INVESTORS in cord-blood bank service provider Cordlife Group : P8A +3.33% may be feeling hard done by &ndash and rightfully so.

 

After lapses found in Cordlife&rsquo s storage of cord-blood units recently came to light, the group sent several letters to customers, some of whom had spent near five-digit figures to store their children&rsquo s cord blood.

 

These customers have every reason to be aggrieved, but so, too, do Cordlife&rsquo s shareholders.

 

The Ministry of Health (MOH) on Nov 30 said it found that seven of Cordlife&rsquo s 22 cord-blood storage tanks had been exposed to temperatures above the acceptable limits of minus 150 deg C, and that these &ldquo temperature excursions&rdquo had happened at different times, some going back to November 2020.

 

In particular, one tank containing 2,200 cord-blood units belonging to around 2,150 clients had been exposed to temperatures higher than acceptable over several days in February, March and June 2022.

 

When exposed to suboptimal storage temperatures, such cord-blood samples start to thaw, possibly damaging the stem cells in them.

 

MOH handed Cordlife a six-month suspension from collecting, storing, processing and testing new cord blood and human tissue &ldquo to safeguard patients&rsquo interest&rdquo .

 

Keeping mum

The lapses in Cordlife&rsquo s lab processes are unforgivable, but the way the mainboard-listed company has handled the situation thus far has pointed to failings in its corporate governance as well.

 

Notably, it has not disclosed information about the storage lapses to its shareholders it has not issued any statement regarding MOH&rsquo s unannounced audits on the company in August and November.

 

In response to queries from the Singapore Exchange (SGX), Cordlife on Sunday (Dec 10) said &ldquo certain members of management&rdquo were alerted in June 2022 that one tank had been exposed to irregular temperatures for several days that month.

 

The company then took &ldquo immediate actions&rdquo and carried out internal investigations to find out more about the incident. Thereafter, the management strengthened its laboratory processes, procedures and staff training to prevent a recurrence of such lapses, it added.

 

The board held the view that a bourse announcement was not needed because the incident would have &ldquo no material impact&rdquo on the group&rsquo s financial performance, and that the group had &ldquo adequate provisions&rdquo against requests for refunds or waivers from affected clients.

 

Cordlife added that it made no announcement about the MOH&rsquo s audits because the company had not been told by the ministry that any rule, regulation or law had been broken. &ldquo The company was informed that the audit was being carried out as a result of feedback received by MOH from a member of the public,&rdquo Cordlife said.

 

Cordlife&rsquo s management may truly believe the storage lapses were not material to its financial performance. Its investors clearly disagreed.

 

Shares of the counter tanked the day after MOH&rsquo s announcement, falling by as much as 42.9 per cent in early trading on Dec 1 it eventually closed down 32 per cent, or S$0.145, at S$0.31.

 

Cutting the cord

Cordlife&rsquo s response to SGX&rsquo s queries was lacking in several other areas.

 

For one, it did not answer the question about whether the board had been aware of the storage lapses that had occurred since November 2020. Instead, the company chose to focus its response on the June 2022 incident.

 

It noted that the other storage lapses in 2022, in February and March &ndash which affected two tanks &ndash were uncovered only in MOH&rsquo s unannounced audit in August.

 

Even if MOH had not told the company it was in breach of its rules and regulations, the discovery of more temperature excursions should have set off alarm bells among members of the board.

 

Cordlife&rsquo s response also did not clarify why the company had not immediately contacted its customers, whose cord-blood units were exposed to unacceptable temperature levels in June 2022.

 

It is also unclear why the board did not see the temperature excursions of the seven storage tanks as a material development.

 

SGX has a corporate-disclosure policy that includes a non-exhaustive list of corporate events that must be disclosed immediately. One item on the list is the major disruption to the supply of critical goods or services.

 

With Cordlife a private cord-blood banking service provider, the storage of its cord-blood units is its critical service &ndash and the temperatures of its storage tanks breaching acceptable levels is arguably a major disruption to the supply of such a service.

 

Regardless of the board&rsquo s assessment of the financial impact of these incidents, the severity of the storage lapses indicates that the incidents should have been disclosed as soon as they were discovered.

 

Shareholders of Cordlife could argue they have been short-changed and are now suffering losses as a result of the board keeping mum. It remains to be seen whether the investors would be able to receive any kind of compensation, though.

 

Legal experts said public investors who have suffered losses, particularly those who bought the shares on or around November 2020, when the first temperature excursion was noted, could seek recourse.

 

If the company&rsquo s directors were aware of the lapses in the affected storage tanks, they could be deemed to have failed in their fiduciary duties to these investors.

 

Singapore Exchange Regulation (SGX RegCo), the bourse&rsquo s regulatory arm, should come down hard on the company for failing to disclose material information. An SGX spokesperson said of this issue: &ldquo SGX RegCo expects listed issuers to disclose material information on a timely basis, subject to certain caveats. We take very seriously any breach by an issuer of continuing disclosure requirements and will take action where warranted.&rdquo

 

With lapses in both its core business processes and on the corporate governance front, shareholders should consider cutting the cord on Cordlife.

Cordlife&rsquo s cavalier response to breaches raises troubling questions

INVESTORS in cord-blood bank service provider  Cordlife Group : P8A 0%  may be feeling hard done by &ndash and rightfully so.

After lapses found in Cordlife&rsquo s storage of cord-blood units recently came to light, the group sent several letters to customers,  some of whom had spent near five-digit figures to store their children&rsquo s cord blood.

These customers have every reason to be aggrieved, but so, too, do Cordlife&rsquo s shareholders.

In particular, one tank containing 2,200 cord-blood units belonging to around 2,150 clients had been exposed to temperatures higher than acceptable over several days in February, March and June 2022.

When exposed to suboptimal storage temperatures, such cord-blood samples start to thaw, possibly damaging the stem cells in them.
 

Keeping mum

The lapses in Cordlife&rsquo s lab processes are unforgivable, but the way the mainboard-listed company has handled the situation thus far has pointed to failings in its corporate governance as well.

Notably, it has not disclosed information about the storage lapses to its shareholders it has not issued any statement regarding MOH&rsquo s unannounced audits on the company in August and November.

In response to queries from the Singapore Exchange (SGX), Cordlife on Sunday (Dec 10) said &ldquo certain members of management&rdquo were alerted in June 2022 that one tank had been exposed to irregular temperatures for several days that month.

The company then took &ldquo immediate actions&rdquo and carried out internal investigations to find out more about the incident. Thereafter, the management strengthened its laboratory processes, procedures and staff training to prevent a recurrence of such lapses, it added.

The board held the view that a bourse announcement was not needed because the incident would have &ldquo no material impact&rdquo on the group&rsquo s financial performance, and that the group had &ldquo adequate provisions&rdquo against requests for refunds or waivers from affected clients.

Cordlife added that it made no announcement about the MOH&rsquo s audits because the company had not been told by the ministry that any rule, regulation or law had been broken. &ldquo The company was informed that the audit was being carried out as a result of feedback received by MOH from a member of the public,&rdquo Cordlife said.

Cordlife&rsquo s management may truly believe the storage lapses were not material to its financial performance. Its investors clearly disagreed.

Shares of the counter tanked  the day after MOH&rsquo s announcement, falling by as much as 42.9 per cent in early trading on Dec 1 it eventually closed down 32 per cent, or S$0.145, at S$0.31.

Cutting the cord

Cordlife&rsquo s response to SGX&rsquo s queries was lacking in several other areas.

For one, it did not answer the question about whether the board had been aware of the storage lapses that had occurred since November 2020. Instead, the company chose to focus its response on the June 2022 incident.

It noted that the other storage lapses in 2022, in February and March &ndash which affected two tanks &ndash were uncovered only in MOH&rsquo s unannounced audit in August.

Even if MOH had not told the company it was in breach of its rules and regulations, the discovery of more temperature excursions should have set off alarm bells among members of the board.

Cordlife&rsquo s response also did not clarify why the company had not immediately contacted its customers, whose cord-blood units were exposed to unacceptable temperature levels in June 2022.

It is also unclear why the board did not see the temperature excursions of the seven storage tanks as a material development.

SGX has a corporate-disclosure policy that includes a non-exhaustive list of corporate events that must be disclosed immediately. One item on the list is the major disruption to the supply of critical goods or services.

With Cordlife a private cord-blood banking service provider, the storage of its cord-blood units is its critical service &ndash and the temperatures of its storage tanks breaching acceptable levels is arguably a major disruption to the supply of such a service.

Regardless of the board&rsquo s assessment of the financial impact of these incidents, the severity of the storage lapses indicates that the incidents should have been disclosed as soon as they were discovered.

Shareholders of Cordlife could argue they have been short-changed and are now suffering losses as a result of the board keeping mum. It remains to be seen whether the investors would be able to receive any kind of compensation, though.

Legal experts said public investors who have suffered losses, particularly those who bought the shares on or around November 2020, when the first temperature excursion was noted, could seek recourse.

If the company&rsquo s directors were aware of the lapses in the affected storage tanks, they could be deemed to have failed in their fiduciary duties to these investors.

Singapore Exchange Regulation (SGX RegCo), the bourse&rsquo s regulatory arm, should come down hard on the company for failing to disclose material information. An SGX spokesperson said of this issue: &ldquo SGX RegCo expects listed issuers to disclose material information on a timely basis, subject to certain caveats. We take very seriously any breach by an issuer of continuing disclosure requirements and will take action where warranted.&rdquo

With lapses in both its core business processes and on the corporate governance front, shareholders should consider cutting the cord on Cordlife.

 

CORDLIFE Group said on Sunday (Dec 10) that its board was informed of irregular temperatures in one of its tanks in February 2023 but did not make any announcement as it assessed that there would be &ldquo no material impact on the financial performance of the group&rdquo for FY2022 and FY2023.

 

The cord blood banking company &ndash which is currently being investigated by the Ministry of Health (MOH) &ndash was responding to queries from the Singapore Exchange (SGX) on why its board did not make any earlier announcements on the temperature irregularities or audit by MOH.

 

MOH said on Nov 30 that it had found that seven of Cordlife&rsquo s 22 cord blood units had been exposed to temperatures above the acceptable limits of below minus 150 degrees Celsius following an unannounced audit.

 

MOH conducted unannounced audits on the company in August and November this year after receiving a complaint in July 2023 by a member of the public alleging issues with storage temperatures and other service quality issues.

 

SGX noted that Cordlife was aware that there were tanks exposed to temperatures beyond the acceptable limits for several days in February, March and June 2022, but had not made any announcements.

 

Cordlife said &ldquo certain members&rdquo of its management team were alerted by an employee in June 2022 of irregular temperatures in one tank for several days in June, and the management had taken &ldquo immediate actions and carried out internal investigations to further understand the issue&rdquo .

 

The incident was later reported to the board in February 2023, and the board had assessed no material impact to the financials, taking into account that the group had &ldquo adequate provisions to offset against the potential financial impact of any fee refunds or waivers of the remaining storage years that may be offered to clients in connection with the incident&rdquo .

 

The group said that earlier temperature irregularities in the affected tank and one other tank, which occurred in February and March 2022, were brought to the attention of the company during the unannounced audit by MOH in August 2023.

 

Cordlife &ndash which is licensed under the Healthcare Services Act &ndash had been inspected by MOH in September 2022 as part of a routine inspection. MOH said on Nov 30 that the group had not disclosed any incidents during or after the routine inspection.

 

SGX also queried the board on why it did not announce the audits by MOH in August and November at the relevant time, given the severity of the subject matter.

 

Cordlife said the company had not been notified by the MOH that it was deemed to be in breach of any rules, regulations or laws in August. It added it was informed the audit was carried out as a result of public feedback.

 

The company added that MOH informed the company that it would be conducting an inspection on Nov 16 and 17, and this was extended for a few more days in November, during which time Cordlife had been attending to MOH and its requests for information.

 

&ldquo Upon receipt of the MOH&rsquo s notice of compliance on Nov 30, 2023 which detailed the inspection outcomes and the consequences of the same, the company released its announcement on the same day,&rdquo Cordlife said.

 

Shares of Cordlife plunged after the temperature irregularities were made known, briefly falling as much as 65.9 per cent, before closing 31.9 per cent lower at S$0.31 on Dec 1.