INS.L Regulatory News (INS)

22 November 2013

Embargoed for 07:00

Instem plc

("Instem", the "Company" or the "Group")

Acquisition of Perceptive Instruments Limited ("Perceptive") 

and

In-line Trading Update

Acquisition extends Instem's Study Data Collection and Management product suite into genetic toxicology, microbiology and immunology markets

Instem plc (AIM: INS.L), a leading provider of IT applications to the global early development healthcare market, today announces the acquisition of the entire issued share capital of Perceptive Instruments Limited (the "Acquisition"), a leader in image analysis and data management solutions. The acquisition marks the Group's entrance into the in vitro R&D marketplace.

The initial cash consideration of £1.0 million will be funded from the Group's existing cash balances. The maximum consideration payable in connection with the Acquisition is £1.3 million, with the £0.3 million earn-out being contingent upon the performance of the acquired business in the twelve months following completion. Assuming the performance targets are met, the earn-out is payable in cash in the first quarter of the 2015 financial year. The Acquisition is expected to be earnings enhancing in the first full year of ownership.

Overview

This Acquisition represents further progress towards Instem's stated strategy of consolidating the fragmented life sciences IT marketplace, as it continues to deliver compelling solutions for data collection, management and analysis across the R&D continuum.

Perceptive's solutions will enhance Instem's Study Workflow and Automation Suite, enabling organisations of all sizes to collect, manage, review and submit study data that streamline processes, increase quality and enhance development programs.

About Perceptive

Perceptive is located in Suffolk, UK, and develops, manufactures and supplies software and hardware products for in vitro study data collection and study management in the genetic toxicology, microbiology and immunology markets. Perceptive is the leading technology provider within its niche market and there are few competitors active in the space.

Turnover for the 12 months to June 2013 was £0.8 million, of which £0.3 million is recurring. Reported earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ended 30 June 2013 was £0.36m and at the same date gross assets (after adjusting for cash and property to be retained by the vendor) were £0.1m.

Perceptive's products, which are fully compliant with the principles of Good Laboratory Practice (GLP) and the FDA 21 CFR part 11 rule on electronic signatures, include image analysis and data processing solutions and equipment used in many areas of scientific research globally. Perceptive has customers in over 49 countries including leading universities, research institutes and various government programs, such as those at the National Center for Toxicological Research, a US Food & Drug Administration division. Perceptive products also serve small and medium-sized companies along with many of today's leading multinational organisations, including all of the top 10 global pharmaceutical companies.

The global in vitro toxicity testing market is a growth area within the industry due to the heightened awareness of animal welfare in laboratory research testing and it has therefore become an area of regulatory priority. In 2010 the in vitro toxicity testing market was worth more than $1.3 billion and has an anticipated value of $2.7 billion in 2015, a compound annual growth rate (CAGR) of 15% between 2010 and 2015 (BCC Research, September 2010).

Acquisition rationale

The incorporation of further capabilities broadens Instem's repertoire, increases the strategic importance of Instem to its clients, and complements the Group's existing solutions. Perceptive's products support the R&D processes at the stage immediately prior to Instem's current solutions, providing opportunities to enhance workflow and data integration across multiple current and anticipated product lines.

Instem believes Perceptive will benefit from the Group's global sales and marketing capability, particularly in the Americas and China where Perceptive has previously had less exposure and penetration, and where Instem has achieved a high level of traction.

The launch of Cyto Study Manager in Q1 2014 is also expected to be a driver for further growth, targeting the entire Instem and Perceptive client base.

Operating in closely connected market segments of the R&D continuum, Instem and Perceptive are serving related client needs, and therefore opportunities exist to cross sell product suites.

Current trading in-line with expectations

Instem remains on course to meet market expectations for the financial year ending 31 December 2013. The acquisition of Logos Technologies and its re-brand to Instem Clinical has been successfully completed and is performing ahead of expectations. Whilst there are continuing signs of improved confidence amongst our Provantis customers, the Group is still experiencing some deferral in perpetual licences. As usual, the outcome for 2013 will rely on the placing of certain anticipated contracts prior to the end of the year and the Group will provide a full pre-close update in January.

Colin White, Managing Director at Perceptive, stated: "The team here at Perceptive is excited and eager to join Instem. Instem's leadership position will allow us to further our mission of providing quality solutions and excellent after-sales service to a growing set of clients. Combined with Instem, we expect Perceptive's products will better penetrate markets such as the US and China."

Phil Reason, CEO of Instem plc, further commented: "This acquisition adds another complementary product offering to Instem. Our clients will now have the ability to turn to one global supplier for their data management needs across broader segments, providing them with greater efficiencies. Many of the tests Perceptive products support are a required part of the regulated study process and our commanding position across early development will enable us to help users better collect, manage, review and extract data while transitioning information into valuable insight.

Earlier this year, Instem entered the early phase clinical market through the strategic acquisition of Logos Technologies, which is performing strongly. We plan to expand the Group's reach into complementary scientific domains as part of our growth strategy."

For further information, please contact:

About Instem plc

Instem is a leading supplier of IT applications to the early development healthcare market delivering compelling solutions for data collection, management and analysis across the R&D continuum. Instem applications are used by customers worldwide, meeting the rapidly expanding needs of life science and healthcare organisations for data-driven decision making leading to safer, more effective products.

Instem's established portfolio of software solutions increases client productivity in drug development by automating study-related processes and enabling high integrity data sharing. The product suite also offers the unique ability to generate new knowledge through the extraction and harmonisation of actionable scientific information.

Instem supports its clients through full service offices in the United States, United Kingdom and China with additional locations in India and a full service distributor based in Japan.

To learn more about Instem solutions and its mission, please visit www.instem.com or its investor centre http://investors.instem.com/

About Perceptive Instruments

Perceptive Instruments Ltd., founded in 1990, develops, manufactures and supplies image analysis and data processing solutions for many areas of scientific research and industry. It provides standard 'off the shelf' systems and customised solutions based on current or novel technologies. Examples of special solutions include systems for antibiotic testing, vaccine development and robot vision.

Perceptive's software and hardware solutions include:

· Comet Assay IV; live video-based system for scoring cells supporting DNA damage and repair studies and genetic toxicology testing

· Ames Study Manager; comprehensive suite of software for conducting and reporting Ames studies in accordance with OECD 471

· Cyto Study Manager; system for integrating all data acquisition, reporting and management during genetic toxicology investigations for individual and combined comet and micronucleus assays. This is a new product launching in Q1 2014.

· Sorcerer Systems

o Colony Counter; combining image processing and analysis with an innovative Petri-viewer providing fast and accurate counts for bacterial and mammalian colonies for a wide range of applications

o Image Analysis System; live video-based analytical tool for research and quality control

o UDS; complete system for Unscheduled DNA Synthesis assays using live-video cell images and software for creating studies, randomization and slide scoring

All Perceptive products are designed to fulfil the requirements of Good Laboratory Practice, FDA 21 CFR Part 11 and other international regulatory guidelines. Perceptive is one of a minority of image analysis & data processing companies worldwide whose management processes have been officially registered to ISO 9001:2008.