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TECHNOLOGY: Hard Cell For JDH

 



Recent Western Cape Business News

CAN the infusion of Dutch expertise see Lazaron Biotechnologies, a subsidiary of Stellenbosch-based venture capital investor John Daniel Holdings (JDH), swing to profitability after trundling along in the red for the last five years?

Last month – to a fair bit of fanfare -Dutch technology company Cryo-Save opened a ‘state-of-the-art’ stem cell processing and storage laboratory in Cape Town in a joint venture with Lazaron.

While Lazaron can claim to be the first company to successfully store cord blood stem cells in South Africa, the company (as reported in the August edition of CBN) can’t claim to have held a viable business model.

But the new prime movers behind (which include new controlling shareholders in JDH) Lazaron apparently think things are looking up…

Cryo-Save CEO Arnoud van Tulder says: “South Africa has always been an important market for Cryo-Save and our joint venture with JDH allows both parties to leverage their core competencies providing best practice medical services with sound governance and commercial practice. In addition the new company will provide the base to penetrate the untapped sub-Saharan market.”

CBN notes the new laboratory will immediately process and store cord tissue as well as stem cells from cord blood.

That means it won’t be to long before investors can see just how the joint venture is impacting on Lazaron’s numbers.

As pointed out previously Lazaron has burnt through R7 million in seed capital and notched up losses totalling around R3.5 million since its launch around six years ago.

It’s one thing, of course, to talk about “leveraging core competencies”, but quite another to drive business levels for a highly specialised operation that does not seem to see much demand from (perhaps sceptical) South Africans.

CBN would imagine a good deal of marketing spend and good old public relations might be necessary for Lazaron’s services to be considered by a broader segment of the local (and indeed) African population.

As far as CBN can ascertain Cryo-Save – at least at this juncture – has not injected fresh capital into the joint venture. If the Lazaron joint venture is expected to wash its own face then client volumes will have to rise markedly to ensure sufficient cash flow to drive a meaningful marketing exercise. But without a meaningful marketing exercise there could be difficulty in raising business volumes.

That sounds pretty much like a Catch 22?

Perhaps it’s worth revisiting the initial ‘specs’ on Lazaron, which in 2006 pencilled in R13 million in revenue and profit of R1.3 million.

That was premised on a simple formula of collecting and storing stem cells for a one-off fee of R6 500 and storage cost of R120 a year.

But for the last three financial years Lazaron’s turnover has stalled at R2.3 million – a fair bit off what might normally be construed as critical mass.

By the end of March next year – when JDH reports its interim results to end December 2011 – we should have a fairly good idea of the potential of the Cryo-Save/Lazaron joint venture.

Perhaps early promise will see Cryo-Save upsizing its participation from joint venture to equity partner? Let’s not even contemplate another disappointing showing from this stem cell business…a


 
 
 
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