for the organization. Some of that as debt, some convertible debt, some short term equities, some long term equities and some preferred equity. In fact, just in the last 18 months, we’ve managed to raise $16.8 million, so it’s been a good experience to be able to raise that capital and with it we now have a decent organic growth story. We’ve made three acquisitions in the last three years and we’re in the process of opening our new state of the art laboratory here in Las Vegas, Nevada.
BioMedReports: Wet thought about covering your company last year, but we decided to take a wait and see approach because, honestly, we didn’t know if you were a real company.
CEO Matthew L. Schissler: (Laughs)
BioMedReports: Now it looks like you guys are turning the corner and that company is coming into it’s own with major milestones and some news events on the way. What can you tell us about what is going on with CBAI?
CEO Matthew L. Schissler: We are what we say we are. In 2009, we said we were going to focus on growth, debt reduction and by all accounts the debt reduction was wildly successful. We reduced over $10 million in 2009 and I think we entered the year with approximately $13 million in long term obligations and about $8 million in short term obligations and by reducing over $10 million in 2009, which we’ve announced so far, we’ve effectively reduced all of our short term obligations and dug in pretty hard to our long terms as well so it was a very good year for us.
BioMedReports: There has been some talk about the upcoming opening of your new state-of-the-art facility. Can you tell us about that?
CEO Matthew L. Schissler: We always try to focus on three core goals and in 2010 we are opening our new state of the art laboratory. One of those three core goals is the diversification of revenue streams. Not only will we have our own organic growth engine, by processing and storing for our own company, but we recently entered into a letter of agreement to process and store for another very successful stem cell company. That’s going to be the flavor for 2010 and onward- diversification of revenue streams by using our new facility to its full capacity. The other goal is continued growth- like we saw mention of when we announced in late 2009 when we signed an agreement with a national labor association, Blue Cross and Blue Shield Association. That’s how we’ll grow some more, through the insurance companies. And finally, we’re going to be very focused on acquisitions. In fact, I’ll tell you that in 2010 we have a voracious appetite for acquisitions. With the economy the way it is, a lot of stem cell companies are struggling and we’ve been very fortunate to have our company go in the right direction by reducing debt and raising capital. We feel it’s a very good time for us to make some acquisitions and so we’re going to be very focused on that this year.
BioMedReports: So I would imagine that these acquisitions are somehow related to the goal of increasing your revenue streams in some way?
CEO Matthew L. Schissler: The overall goal in our mission statement is to not only become the world’s number one most respected stem cell company but also to be the largest as well. As we say in our mission statement, the world’s globally dominant stem cell storage company and so, those acquisitions will be in related fields, but I can’t say too much but it’s all about cryogenic preservation of stem cells and other forms of biologics.
BioMedReports: Tell us about this new state-of-the-art facility that you’re getting ready to open.
CEO Matthew L. Schissler: It’s a seventeen thousand square foot facility and to start, it’s going to be able to process cord blood stem cells. It’s built for expansion, though. Like I said we’ll be able to process our own company’s cord blood stem cells and other company’s stem cells as well. It’s built so that we can build different laboratories within the building so that we can focus on different types of technologies that we so need. It’s also being built to become one of the largest storage facilities in the country with tremendous room for expansion, so it’s going to be a very large cryogenic preservation area with multiple labs to focus on different products.
BioMedReports: Some of the bears are claiming: 'Oh it’s just a big warehouse.' What’s your reaction to that?
CEO Matthew L. Schissler: Our address is 1857 Helm Drive. Give me a call. Come on down and take a look.
As you know, we have a very liquid stock and liquid creates volatility so it’s got a lot of bulls and a lot of bears because there’s money to be made on both sides. As much as they can, the detractors will say anything negative they can about our company to create some of that and move the stock price around. At least, that’s my belief. If they want to come see the facility, we’re having a grand opening on January 22nd. We’ll be giving tours of the facility. They’ll be able to see the expansion. They’ll be able to see our current processing, the cord blood lab and our cryogenic lab. That’s what I like to say to the bears. We’re not hiding. If you have any questions, please feel free to come down and take a look.
As you know, we have a very liquid stock and liquid creates volatility so it’s got a lot of bulls and a lot of bears because there’s money to be made on both sides. As much as they can, the detractors will say anything negative they can about our company to create some of that and move the stock price around. At least, that’s my belief.
If they want to come see the facility, we’re having a grand opening on January 22nd. We’ll be giving tours of the facility. They’ll be able to see the expansion. They’ll be able to see our current processing, the cord blood lab and our cryogenic lab. That’s what I like to say to the bears. We’re not hiding. If you have any questions, please feel free to come down and take a look.
BioMedReports: Why would I want to invest in Cord Blood America?
CEO Matthew L. Schissler: I can’t speculate or tell people to buy or sell our stock, but why I believe Cord Blood is a good company is because of the vision that we have for the cryogenic and the stem cell storage industry in particular. We want to be a globally dominant storage facility. Why? It’s a pretty simple equation. As you know there are hundreds if not thousands of stem cell research and development companies around the world. Some of those companies are going to have breakthroughs and they’re going to push a product to market. The ones that do are going to need inventory. Whether that inventory is for private banking, like we currently provide, or whether we create a public bank, or whether we store different types of stem cells, they need inventory and this model is a very simple business model.
First, let’s consider inventory. Think about OPEC or other organizations that control the oil and gas inventory, they are the ones that control the industry. Then if you have to create various products from stem cells, then you start to create a cellular pharmacy.
Yes, there are some billion dollar stem cell plays out there that could strike some great, great advancement and as they make it to market more and more people are going to want to store their stem cells. At the same time more and more individuals, healthcare companies, research companies, insurance companies are going to need some of that stem cell inventory that we want to have a hand in controlling.
We may have opportunities to store for research and development, or for a government or country. There are many different initiatives to store stem cells and we want to create the largest cryogenic storage facility because if you can put that inventory in play, more and more people will need that inventory as therapies get to market.
People don’t usually realize when you’re in the middle of a revolution that you are actually in a revolution, but we are. We’re in a medical revolution right now. Stem cells, every week, every month are showing more ability to not only treat diseases, but to actually cure them. Whether it’s just a few more diseases or a hundred, we don’t know yet, but we know that we can battle afflictions using stem cells and because of that we’ve always known that there is going to be a need for stem cells to be harvested and used for future uses. That is what has always intrigued us about the industry.
Now as a financial model, our business model has a strong annuity to it. We have the yearly storage fee which has a very low debt rate. That’s a beautiful business model. It’s a biological annuity. What caused us to get into the business was seeing a need, some time ago, that this inventory is going to need to be captured.
BioMedReports: Your long term investors seem to be genuinely interested and excited about this particular time in the company’s history. Why do you suppose that is?
CEO Matthew L. Schissler: I think I would be too if I were on the outside looking in. We went down the hard road of rocky terrain. We took down a tremendous amount of debt in a very new industry without the benefit of knowing whether the industry was going to make it or not, even though everything was pointing north. Then we had to have fortitude to dig out of that debt.
Investors are thinking now is the right time because we’re still on the very front end of that stem cell revolution, if you will. The company has positioned itself well. Our balance sheet is cleaning up in particular and if you study a number of different companies in the sector and you’ll find that most of those companies are tremendously laden with debt where we have revenues. In 2009 we started working on the second half of that balance sheet to make it look a lot better. That’s why I believe investors are looking at us right now as an interesting opportunity.
BioMedReports: Do you see those positive revenue streams continuing for you this year?
CEO Matthew L. Schissler: We’re always going to have revenues because of the biological annuity, especially this year. Do I see the trend upwards? I do because we’re continuing to grow and we’re going to diversify those revenue streams and make acquisitions. Obviously I can’t make any bold predictions, this is all speculation on my part, but I’m very comfortable that the revenue is going to move north.
BioMedReports: Why did you choose Las Vegas as the home to the new facility, by the way?
CEO Matthew L. Schissler: It’s more bang for the buck. We were in California for seven years, but the bottom line was cost analysis. We hit that delta. The delta of customers which was right around 20,000. It was the tipping point in which we said, right now is when we should start storing our own cord blood samples because it’s more cost effective for us to do that. Prior to that, it was cheaper to outsource the services. So we hit the delta and we said, “Okay, let’s open up our own lab. The time is right, real estate is down and so forth.” Then we went to work evaluating the cost of opening the lab in California and some other states. The cost of doing business in Nevada, the low tax base, the incentives they all pointed to being here. That’s number one. Number two is the fact that we are right by the busiest airport in the country. We were able to secure some space right by the airport and that enabled us to really reduce our shipping costs. Real estate by major airports is usually very expensive, but we were fortunate to find some inexpensive space here. This was about the second half of the P&L, saving a lot of expenses.
BioMedReports: What are some of the misconceptions that people have about your company?
CEO Matthew L. Schissler: One, perhaps, is that we’re a bulletin board company, so how good can we be? I’ll argue that we are fully reporting and you can come see us any time.
The second one is our capital structure. That’s a concern to everybody. We have a large outstanding share count right now. That being said, once the debt is gone and we see the true value of the stock start to emerge, then we’ll sit down and evaluate as a board what, if anything, will we do with the capital structure.
I believe we’re pointing the company in the right direction by reducing our debt and going into our acquisition strategy.
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