SINGAPORE – Private cord blood bank Cordlife Group reported a 50 per cent drop in second-half profit and the departure of its chairman amid a probe into improper storage methods that had damaged the cord blood units of more than 2,000 customers.

In separate bourse filings late on Feb 29, Cordlife said Mr Joseph Wong had stepped down as chairman due to “personal family and health reasons”, with effect from Feb 28.

Dr Ho Choon Hou, the vice-chairman and non-independent and non-executive director of the company, has been appointed acting chairman with effect from Feb 29 until the appointment of a new chairman.

The changes come after Cordlife on Feb 19 named former TransGlobal executive director Ivan Yiu Pang Fai as group chief executive following the resignation of Ms Tan Poh Lan in October 2023.

Cordlife also reported that its net profit for the six months to Dec 31 fell 50.3 per cent year on year to $1.5 million as revenue declined 4.5 per cent to $27.6 million. It blamed the drop in revenue on a decrease in new samples processed and stored in Singapore, India and Indonesia.

Processes at the cord blood banking firm hit the headlines after the health authorities revealed on Nov 30, 2023, that cryopreserved cord blood units in seven of its 22 storage tanks were exposed to suboptimal storage temperatures.

The company was given a six-month suspension by the Ministry of Health that began on Dec 15, 2023. Under the suspension, the company may not collect, test, process or store any new cord blood and human tissues, or provide new types of tests for clients in Singapore.

As fewer new samples were processed and stored, Cordlife’s second-half gross profit in 2023 decreased 6.5 per cent to $18.3 million, with the gross profit margin dropping 1.4 percentage points to 66.4 per cent.

In addition, its Singapore business continued to incur fixed running costs despite the suspension, which further eroded the gross profit and gross profit margin.

For the full year, net profit declined 24 per cent to $3.7 million from $4.9 million a year earlier.

Since end-December 2023, the company had been sending donated cord blood samples from tanks under investigation to a third-party laboratory for testing in batches. The results are estimated to be ready in end-March 2024.

“There is no certainty on the outcome of the ongoing investigations. This, along with the fixed costs being incurred during the suspension, is expected to continue to have a negative financial impact in Singapore, which had in past years been the largest contributor to the revenue of the group,” said the company.

Cordlife said it is currently unable to assess the exact financial impact of the temperature lapses and the investigations on its 2024 financial year. But if the results confirm that the affected tanks are adversely affected by temperature lapses, this may have a further adverse impact on financial year 2024, the company said.

“The group would like to emphasise that the suspension and ongoing investigations are isolated to the group’s operations in Singapore and do not impact the operations of the subsidiaries located outside Singapore,” said the company.

Its new CEO, Mr Yiu, said that he wants to convey his sincere apologies to Cordlife’s clients for the distress the incident has caused.

Cordlife was on a post-pandemic recovery path when major lapses in its operations were identified and ever since, the entire team has been working tirelessly to address and rectify the issues at hand, he said.

“We strongly believe that we owe this to the families that placed their trust in us and will continue to do our utmost to make it right. With Singapore being one of our largest revenue contributors, we expect a challenging year ahead as there continues to be uncertainty in terms of the outcome of the investigations and the lifting of the suspension,” Mr Yiu said.

On the same day of its results announcement, Cordlife revealed that it has set up a subsidiary in Vietnam through its wholly owned subsidiary, CS Cell Technologies.

Called CL Biotech, the new unit will provide management consulting services, as well as medical and pharmaceutical research and development services.

Cordlife also responded separately to an opinion piece published by The Business Times on Feb 27 that raised issues on the appointment of 34-year-old Mr Yiu as group CEO, citing familial connections and lack of healthcare experience.

The company said its nominating committee had found that Mr Yiu had taken the initiative to understand the issues facing Cordlife and was prepared to join the company on short notice.

“Given the ongoing negative publicity on the company, the nominating committee had assessed that it may be difficult to find a more experienced candidate to assume the role of group CEO,” it added.

The company said that Mr Yiu’s brother, Mr Yiu Ming Yiu, who has been a non-independent and non-executive director of Cordlife since December 2021, had abstained from the board’s decision on the CEO appointment.

Two other non-independent and non-executive directors, Ms Chen Xiaoling and Mr Zhai Lingyun, who had raised reservations over Mr Yiu’s appointment, had also abstained.

Shares of Cordlife closed at 26.5 cents on March 1, down 2.5 cents or 8.6 per cent.