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Cryo-Cell works to calm parents as its stock falls

By KRIS HUNDLEY, Times Staff Writer
© St. Petersburg Times
published February 4, 2003

CLEARWATER -- Doug Smith and his wife decided to store their son Sean's umbilical cord stem cells with Cryo-Cell International Inc. after his birth in June just in case of emergency.

"It was a safety blanket," said Smith, referring to the Clearwater company that promises to freeze a newborn's stem cells for the unlikely event they might be needed to cure a life-threatening disease. "I remember Cryo-Cell had a very slick, impressive video. That and the fact they were local sold me."

But on Monday, Smith and many other customers said they were wondering whether their decision to rely on Cryo-Cell, the lowest-priced stem cell storage company in the business, was a good idea.

As reported in the St. Petersburg Times on Monday, current and former Cryo-Cell employees said the company's supercold storage freezer has malfunctioned repeatedly, jeopardizing the viability of the stem cells inside.

They recounted how the pumps sometimes froze, making the temperature inside the freezer rise to dangerously high levels. The cells, extracted from the blood of a newborn's umbilical cord, can't go above minus 130 degrees Celsius or they quickly deteriorate. The freezer's robotic arm dropped vials, shattering them and destroying the contents. And on at least two occasions, the liquid nitrogen in the tank overflowed, setting samples afloat.

Cryo-Cell's executives declined to be interviewed before the Monday story's publication. On Monday they denied the allegations and defended their company's technology.

"The cells, and the technologies that house them, are fully functional and monitored continually to assure appropriate temperature levels," the company said in a statement released just before the market closed.

The company said the Times article contained "multiple errors regarding stem cell storage, has caused undue concern to Cryo-Cell clients, and could erroneously jeopardize the reputation of the company."

Cryo-Cell's stock closed at a 52-week low of $1 a share, down 36 cents, or more than 26 percent. Trading was seven times normal volume.

In its statement, Cryo-Cell said that it has more than 46,000 customers and that its specimens have been used in "several successful transplants." Details of the transplants were not disclosed.

"We will be happy to assure parents that their child's specimens are safe and have been safe in the CCEL II," said Cryo-Cell's chief executive, John Hargiss, referring to the company's patented freezer. "The CCEL II has been operational since its inception."

Hargiss joined Cryo-Cell a year ago.

But Diana Leavengood, a St. Petersburg mother, said she was concerned about her child's stem cells, which are stored at Cryo-Cell, as well as those of friends whom she convinced to use the service.

"I have freezer pops that have been treated nicer," she said of Cryo-Cell's storage problems.

Bill Hardy, who was chief executive of the company from 1996 to 1997, said Monday the CCEL II never worked properly during his tenure.

"Sure it was operational," Hardy said. "You could turn it on and the red light would go on. But it was never reliable. I never allowed any specimens to be put in it because I didn't trust it."

Instead, he said, stem cells were kept in conventional laboratory freezers.

Hardy said he hired Bob Vago, a research engineer, to modify the CCEL II.

"I can't tell you the time he and I spent together trying to get the thing fixed," Hardy said of Cryo-Cell's custom-designed freezer. "Early on we came to the decision that we would have to build a new machine, but we kept running into roadblock after roadblock."

In October, the company said it had abandoned development of the improved freezer design.

Frances Verter, a NASA scientist, started a Web site in 1998 to compile information on private stem cell storage companies like Cryo-Cell. She said she has often been asked by parents how Cryo-Cell could be one of the lowest-cost providers in the business. Cryo-Cell charges $315 for processing and $90 a year for storage compared to competitors who charge up to $1,400 for processing and as much as $120 a year for storage.

"The only thing I warned parents is that if something seems too cheap to be true, it usually is," said Verter, who said her site (www.parentsguidecordblood.com) is intended to present information, not recommendations.

Verter said there is little regulation of the private stem cell storage business. The Food and Drug Administration began requiring the companies to register in January, but does not conduct regular inspections of the facilities. The American Association of Blood Banks offers voluntary certification of stem cell companies; an inspection of Cryo-Cell was reportedly in progress Monday.

While Cryo-Cell blamed criticism on "several former employees and the CEO of Cryo-Cell Europe," customers considered their options.

Doug Smith, who was an anchor at Channel 28 in Tampa before relocating to the ABC affiliate in Orlando, said he wonders whether he should keep paying Cryo-Cell's annual storage fee or retrieve his son's stem cells and store them elsewhere.

Regardless of his decision, Smith said he intends to visit Cryo-Cell and locate his child's specimen.

"I just want to stop in and see it," he said.

-Kris Hundley can be reached at hundley@sptimes.com or (727)892-2996.

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