StemCell United delivers on first stage of long-term resina supply contract

StemCell United ASX SCU Daemonorops Draco Blume resina Indonesia Zhejiang Forest Rainbow Medical Co
StemCell United has secured contract to supply 50 tonnes of Daemonorops Draco Blume extract (resina) to a Chinese customer over a five years period.

Biotechnology company StemCell United (ASX: SCU) has made its first resina delivery as part of a contract to supply 50 tonnes of resina to Zhejiang Forest Rainbow Medical Co over the next five years, in a deal expected to generate US$10 million in revenues.

StemCell extracts its resina from Daemonorops Draco Blume, a plant that grows in the tropical rainforests of Indonesia.

Traditionally, resina is used to assist blood circulation, stop bleeding, alleviate pain caused by external injuries and to promote tissue regeneration.

The two companies have agreed to a unit price of resina at US$200 per kilogram (or US$200,000 per tonne) but this remains subject to change according to market prices. According to StemCell, it expects to generate a profit of about US$40,000 per tonne.

StemCell delivered an initial 1 tonne of Daemonorops Draco Blume extract as part of a longer-term contract signed in June 2018 with Zhejiang Forest Rainbow, a major importer and distributor of medical equipment and TCM products in China.

StemCell’s role is to supply chain management and quality check its products before delivery after procuring its resina powder from its Indonesian agents.

The company then ships resina powder to subcontractors for extraction of the active ingredient (dracohodin) before it is processed into cakes. The completed products are to be shipped to Singapore for final quality check before shipping to China.

Quality matters

The quality of the resina needs to comply with China’s import regulations and safety standards in order for each sale contract to be completed.

The stipulation means product shipments must consistently meet strict import criteria to be commercially viable.

The product shipments are expected to be held by Chinese customs officials for about three weeks in order for safety standard checking to be completed, before being released to the customer.

The first shipment has complied with the Chinese safety standards and been released to Zhejiang Forest Rainbow on 9 July 2018, thereby validating the broader 50-tonne contract with the Chinese company.

According to the terms of the deal, StemCell will provide instructions on the extraction techniques to its subcontractor and monitor the quality control during the whole process.

“StemCell has a proven track record in producing and marketing high-quality Daemonorops Draco Blume extract and securing this contract is further validation of opportunities in the multi-billion dollar global health market to commercialise our proprietary stem cell technology and generate substantial revenue from traditional Chinese medicine products,” said Philip Gu, CEO of StemCell.

In parallel to today’s first shipment of resina, StemCell also says it is uniquely positioned to commercialise the use of its proprietary technology for cannabis stem cell extraction in cooperation with Yunnan Hua Fang Industrial Hemp (HFIH).

The company is StemCell’s close working partner and obtained its inaugural industrial hemp licence in China in June this year.

StemCell signed a co-operation agreement with HFIH in April this year which included a payment of A$400,000 and several exclusive rights options.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.