EHP.L Share News (EHP)

Drug testing group Epistem moved closer to profit after a research and collaboration deal with the Swiss pharmaceutical giant Novartis helped revenues soar.The firm posted a pre-tax loss of £700,000 in the year to June 30 compared with losses of £1.3m previously, with revenues nearly doubling to £4m from £2.1m.The deal with Novartis, which involves the two companies identifying new drug targets and therapeutics across a variety of disease areas, resulted in Epistem's Novel Therapies division posting revenues of £1m, compared with nil the previous year.Revenues at the contract research services division climbed by £2.3m from £1.9m. The biomarker division, which runs tests on plucked hair to track how a drug treatment is affecting the patient for customers such as AstraZeneca and Johnson & Johnson saw sales soar to £700,000 from £200,000.The division is profitable at the operating level in its first full year of operation, an achievement which came as no surprise to chief executive officer Matthew Walls, who told Sharecast that the Biomarker business had 'done about as well as we expected.'The company is doing an increasing amount of business with the larger pharmaceutical companies as they begin to develop a greater appreciation of Epistem's core competencies.'The models we use [in pre-clinical testing and discovery research] are quite unique to us; I don't see anybody doing the same sort of thing we do. It has taken us a long time to develop the models, with some of them going back to the eighties,' Walls explained.Walls is happy with the three-legged structure of the company (novel therapies, contract research and biomarkers) but said the board is looking to 'strengthen each leg', both through organic growth and possibly through bolt-on acquisitions, 'though we're in no rush.'With almost two-thirds of revenues now coming from the US following the Novartis deal the company is set to become a lot less UK-centric, and has just opened up its first office in the US.Walls's sense is that the 'US seems to be picking up its feet a bit quicker' than other parts of the world so an increased US focus should be beneficial to the company.The company is unlikely to derive any benefit at the micro level from President Obama's health care reforms - assuming they ever get passed by Congress - but Walls is nevertheless enthused by developments in the US where stem cell research is becoming increasingly important, 'which bodes well for our areas of expertise,' Walls concluded.