Cordlife's CEO runs a tight ship

PHOTO: Cordlife's CEO runs a tight ship

THERE are no carpets lining the concrete floors of Cordlife's Yishun headquarters, and the firm's CEO, Jeremy Yee, wants you to know that. So verboten is the idea of spending perfectly good money on corporate frippery that Mr Yee has warned shareholders to look out for carpets in the hallways if the company ever gets a new CEO.

There is currently little reason for a furnishing-inspection expedition to Yishun, for Mr Yee and his pared-down approach appear to be here to stay. Cordlife stock has been a darling of the market since it went public in March last year, its share price now more-than-double its offer price.

While the firm's revenue grew 14.6 per cent to $34.7 million for its financial year ended June 30, 2013, Mr Yee's tight grip on expenditure showed, with the selling and marketing expenses growing only 12.9 per cent, or $800,000.

Profit for the year almost doubled from $6.9 million to $13.5 million, padded out with almost $4 million worth of gains from disposal and fair value gains. Excluding one-off gains, however, net profit would have increased 33.6 per cent - still growth that is not to be sneezed at.

Mr Yee's thrift extends to his attitude towards acquisitions, as well. "We should not allow ourselves to ... buy things we don't need. We should at all times try to return surplus capital to shareholders," he explains.

Even so, Mr Yee will be the first to tell you that shareholders invariably take a backseat to customers at Cordlife.

"We exist not just for shareholders but for people who will rely on the company. Forty years from now, one of our customers who stored a cord blood and specimen with Cordlife will require a transplant, and the company will exist for that particular patient at that point in time," Mr Yee tells The Business Times.

"So, building longevity and ensuring that the business remains viable and sustainable is the most important thing the company must do."

In April, Cordlife launched its mammoth 23,000 square feet cord blood storage facility in Yishun, with capacity for 650,000 cord blood units. At last count in April, 40,000 slots at the facility were already spoken for. Currently, Cordlife has an average collection of about 7,500 new clients every financial year, Mr Yee says, which works out to a historical growth rate of 10-15 per cent of new client acquisition annually.

Across the Causeway, Cordlife's ambitions are no less outsized. Its 19.9 per cent stake in StemLife Berhad, which it bought in September, is allowing it to defray costs for certain segments of its clientele.

"Out of 40,000 births a year (in Singapore), about 6,000 of them are non-Singaporeans. As a non-Singaporean, you're not able to draw down on your Child Development Account (CDA) to pay for a service like that. We don't want our margins to suffer, so we can offer to market Stemlife's services to non-Singaporeans who cannot draw on CDA to store (cord blood) across the Causeway," Mr Yee says.

At the same time, the prospects offered by the Malaysian market are enough to trigger salivation. Of the 500,000-odd babies born there every year, about 120,000 - those born in private hospitals - are considered the "addressable market" for cord blood storage services.

"The total market size (in Malaysia) is only about 10,000 a year, so there's a lot of growth potential," Mr Yee says.

Now, having cornered the cradle-to-avoiding-the-grave market, Cordlife has turned its attention to everything in between. An awful lot of time can go by between a baby's birth and his need to draw on stem cells for treatment in his advanced years, and Cordlife is determined to play a role in those intervening years.

To this end, the company has begun to establish itself in what Mr Yee calls the "mum-and-child segment". "We will be in a position to charge the customers at different points in time of," Mr Yee explains.

The first signs of this strategy are visible in one of the company's latest products - MetaScreen - which uses metabolic screening that tests for up to 110 "metabolic deficiencies". The idea, Mr Yee says, is that having screened their baby for such deficiencies, parents will be able to take corrective action such as consulting with an early childhood physician or therapist.

Right now, Cordlife is offering this service in India, but other markets beckon if the health authorities of other countries in the region greenlight the service.

If Mr Yee has his way, more services for the mum-and-child segment will soon follow MetaScreen. "We have new products that we're going to be launching across the market to fill up this gap," he says.

While a concerted effort is being made to broaden the scope of what Cordlife can do, there is even greater certainty about what the firm will not do, which is to venture too far from what it does best.

"We're a multiple product healthcare company... firmly anchored in the mother-and-child segment. I don't want to go into other segments because that is a diversification strategy. I want to fix my operating leverage firmly on one anchor, one fulcrum. And this fulcrum is the mum and the child," Mr Yee says.

Underneath that fulcrum, there will certainly be no carpeting.

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