BEIJING, Jan 10 (Reuters) - Scores of Shanghai parents are to sue a biotech firm suspected of concealing the fact that their children's umbilical cord blood, believed to be a likely cure for future blood diseases, was tainted, state media said on Thursday.

Lu Yi, a mother of a two-year-old girl, said the company charged 16,000 yuan ($2,200) to collect umbilical cord blood in delivery rooms. It would keep it frozen at minus 196 degrees Celsius for 20 years.

"It was rich in primitive stem cells that formed the different types of blood cells and was widely believed to be a cure for leukemia and other fatal blood diseases," Xinhua news agency said.

Lu thought of it as health insurance and chose to store her daughter's umbilical cord when she gave birth in late 2005.

"Within two months, I was told the blood had passed all the lab tests and was up to standard. I prayed that was to be the end of the story and I would never have to use it after all," she was quoted as saying.

In September 2006, however, she received an anonymous text message on her phone saying her baby's cord blood had been tainted and was therefore worthless for clinical use.

The message's author also provided a link to a blog article that explained how stem cell company managers had fabricated test reports to cheat customers and seek unlawful profit, Xinhua said.

Lu was soon in contact with dozens of other parents brought together by the same text message. They all had their children at the same hospital.

The Shanghai Health Bureau denied the blood was tainted.

"Investigations show that the process of collecting and restoring the umbilical blood was under control, and no such case of artificially tainted blood has been found so far," it said in a statement posted by the bureau in the Nanfang Weekend newspaper. (Reporting by Nick Macfie and Beijing newsroom; Editing by Jerry Norton)

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