Blood for Sale

Back in November, we examined several companies looking to break some rules and save some lives -- two objectives that earn plenty of plaudits from the Motley Fool's groundbreaking Rule Breakers newsletter. In reviewing the field of businesses hoping to rake in recurring revenues from collecting and storing the umbilical cord blood of newborn infants for later medical use, we found one name that stood out from the pack: ViaCord, a subsidiary of privately held ViaCell.

The "privately held" part is about to change. ViaCell filed with the Securities and Exchange Commission way back in April, announcing its intention to go public on the Nasdaq with the ticker symbol "VIAC." The company didn't make a peep until yesterday, when ViaCell's underwriters, UBS (NYSE: UBS) and Credit Suisse Group (NYSE: CSR), announced that ViaCell will price its IPO in the $7 to $9 range and will float 7.5 million shares, though still on a date "to be announced."

Once the company comes public, we'll get a more complete picture of its business. But even now, the aspiration of its ViaCord division is clear. It aims to become for the medical industry what subscription service companies such as TiVo (Nasdaq: TIVO), Sirius (Nasdaq: SIRI), and XM Satellite (Nasdaq: XMSR) are for the entertainment realm -- a guaranteed moneymaker.

What's that? OK, I'll concede that those companies aren't yet profitable. Neither is ViaCell, but its business model looks attractive, as it aims to generate a guaranteed source of revenue that, with luck and scale, will eventually turn into profits. In fact, ViaCell could well outperform the more frivolous services of those other firms. Lay down $99 on a new TiVo DVR, or on a Sirius or XM satellite radio receiver, and that upfront investment gives you a small incentive to keep paying the $10-or-so monthly service fee. But while ViaCell charges a similar monthly fee (about $10) for storing a unit of cord blood, its hefty $1,650 upfront processing fee pretty much guarantees that once you sign on for its service, you're a client for life (pun intended). Few clients will be willing to write off that upfront payment to save just $125 a year.

And that could well make ViaCell's business model a winner, as well as a lifesaving business. 

Interested in biotech? Rule Breaking Fools David Gardner and Charly Travers are. Each month, Motley Fool Rule Breakers subscribers get two exciting investment possibilities, including some biotech ideas. If a high-risk, high-reward investing plan sounds as if it might appeal to you, get a free trial today.

Fool contributor Rich Smith owns no shares in any company mentioned in this article.