The company's vaunted CCEL II, which workers reported overflowed with liquid nitrogen in 2001, has been iced.
By KRIS HUNDLEY
Published March 2, 2004
CLEARWATER - Cryo-Cell International, which stores newborns' umbilical cord stem cells for possible future medical use, said Monday that it has stopped using the proprietary freezer once touted as giving the company a competitive edge.
In a filing with the Securities and Exchange Commission for the year ended Nov. 30, Cryo-Cell of Clearwater said that in January its board approved abandoning use of the freezer known as the CCEL II because of its belief that "the company's resources are best utilized for market development and expansion of services."
Though the company repeatedly denied any operational problems with the CCEL II, numerous employees, including two former presidents and an engineering executive, have said the machine never worked properly.
The St. Petersburg Times reported in February 2003 that workers said a CCEL II malfunction in fall 2001 resulted in liquid nitrogen overflowing from the top of the 7-foot-tall stainless steel freezer, damaging a nearby computer and cracking tiles in the lab. The overflow also dislodged vials inside the freezer. During the cleanup, the workers said, at least a couple of vials dropped to the bottom of the unit and became wedged under shelving, not to be retrieved until months later.
At the time about 1,100 customers' stem cells were stored in the CCEL II. Customers were not notified of the incident, according to Wanda Dearth, who was Cryo-Cell's president at the time.
Although Cryo-Cell said Monday it decided to discontinue use of the CCEL II voluntarily, it disclosed that a visit to its Clearwater headquarters last month by the federal Food and Drug Administration resulted in "a written list of inspectional observations."
No details were provided about the FDA's findings. Nor did the company give any details concerning corrective actions it said it undertook in response to the FDA's letter. Cryo-Cell did say, however, that it asked the FDA to cancel its "device manufacture registration and device listing" for the CCEL II.
The company said customers' specimens in Clearwater, numbering about 60,000, are now stored in commercially available cryogenic equipment, the same used by its competitors. The company did not say how or when specimens were transferred from the CCEL II. Cryo-Cell also offers customers storage of a second specimen at a lab in Sedona, Ariz., owned by a board member. About 15,000 specimens are stored there.
Cryo-Cell, which was delisted from the Nasdaq Stock Market in July, continues to struggle financially. The company reported a net loss of $7.5-million or 66 cents a share for the year ended Nov. 30 on revenues of $7.6-million. That compares to a net loss of $6-million or 53 cents a share on revenues of $6.7-million in fiscal 2002.
Revenue increases were caused primarily by two price increases last year in processing and storage fees, the company said. New specimens processed, meanwhile, dropped 18 percent in fiscal 2003 compared to the year before.
Cryo-Cell charges $595 for processing and testing, plus $90 a year for storage.
The company attributed increased expenses in part to putting $1.1-million in escrow to pay a judgment in a patent lawsuit for which post-trial motions are pending. The company also wrote off $1.3-million in a deferred consulting agreement with the company's founder and former chief executive. Cryo-Cell also took charges involving its European licensee as well as its investment in Saneron CCEL Therapeutics in Tampa.
Despite the grim financial results, Mercedes Walton, interim chief executive, said the company had made progress on resolving several legal actions and business dealings outside its main stem-cell storage business.
"Cryo-Cell currently has a strong cash position, no debt, and continues to make progress in stemming losses beyond our core business," she said. "We expect the company's financial results to reflect positive improvement in the coming periods."
