China Cord Blood Corporation (NYSE : CO) Corporate Presentation - December 2014

Transcription

1 China Cord Blood Corporation (NYSE : CO) Corporate Presentation - December

2 Disclaimers This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of These statements relate to future events or the Company s future financial performance. The Company has attempted to identify forward-looking statements by terminology including anticipates, believes, expects, can, continue, could, estimates, intends, may, plans, potential, predict, should or will or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause the Company s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. The information in this presentation is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company expectations are as of the date of this presentation, and the Company does not intend to update any of the forward-looking statements after the date of this presentation to conform these statements to actual results, unless required by law. The forward-looking statements included in this presentation are subject to risks, uncertainties and assumptions about the Company s businesses and business environments. These statements reflect the Company s current views with respect to future events and are not a guarantee of future performance. Actual results of the Company s operations may differ materially from information contained in the forward-looking statements as a result of risk factors some of which include, among other things: continued compliance with government regulations regarding cord blood banking in the People s Republic of China, or PRC and any other jurisdiction in which the Company conducts its operations; changing legislation or regulatory environments (including revisions to China s One Child Policy) in the PRC and any other jurisdiction in which the Company conducts its operations; the acceptance by subscribers of the Company s different pricing and payment options and reaction to the introduction of the Company s premiumquality pricing strategy; demographic trends in the regions of the PRC in which the Company is the exclusive licensed cord blood banking operator; labor and personnel relations; the existence of a significant shareholder able to influence and direct the corporate policies of the Company; credit risks affecting the Company's revenue and profitability; changes in the healthcare industry, including those which may result in the use of stem cell therapies becoming redundant or obsolete; the Company s ability to effectively manage its growth, including implementing effective controls and procedures and attracting and retaining key management and personnel; changing interpretations of generally accepted accounting principles; the availability of capital resources, including in the form of capital markets financing opportunities, in light of industry developments affecting issuers that have pursued a reverse merger with an operating company based in China, as well as general economic conditions; compliance with restrictive debt covenants under our senior convertible notes; and other relevant risks detailed in the Company s filings with the Securities and Exchange Commission in the United States. Regulation G Compliance You are also reminded that during this presentation, certain non-gaap financial measures, such as EBITDA, EBITDA Margin, Net Income ex. CB Interests, Total Debt ex. CBs and Net Cash ex. CBs, may be discussed. These measures should not be considered an alternative to net income, or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles (GAAP). These measures are not necessarily comparable to a similarly titled measure of another company. Please refer to the Appendix for information that reconciles these discussed figures with the most comparable U.S. GAAP measures. 2

3 Table of Contents 1 Executive Summary 2 Company Overview 3 Industry Overview 4 Financial Highlights 3

4 1 Executive Summary 4

5 Executive Summary Largest Presence & Coverage in China First and largest cord blood banking operator in China o Company stores cord blood for clients for potential clinical use o Started commercialization in Beijing in 2003, listed on NYSE in 2009 Sole operator in Beijing, Guangdong and Zhejiang, 3 of 7 total licensed regions, covering ~2 mil newborns per year 24% minority stake in Shandong Cord Blood Bank; ~10% equity interest in Cordlife Group Limited (CGCL.SP) Global Leader in Size with Significant Upside ~376,623 subscribers as of the end of March 2014, largest outside of the U.S. (407,755 subscribers as of Sep 2014) Low penetration rate (estimated at only ~1% in China) points to future growth potential o Some Asian markets like Singapore and South Korea have much higher penetration rate o Rising disposable income, systematic marketing approach, continuous urbanization and R&D breakthrough in clinical use can drive up penetration Sufficient capacity to satisfy existing and emerging demand Strong Financials and Cash-flow Generation Strong cash flow: Operating cash flow of US$86.2 mil in FY14, which equals ~94% of revenue Stable profit margins: Gross margin at ~80%; EBITDA margin at ~47% Solid balance sheet: US$168 mil net cash as of the end of March 2014 (US$212 mil net cash as of Sep. 2014) 5

6 Key Financial Highlights In RMB 000, FY ended March FY2010 FY2011 FY2012 FY FY2014 Revenues 261, , , , ,857 Revenue Growth % 34.4% 29.8% 12.1% 38.3% 8.9% Gross Profit 195, , , , ,632 Gross Margin % 74.9% 77.2% 77.2% 79.7% 81.5% Operating Income 97, , , , ,926 EBITDA 1 117, , , , ,991 EBITDA 1 Margin % 45.0% 43.4% 43.2% 46.6% 47.0% Depreciation & Amortization 20,431 23,475 29,357 35,874 37,065 Net Income 54,893 98, , , ,526 Interest expense 2,431 2,606 3,287 70, ,075 5 Net Income ex. CB Interests 54,893 98, , , ,783 Net Income ex. CB Interests Margin % 21.0% 28.9% 37.3% 35.4% 34.9% Cash & Cash Equivalents 280, , ,311 1,494,099 1,882,901 Total Debt ex. CBs 2 45,000 45,000 45,000 50,000 60,000 Net Cash ex. CBs 2 235, , ,311 1,444,099 1,822,901 Net Assets 819,608 1,093,392 1,235,627 1,241,463 1,439,996 Operating Cash Flow ( OCF ) 36, , , , ,015 OCF as % of Revenue 13.9% 52.0% 93.0% 110.0% 93.6% Free Cash Flow ( OCF Capex) ( FCF ) 19, , , , ,922 FCF as % of Revenue 7.5% 46.0% 81.7% 67.0% 67.4% Market Cap 3 (Oct 10, 2014) ~US$ 564 mil ~RMB 3.5 bil Enterprise Value (Mkt Cap Net Cash 2 ) ~US$ 253 mil ~RMB 1.6bil Notes: 1. Operating income before depreciation and amortization expenses 2. Excluding convertible notes, which are currently in the money (assuming CB conversion) 3. Based on fully diluted shares outstanding: mil shares (assuming CB conversion) 4. Year of the Dragon 5. Including CB interests of RMB66.58 mil and RMB67.26 mil in the fiscal year ended March 31, 2013 and 2014 respectively 6

7 Strong Operating & Financial Growth Accumulated Subscriber Base 376,623 Units 311, , , ,312 10,975 23,322 49,382 84,060 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 RMB million Revenue RMB million EBITDA FY2009 FY2010 FY2011 FY2012 FY2013 FY FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Notes: Fiscal year ended March 31 (1) Operating income before depreciation and amortization expenses. See appendix for a reconciliation to U.S. GAAP amounts. 7

8 Timeline & Milestones CCBC s Beijing cord blood bank begins commercialization Beijing cord blood bank becomes the 1 st cord blood bank in China to receive ISO9001 CCBC acquires Guangdong cord blood bank Invests in Cordlife 1, largest cord blood bank in South East Asia Capacity expansion in Beijing completed CCBC listed on the NYSE CCBC acquires 19.9% stake in the Shandong cord blood bank 2010 CCBC s Zhejiang cord blood bank begins operations 2011 KKR invests US$65 mil in CCBC GM invests in CCBC through US$50 mil CB Beijing cord blood bank receives the AABB accreditation CCBC increases stake in Shandong cord blood bank to 24% 2013 Guangdong capacity expansion and Zhejiang new facility completed Largest cord blood banking service provider in China 2014 onwards Cordlife Group Limited ( Cordlife ) is a Singapore listed multi-product healthcare company catering to the mother and child segment and a leading cord blood and umbilical cord lining banking services provider. Today, Cordlife operates the largest private cord blood banks in each of Singapore, the Philippines and Indonesia; and is amongst the top three market leaders in Hong Kong and India, according to Deloitte & Touche Financial Advisory Services Limited report, 10 April Convertible notes of US$ 50 mil was subsequently transferred from GM to Magnum and Cordlife in Nov

9 2 Company Overview 9

10 Company Overview China Cord Blood Corporation (NYSE: CO) is the first and largest cord blood banking operator in China, providing cord blood stem cell processing and storage services for subscribers exclusively in the Beijing municipality, Guangdong province, and Zhejiang province Total Newborns in China 16,384,000 1 Regulatory entry barrier Licensed regions cover 26% of newborns Total Newborns in Licensed Provinces 4,274,000 1 Total Newborns Covered by CCBC 3 CCBC FY14 New Subscribers 1,970, ,641 2 CCBC s strong market coverage CCBC market share: 46% Strong & growing penetration rate CCBC penetration: 3.3% Sources: (1) National Bureau of Statistics of China (China Statistical Yearbook 2013) (2) Fiscal year ended March 31, 2014 (3) Covers Beijing, Guangdong, and Zhejiang 10

11 Strong Market Coverage Cord Blood Banking Licenses in China Largest Newborn Coverage Among Authorized Regions Province / Municipality 1 Newborn Population Percentage of Total (%) Beijing 2 187,000 4% Sichuan Beijing Tianjin Shandong Shanghai Zhejiang Guangdong 1,229,000 29% Zhejiang 554,000 13% Shandong 3 1,153,000 27% Tianjin 2 124,000 3% Shanghai 2 228,000 5% Sichuan 799,000 19% 46% 73% Total 4,274, % Guangdong CCBC s operating regions CCBC s minority investment CCBC is the only operator with multiple licenses Beijing, Guangdong, Zhejiang are among the wealthiest regions in China. Zhejiang is a nascent market 7 licensed regions only account for approximately 26% of newborn population in China Newborns Cord Blood Storage Coverage Represents A Fraction of China s Total 74% 26% 7 licensed regions 24 unlicensed regions Source: - National Bureau of Statistics of China (China Statistical Yearbook 2013) Notes: 1. 3 additional licenses can be issued in other regions 2. Represents direct-controlled municipalities, which are cities 3. 24% equity investment 11

12 Growing Penetration Rates CCBC has proven track record in entering and deepening penetrations in new markets o Beijing (entered 2003): longest operating history, gradually reaching higher penetration as a result of Company s systematic sales and marketing strategy o Guangdong (entered 2007): a fast developing and massive market o Zhejiang (entered 2011): a relatively nascent market with huge potential and swift ramp-up trajectory Beijing 14.0% 12.5% 12.0% 10.0% Beijing + Guangdong Beijing + Guangdong + Zhejiang 8.0% 6.8% 6.0% 4.0% 2.0% 2.1% 2.7% 3.5% 4.3% 3.0% 3.7% 0.0% Total Number of Newborns Under Coverage FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 97k 99k 1,266k 1,265k 1,277k 1,314k 1,782k 1,970k Sources: - China Statistical Yearbook CCBC s annual reports 12

13 Business Overview Cord Blood Collection Separation & Extraction Lab Testing & Validation Storage Cord blood is collected by qualified physician in hospitals immediately after the baby is born Deliver to laboratories within 24 hours Remove red blood cells, platelets, and other components Determine cell recovery rate and amount of total nucleated cells Test for bacteria and viruses Extraction of other relevant information for client record Pre-storage programmed freezing to minus 90 degrees celsius Store the samples in tanks with liquefied nitrogen (minus196 degrees celsius) Security system monitoring and tracking on a real time basis 13

14 Our Revenue Model Subscription & Revenue Model Revenue from subscription fees consist of two components: o Processing fee (RMB6,800) o Annual storage fee (RMB860 / year for 18 years) Revenue recognition is based on service delivery (graphed below) over the 18 years, though cash flow profile could vary according to different payment plans o Cash received after service delivery Accounts receivable o Cash received before service delivery Deferred revenue Aggregated revenue per subscriber is ~RMB22,280 (RMB6,800 + RMB860 x 18) Processing Fee 6,800 Storage Fee Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 18 Notes: (1) Customers have the right to terminate their subscription agreements with us prior to the end of the 18-year term, and the children have the option of continuing them beyond 18 years (2) All figures in RMB 14

15 Single Customer Cash Flow Stream Normal Payment Plan Processing Fee 7,660 6,800 Cash flow most closely matches revenue recognition (for all payment methods) under US GAAP, which is based on service delivery Steady & recurring 18 years cash flow on a growing cumulative subscriber base Storage Fee Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 18 Upfront Payment Plan 17,640 Processing Fee 6,800 Storage Fee 10,840 Majority of payment mix currently Cash collected upfront Total package price at a discount to entice customers selection Creates significant deferred revenue in Year 1 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 18 Installment Payment Plan (BJ) Creates accounts receivable in Year 1-2, and deferred revenue in Year 3-6 3,400 3,400 3,380 3,380 3,380 3,380 Processing Fee Storage Fee Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 18 Notes: All figures in RMB 15

16 Public Bank & Social Commitment CCBC operates multiple public cord blood banks in China, and applies the highest operation standards to meet the embedded social responsibilities CCBC has established collaboration with Cordlife to share its donated samples database, and locate suitable samples to increase matching probability for those seeking stem cell therapy o A milestone collaboration to assist families across PRC and other parts of Asia Units Accumulated Donated Units 40,000 30,000 20,000 10,000 10,228 13,618 16,619 21,125 26,525 33,225 - FY09 FY10 FY11 FY12 FY13 FY14 Units Donated Units Used in Medical Treatments FY09 FY10 FY11 FY12 FY13 FY14 16

17 3 Industry Overview 17

18 Large Potentially Addressable Market Total Newborns: Approx. 16,000,000 The number of newborns in China rank 2nd in the world o 16 mil+ newborns per annum o Substantial market depth with high entry barrier Income Threshold Marketing Capabilities Hospital / New Birth Coverage Potential Cord Blood User Pool Collection Only 7 out of 31 administrative regions in China have been authorized to provide cord blood banking services 52,661 o More untapped demand to emerge with market education o Amended single-child policy Newborns Per Annum by Country and Region 1 ( 000) 37,084 27,098 Technological Capabilities 16,364 4,322 1, Storage Source: Data from Wind, UN, EU and HK Gov (year 2012) 18

19 Nascent Market with Huge Penetration Upside Overall penetration rate est. at approx. 1% in the PRC o Very low compared to other regions in Asia such as HK, Singapore, and South Korea o The adoption of the cord blood banking service will continue to rise, with growing disposable income, continuous market education, continuous urbanization and on-going R&D on clinical applications Regulation Comparison with More Mature Asia Market Highlights Significant China Upside China Restricted number of banks - one license per province/municipality Stringent approval process Unrestricted pricing South Korea Highly unregulated up to 2005, when MoH introduced guidelines to help cord blood banks win public trust 25% Cord Blood Penetration Rate by Country 1 Public Awareness Significant public awareness momentum in some of the regions with licenses Lack of awareness outside those regions Concept of cord blood banking introduced since late 1990s and industry has grown quickly 16% 15% 14% Market Growth Potential Est. 1% penetration 16.4m newborns per year Huge upside from large newborn population, expanding income and potential for more licenses Approx. 15% penetration 0.5m newborns per year Market already highly penetrated, though could see growth after additional clinical applications 5% 4% 3% 1% 1% 0% Religion & Ethnics No religious and ethnical issue against stem cells Cultural norms favor idea of biological insurance No religion and ethnical issue against stem cells Cultural norms favor idea of biological insurance Source: 2010/2011 Data from research from Deloitte, Citi, First Berlin Research, Rodman & Renshaw, etc. 19

20 Proven Cord Blood Stem Cell Therapies Hematopoietic stem cell is proven to treat diseases, such as leukemia, aplastic anemia, and potentially more therapeutic benefit emerging from ongoing R&D and clinical studies every year o o o o The application of cord blood stem cells has been proven since 1988, and is now increasingly used given its less stringent matching requirements, low risk of GVHD (Graft-versus-host disease) compared to adult bone marrow stem cells Stem cells have been used for over 30 years to patients with various conditions related to blood cancer Cord blood stem cells can now treat over 85 types of diseases Cord blood stem cells collection poses no discomfort or harm to the mother and child Successful Cord Blood Stem Cells Transplantations 1 Units 1,200 1,153 1,056 1, Key Advantages of Storing Cord Blood Stem Cells Easy & fast collection without medical risk Readily available supply when in need Higher successful rate due to lower risk of GVHD On-going R&D with increasing potential usage of cord blood stem cells in the future Source: 1. U.S. National Marrow Donor Program 20

21 Regulations and Industry Dynamics High Entry Barriers Under the One License per Region policy, only one cord blood banking license is issued in any single province / municipality, precluding more than one cord blood licensee from operation in the same jurisdiction Only 7 licenses have been issued in China as of today The NHFPC may issue up to 10 licenses in 10 different provinces or municipalities before 2015 It typically takes several years to complete the application process with stringent requirements Significant upfront financial commitment and highly uncertain duration for the application process Favorable Macro Factors Lengthy & Stringent Application Process Application to the National Health and Family Planning Commission (NHFPC) Facilities that meet various national standards Collection of donated samples Fulfilling transplant requirements Relaxation of single-child policy Urbanization, rising disposable income, more expenditure on healthcare for better services Final review and approval Rising public awareness of cord blood stem cells clinical usage 21

22 4 Financial Highlights 22

23 Consistent Subscriber Growth Units Annual New Subscriber Sign-ups Dragon Year Impact FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Dragon year (FY13) baby boom resulted in a YoY drop in new subscribers in FY14. New subscriber is returning to a steady growth in FY14-15 Further penetration rate and hospital coverage upside in Guangdong and Zhejiang to fuel long-term growth Quarterly New Subscriber Sign-ups Units 000 Accumulated Subscriber Base Units 311, , , ,312 84,060 49,382 10,975 23, , FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Note: Fiscal year ended March Full effect Partial effect 23

24 Substantial Profitability & Cash flow RMB million Revenue RMB million EBITDA FY2009 FY2010 FY2011 FY2012 FY2013 FY FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 RMB million Net Income ex. CB Interests RMB million Operating Cash Flow FY2009 FY2010 FY2011 FY2012 FY2013 FY FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Notes: 1. Fiscal year ended March Operating income before depreciation and amortization expenses. See Appendix for a reconciliation to U.S. GAAP amounts. 24

25 Robust & Recurring Revenue The recurring revenue model builds a solid payment structure for a steady stream of long-term revenue inflow Processing Fee Generation of substantial upfront cash flow Growth driven by increase in new subscriber numbers Storage Fee Annuity-like recurring storage fees Increasing storage fee revenue as subscriber base continues to grow Economy of scales, small incremental cost to store one additional sample Revenue Breakdown (RMB mil) Storage Fee Revenue CAGR: 43% Processing Fee Revenue CAGR: 19% FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Note: Fiscal year ended March 31 25

26 Appendix 26

27 Experienced & Dedicated Management Team Extensive healthcare experiences & abilities to commercialize and expand our services Mr. Yuen Kam Chairman Ms. Ting Zheng Chief Executive Officer and Director Oversees the strategic direction of CCBC 20+ years of experience in China s healthcare industry Actively involved in establishment of cord blood banking operations since years of experience in the field of corporate strategy in China s healthcare industry Seasoned Management Team with Extensive Experience Mr. Albert Chen Chief Financial Officer and Director Ms. Yue Deng Chief Executive Officer Beijing Division Ms. Rui Arashiyama Chief Executive Officer Guangdong and Zhejiang Divisions Ms. Xin Xu Chief Technology Officer 10+ years of experience in the pharmaceutical and healthcare industries CFA charter holder 10+ years of managerial, sales and marketing experiences Worked in Guidant s Beijing representative office from 1995 to 2004 Worked at NOX international from 1993 to years of sales and marketing experiences in China Worked at Nissan from 1989 to 1999, responsible for overseas market development including China, Hong Kong and Singapore 20+ years of solid experience in Cryobiology research Lectured Cryobiology at Beijing Medical University In-depth Knowledge of the China Healthcare Services Sector Successful Track Record on Acquisition and Commercialization 27

28 Historical Payment Plan Before Pricing Adjustment Normal Payment Plan (BJ & GD) 6,300 Processing Fee 5,800 Storage Fee Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 18 Upfront Payment Plan (BJ) 14,800 Upfront Payment plan (GD) 13,640 Processing Fee 5,800 Processing Fee 4,640 Storage Fee 9,000 Storage Fee 9,000 Year 1 Year 2 Year 3 Year 18 Year 1 Year 2 Year 3 Year 18 Installment Payment Plan (BJ) Installment Payment plan (GD) 1,750 1,960 1,710 1,710 1,710 1,710 Processing Fee Storage Fee 1, Processing Fee Storage Fee 1,460 1,210 1,210 1,210 1, Year 1 Year 2 Year 3 Year 4 Year 5 Year 18 Year 1 Year 2 Year 3 Year 4 Year 5 Year 18 Notes: Fiscal year end March 31; all figures in RMB 28

29 Income Statement (U.S. GAAP) Summary of Income Statement Three months ended Sep 30, Six Months ended Sep 30, (In thousands) RMB RMB US$ RMB RMB US$ Revenues 141, ,122 24, , ,453 49,764 Gross profit 114, ,774 19, , ,329 39,969 Research and development (2,310) (2,330) (380) (4,833) (4,829) (787) Sales and marketing (27,633) (30,953) (5,043) (56,057) (62,696) (10,214) General and administrative (28,042) (31,028) (5,055) (55,444) (60,174) (9,804) Operating income 56,290 57,463 9, , ,630 19,164 Interest expense (16,461) (25,209) (4,107) (31,219) (50,104) (8,163) Total other expense, net (11,566) (20,007) (3,260) (13,014) (38,643) (6,296) Income tax expense (19,706) (10,214) (1,664) (31,079) (22,151) (3,609) Net income ex. CB interests 41,016 51,485 8,388 88, ,875 17,086 Net income attributable to 24,904 27,249 4,439 57,810 56,985 9,283 the Company s shareholders Depreciation and amortization 8,715 13,301 2,167 17,308 24,708 4,025 Notes: 1. Only key line items are shown 2. Financials of Shandong cord blood bank and Cordlife Group Limited are not consolidated 29

30 Balance Sheet (U.S. GAAP) Selected Balance Sheet Items March 31, 2014 September 30, 2014 (In thousands) RMB RMB US$ Cash and cash equivalents 1,882,901 2,156, ,340 Total current assets 2,058,047 2,321, ,209 Property, plant and equipment, net 626, , ,446 Total assets 3,631,022 3,867, ,166 Bank loan 60,000 60,000 9,775 Deferred revenue 196, ,151 33,912 Total current liabilities 397, ,347 64,735 Convertible notes 777, , ,884 Non-current deferred revenue 823, , ,822 Total liabilities 2,191,026 2,374, ,772 Total shareholders equity 1,435,042 1,489, ,611 Working capital 1 1,660,710 1,924, ,474 Notes: 1. Current assets less current liabilities 2. Only key line items are shown 3. Fiscal year ended March 31 30

31 Latest Quarterly Financials Q3 Q4 Q1 Q2 FY FY (In thousands) RMB RMB RMB RMB RMB RMB Revenues 150, , , , , ,857 Gross Profit 123, , , , , ,632 Gross Margin % 82.0% 82.0% 80.6% 80.1% 79.7% 81.5% Operating Income 65,743 64,013 60,167 57, , ,926 Operating Margin % 43.7% 42.1% 39.2% 37.8% 39.8% 40.5% Depreciation & Amortization 9,949 9,808 11,407 13,301 35,874 37,065 Cash & Cash Equivalents 1,754,558 1,882,901 1,989,506 2,156,527 1,494,099 1,882,901 Total Debt 821, , , , , ,753 Net Cash 932,742 1,045,148 1,141,518 1,299, ,318 1,045,148 Net Assets 1,410,326 1,439,996 1,474,625 1,493,962 1,241,463 1,439,996 Operating Cash Flow 168, , , , , ,015 Notes: Fiscal year ended March 31 31

32 Economics of CCBC s Licensed Regions CCBC operates in Beijing, Guangdong, and Zhejiang, and has exposure to Shandong province through a minority investment These are some of the wealthiest regions in China with high population density and abundant hospital resources, with significant market potential for cord blood banking 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - CCBC s operating regions CCBC s minority investment GDP by Region (RMB billion) 1 120, ,000 80,000 60,000 40,000 20,000 - GDP per Capita (RMB) 2 1,400,000 1,200,000 1,000, , , , ,000 - Births in China by Region 3 Sources: National Bureau of Statistics of China (1) & (2) 2013 data (3) 2012 data 32

33 Diseases Treatable with Cord Blood Stem Cells Cancers Acute lymphoblastic leukemia (ALL) Acute myeloid leukemia (AML) Burkitt's lymphoma Chronic myeloid leukemia (CML) Juvenile myelomonocytic leukemia (JMML) Non-Hodgkin's lymphoma Hodgkin's lymphoma Lymphomatoid granulomatosis Myelodysplastic syndrome (MDS) Chronic myelomonocytic leukemia (CMML) Bone Marrow Failure Syndrome Amegakaryocytic thrombocytopenia Autoimmune neutropenia (severe) Congenital dyserythropoietic anemia Cyclic neutropenia Diamond-Blackfan anemia Evan's syndrome Fanconi anemia Glanzmann's disease Juvenile dermatomyositis Kostmann's syndrome Red cell aplasia Shwachman syndrome Severe aplastic anemia Congenital sideroblastic anemia Thrombocytopenia with absent radius (TAR) Dyskeratosis congenita Blood Disorders Sickle-cell anemia (hemoglobin SS) HbSC disease Sickle βo Thalassemia α-thalassemia major (hydrops fetalis) β-thalassemia major (Cooley's anemia) β-thalassemia intermedia E-βo thalassemia E-β+ thalassemia Metabolic Disorders Adrenoleukodystrophy Gaucher's disease (infantile) Metachromatic leukodystrophy Krabbe disease (globoid cell leukodystrophy) Gunther disease Hermansky-Pudlak syndrome Hurler syndrome Hurler-Scheie syndrome Hunter syndrome Sanfilippo syndrome Maroteaux-Lamy syndrome Mucolipidosis Type II, III Alpha mannosidosis Niemann Pick Syndrome, type A and B Sandhoff Syndrome Tay-Sachs Disease Lesch-Nyhan disease In Clinical Trial Autism Cerebral palsy Pediatric stroke Traumatic brain injury Spinal cord injury Immuno-deficiencies Ataxia telangiectasia Chronic granulomatous disease DiGeorge syndrome IKK gamma deficiency Immune dysregulation polyendocrineopathy X-linked Mucolipidosis, Type II Myelokathexis X-linked immunodeficiency Severe combined immunodeficiency Adenosine deaminase deficiency Wiskott-Aldrich syndrome X-linked agammaglobulinemia X-linked lymphoproliferative disease Omenn's syndrome Reticular dysplasia Thymic dysplasia Leukocyte adhesion deficiency Other Osteopetrosis Langerhans cell histiocytosis Hemophagocytic lymphohistiocytosis Lung injury Stroke Parkinson s Alzheimer s Liver disease Heart repair Bone repair Wound healing Rheumatoid arthritis Source: Parent s Guide to Cord Blood Foundation 33

34 Regulation G Compliance About Non-GAAP Financial Measures The Company makes reference to non-gaap financial measures, as supplemental measures to review and assess our operating performance: EBITDA, EBITDA Margin, Net Income ex. CB Interests, Total Debt ex. CBs and Net Cash ex. CBs. The presentation of these non-gaap financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. We define (1) EBITDA as Operating Income plus Depreciation and Amortization Expenses, (2) EBITDA Margin as EBITDA divided by Revenues, (3) Net Income ex. CB Interests as Net Income plus CB Interests, (4) Total Debt ex. CBs as Bank Loan and assuming CB conversion, and (5) Net Cash ex. CBs as Cash and Cash Equivalents minus Total Debt ex. CBs and assuming CB conversion. We use EBITDA, EBITDA Margin, Net Income ex. CB Interests, Total Debt ex. CBs and Net Cash ex. CBs as measures of operating performance to assist in comparing performance from period to period on a consistent basis, as measured for planning and forecasting overall expectations and for evaluating actual results against such expectations and as performance evaluation metrics, including as part of assessing and administering our executive and employee incentive compensation programs. We believe that the use of these non-gaap measures facilitates investors assessment of our operating performance from period to period and from company to company by backing out potential differences caused by variations in items such as capital structures (affecting relative finance or interest expenses), the book value of intangibles (affecting relative amortization expenses), the age and book value of property and equipment (affecting relative depreciation expenses) and other non-cash expenses (affecting one-time transition charges). We also present these non-gaap measures because we believe these non-gaap measures are frequently used by securities analysts, investors and other interested parties as measures of the financial performance of companies in our industry. These non-gaap financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. These non-gaap financial measures have limitations as analytical tools, and when assessing our operating performance, investors should not consider them in isolation, or as a substitute for profit (loss) or other consolidated statements of operation data prepared in accordance with U.S. GAAP. Some of these limitations include, but not limited to: they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; they do not reflect changes in, or cash requirements for, our working capital needs; they do not reflect the finance or interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt; they do not reflect income taxes or the cash requirements for any tax payments; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and adjusted net profit, EBITDA and EBITDA Margin do not reflect any cash requirements for such replacements; and other companies may calculate EBITDA, EBITDA Margin, Net Income ex. CB Interests, Total Debt ex. CBs and Net Cash ex. CBs differently than we do, limiting the usefulness of these non-gaap measures as comparative measures. We compensate for these limitations by relying primarily on our U.S. GAAP results and using EBITDA, EBITDA Margin, Net Income ex. CB Interests, Total Debt ex. CBs and Net Cash ex. CBs only as supplemental measures. 34

35 Regulation G Compliance (Continued) These non-gaap measures are calculated as follows for the periods presented: In RMB'000 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Revenue 194, , , , , ,857 Opearting Income 85,197 97, , , , ,926 Depreciation & Amortization 8,546 20,431 23,475 29,357 35,874 37,065 EBITDA 1 93, , , , , ,991 EBITDA Margin % 45.0% 43.4% 43.2% 46.6% 47.0% Net Income 24,445 54,893 98, , , ,526 CB Interests ,575 67,257 Net Income ex. CB Interests 3 24,445 54,893 98, , , ,783 Cash and Cash Equivalents 161, , , ,311 1,494,099 1,882,901 Total Debt ex. CBs 4-45,000 45,000 45,000 50,000 60,000 Net Cash ex. CBs 5 161, , , ,311 1,444,099 1,822,901 Notes: 1. EBITDA = Operating Income plus Depreciation & Amortization 2. EBITDA Margin = EBITDA divided by Revenues 3. Net Income ex. CB Interests = Net Income plus CB Interests 4. Total Debt ex. CBs = Bank Loan and excluding convertible notes, which are currently in the money (assuming CBs conversion) 5. Net Cash ex. CBs = Cash and Cash Equivalents minus Total Debt ex. CBs (assuming CB conversion) 6. Sources of the figures in the table: CCBC s annual reports 7. Fiscal year ended March 31 35

36 Summary and Q&A 36