IDH.L Regulatory News (IDH)

 10 April 2013

Immunodiagnostic Systems Holdings plc

Trading Update

Immunodiagnostic Systems Holdings plc ("IDS" or "the Company" or "the Group"), a leading producer of manual and automated specialist diagnostic testing kits and instrumentation for the clinical and research markets, today provides a trading update for the year ended 31 March 2013.

Financial update

IDS can confirm that results for the full year ended 31 March 2013 are anticipated to be in line with the Board's expectations, as set out at the interim results in November 2012. Total revenues are expected to be £49.8 million (2012: £53.7 million). The revenue performance is encouraging particularly given the tough trading environment due to a rapidly declining manual 25OH Vitamin D market, significantly increased automated vitamin D competition and ongoing laboratory consolidation, predominantly in the French market.

Operating costs, on a pre-exceptional basis, are anticipated to be in line with the Board's expectations.

The Group's operations have generated £13.6m of cash during the year (2012: £6.7m before loan repayments). Closing net cash was £20.5m at 31 March 2013 (2012: Net cash £6.9m).

IDS-iSYS instrument placements

Direct instrument placements were 88 (net of returns) (2012: 87) representing an increase of 50% over the installed base as at 31 March 2012. Direct instruments are those sold or placed with reagent rental IDS end-user customers in the Group's core markets of the USA and Europe (excluding distributor territories of Spain and Italy). The total number of instruments placed (directly or through distributors) and sold to OEM partners was 138 (2012: 134). These placement levels underpin the changing balance of the Group away from manual tests and towards a more stable and growing reagent rental business model.

Average revenue per direct instrument was £72,000 per annum (calculated on a rolling 12 month basis) (2012: £84,000).

Product mix*

Overall revenues from the Group's automated IDS-iSYS testing system increased by 19.2% to £21.7m (2012: £18.2m), equating to 43.6% of total Group revenue.

Driving the expansion of non-25OH vitamin D tests is a key priority for the Group and therefore the Board is encouraged by the growth seen in sales of its automated specialty test kits (including 1,25 Vitamin D), particularly the Group's bone, growth and hypertension panels. Non-25OH vitamin D automated tests accounted for 20.2% of the Group's automated revenues (2012: 9.1%). In the last quarter of the financial year, non-25OH vitamin D automated tests accounted for 28.2% of the Group's automated revenues.

Manual revenues decreased 20.9% to £28.0m (2012: £35.4m). The majority of this decrease was due to the decline in revenue from manual 25OH vitamin D tests as a result of both increased competition and also customers purchasing automated vitamin D kits in preference to manual kits. Sales of manual 25OH vitamin D tests were £12.1m (2012: £19.4m). This now represents 43.2% of overall manual revenues (2012: 54.8%).

*All automated revenues are stated before IFRIC 4 rental income allocation

Strategy update

The Group continues to pursue its threefold strategy of developing new specialist assays, entering into new geographies with attractive growth opportunities and developing the next generation IDS-iSYS system. Progress was made in all three of these areas during 2012/13.

IDS is continuing to invest in R&D and pursue further strategic initiatives to increase the "content" on the IDS-iSYS platform. The Board anticipates a number of further product launches in 2013/14 with the Group currently seeking FDA clearance for 5 automated assays which previously achieved CE marking: 1,25 Dihydroxy vitamin D, Osteocalcin, PINP, Aldosterone and Renin.

The Group is pleased to announce today that it has agreed with Omega Diagnostics Group plc ("Omega"), that IDS will have the option to exclusive rights to distribute the allergy tests developed by Omega on the IDS-iSYS automated instrument in IDS's core markets including the USA, Germany, France, the Nordic regions and the UK. The distribution agreement follows the announcement in March 2011 which gave Omega a worldwide license to develop and distribute allergy tests on the IDS-iSYS automated instrument. This distribution agreement fits with IDS's strategy of increasing the assay menu of the IDS-iSYS and allows IDS to leverage its existing sales and marketing infrastructure in these key markets.

The Group continues to pursue a number of opportunities outside its core presence in Europe and the USA to expand its geographical footprint. Europe and the USA accounted for 74.8% of sales in the year ended 31 March 2013 (2012: 83.6%). The Board is confident of finalising a number of collaborations which will further diversify the Company's geographic presence in 2013/14.

The joint development agreement with Diagnostica Stago announced in February 2013 will underpin the evolution of the next generation IDS-iSYS system. The key aim is to create a more cost-effective instrument with a reduced footprint, allowing access to a greater number of laboratory customers, both in terms of size and geography. The IDS-iSYS mark II will be connectable to laboratory track systems enabling access to large laboratory customers. The agreement with Stago underlines IDS's reputation as a best in class provider of instruments and highlights the potential prospects for collaboration in non-core diagnostic markets which could bring significant revenue and manufacturing efficiency opportunities. The development remains on track and the expected timescale for completion of the European system is the first half of 2015.

Management changes

Chris Yates joined IDS on 4 March 2013 as the Company's new Finance Director. In addition, the senior management team was strengthened further by the appointment of Dr. Karim Tabiti as Head of Strategic Marketing, and Nicola Trewin as Group HR Manager. Alongside the existing team, these senior hires will help support the execution of the Group's strategy and drive change within the business. 

Outlook

The Board maintains the view that overall revenues in 2013/14 will be in line with the previous financial year.

The business is emerging from a difficult trading environment on a more stable footing and has a focused, iterative, strategy for growth. It is anticipated that the level of new IDS-iSYS placements, increasing reagent volumes from the current range of automated tests and the impact of new automated tests becoming available, will offset the expected decline in manual 25OH vitamin D test revenues and the decline in reagent revenues per instrument.

Importantly, the Board believes the continued evolution in the product mix towards a broader range of specialty assays and a greater weighting towards automated revenues will provide the Group with a significantly improved quality of revenues and earnings. The increasing range of tests offered reduces exposure to changes in specific market segments. For automated assays this also enhances the functionality of the instrument to current and new customers offering the ability to operate a number of test panels on the same instrument. In addition, the growing installed base gives greater medium-term visibility on revenues compared to the more transactional nature of manual assay revenues.

The Company will issue its preliminary results for the year ended 31 March 2013 on 17 June 2013.

Patrik Dahlen, CEO of IDS, commented:

"We are pleased to report trading has been in line with Company guidance following a strong second half of the financial year, with robust growth in our range of recently launched bone, growth and hypertension panels. Our focus remains on the development of our IDS-iSYS automated platform through broadening the assay menu, improved instrumentation and greater geographic penetration. We believe that IDS is now well positioned to execute this strategy and drive continued change within the business."

For further information:

About Immunodiagnostic Systems Holdings PLC

The Group operates in the in-vitro diagnostics ("IVD") market by designing, manufacturing and selling immunoassay kits as well as its automated analyser, the IDS-iSYS System. The IDS product range is used to measure or detect particular substances within a sample, thus aiding the diagnosis or monitoring of a disease or providing information for research studies.

http://www.idsplc.com