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Source BioScience plc: Acquisition of Inverclyde Biologicals Limited

Source BioScience plc: Acquisition of Inverclyde Biologicals Limited

Nottingham, UK - 30 April 2013 − Source BioScience plc (LSE: SBS), the international diagnostic and genetic analysis services business, announces the acquisition of the entire issued share capital of Inverclyde Biologicals Limited (‘Inverclyde Biologicals’), Motherwell, Scotland for a total consideration of £1.6 million payable in cash.

Highlights

• Inverclyde is a market leading manufacturer of high quality diagnostic kits and blood group serology reagents

• Consideration of £1.6 million; cash acquired with the business of £0.3 million

• Revenue of £0.7 million; £0.2 million profit before tax and cash generated from operations

• Complementary with existing Source BioScience healthcare products business with the same high standards for quality and service and a strong reputation within the NHS

• Creation of new cross-selling opportunities, an extended customer base and better utilisation of existing infrastructure

• Inverclyde Biologicals’ expertise in designing and manufacturing clinical grade reagents complement the Group’s expansion plans for the reSource™ range of life science products

• Geographic expansion into Scotland, providing the opportunity to establish an Overnight Service for DNA sequencing accessible by the Scottish research community

• The current Inverclyde Biologicals directors are both remaining with the Group and bring a well regarded and qualified talent, together with a dedicated, highly skilled and knowledgeable workforce.

Dr Nick Ash, CEO of Source BioScience, said: “The acquisition of Inverclyde Biologicals fits squarely with our stated objective of continued expansion through both targeted acquisitions and development of our existing business.  This acquisition provides a platform for increased penetration of the UK healthcare market, acting as a catalyst for our accelerated growth.  The Inverclyde Biologicals team will bring significant experience and knowledge to the Group and we will be able to leverage the enlarged Group’s existing links with healthcare providers across the UK and distributor network overseas.”


Introduction

The Board announces the acquisition of the entire issued share capital of Inverclyde Biologicals Limited for a total consideration of £1.6 million payable in cash.  The expenses of the transaction are anticipated to amount to £0.1 million.

Based in Motherwell, Inverclyde Biologicals is a market leading manufacturer of high quality diagnostic kits and blood group serology reagents.  Inverclyde Biologicals was founded over 30 years ago and has built a specialism and reputation for manufacturing superior quality products, supplying a large percentage of the UK market.  The Company has established a robust and long term customer base including NHS Blood and Transplant and many NHS Trusts.

The business is cash generative from operations and made a profit before tax of £0.2 million in the year ended 30 April 2012 on revenue of £0.7 million.  On completion, which is subject only to the preparation of completion accounts, it is anticipated that the acquired business will have net cash of £0.3 million. As at 30 April 2012, Inverclyde Biologicals had total gross assets of £0.3 million and no bank borrowings or other financial liabilities.

The acquisition will bring considerable know how and flexibility in terms of both scientific and manufacturing capability which will enhance Source BioScience’s existing Healthcare product portfolio and enable the Group to broaden its addressable market.

Background and reasons for the transaction

The Group’s strategy is to grow its Healthcare and LifeSciences business through organic growth from existing operations combined with selected acquisitions to broaden the portfolio of products and services.

Source BioScience has built its Healthcare business on traditional histopathology expertise and is at the forefront of cervical cancer screening in the UK.  Source BioScience has also established a diagnostic reference laboratory offering a comprehensive suite of tissue-based pathology and molecular diagnostics from fully accredited laboratories.  The UK NHS is currently the largest customer for the Group’s portfolio of products and services with which it has established an excellent reputation for clinical expertise, quality and service.

Inverclyde Biologicals is a private company established in 1983 in Motherwell, Scotland and is managed and owned by its two founder directors.  The company’s primary customer base has been the UK NHS and it has forged strong and long-established links with NHS Blood and Transplant and many NHS Trusts across the UK.
Inverclyde Biologicals manufacture a portfolio of products complementary with that offered by Source BioScience and it is anticipated that the combination will create new cross-selling opportunities and better utilisation of existing infrastructure.

The manufactured products fall broadly into four categories:

• Phosphate Buffered Serology Saline (‘PBSS’); the most significant product line by revenue is used as a “wash” solution for human red blood cells prior to blood grouping and serological antibody investigation.  Inverclyde Biologicals is the largest serology saline manufacturer in the UK

• Foetal cell detection kit; this product detects foetal cells in circulation in maternal blood.  Demand for this product is strong because of the requirement in the UK to test a mother’s blood within 72 hours of birth

• Tissue reagents; a range of products used by tissue services including antibiotics and cryopreservative media

• Other products; a range of other products that complement the core product range.

Benefits of the acquisition

The acquisition is expected to bring a number of benefits to Source BioScience, including:

• Complementary products and commercial efficiency; the acquired portfolio is highly complementary with the Group’s existing Healthcare products business with the same high standards for quality and service and a strong reputation within the NHS.  All the blood bank products are CE-marked and conform to stringent biomedical parameters.  It is anticipated that the combination will facilitate better utilisation of existing infrastructure, particularly through the sale of an extended range of products and services to common customers

• Expanded product offering and enlarged customer base; by making available the additional blood banking, serology and diagnostic products to the Group’s customers.  These products are extremely complementary with Source BioScience’s existing Healthcare products and services.  The enlarged Group will be able to offer immediate access to a broad range of trusted formulations

• Creation of new cross-selling opportunities; to offer Source BioScience’s diagnostic services to Inverclyde Biologicals’ existing product customers and vice versa

• Geographic expansion; the opportunity to establish a laboratory in Scotland will provide local access to the Overnight Service for DNA sequencing, consistent with the Group’s strategy of operating a network of laboratories close to major life science research centres; and

• In-house manufacturing capabilities; Inverclyde Biologicals’ expertise in designing and manufacturing clinical grade reagents creates opportunities for additional margin capture on solutions and reagents the Group currently resells to its Healthcare (Cytology) and LifeSciences products customers; this also complements the Group’s expansion plans for the reSource™ range of life science products.

Summary

Source BioScience has continued to strengthen its position across both its divisions through a combination of organic growth and targeted acquisitions.  The acquisitions have been successfully integrated and the Group now offers a range of expert products and services to the healthcare sector and for use in a broad spectrum of life science applications.

Source BioScience and Inverclyde Biologicals bring together complementary skills, expertise and product portfolios which will help Source BioScience enhance its position as a leading provider of diagnostic laboratory products for Healthcare.  The management of Inverclyde Biologicals will add significantly to the depth of experience and knowledge in Healthcare and bring links to customers beneficial to the Group.

 

Notes to Editors

About Source BioScience

Source BioScience plc (LSE: SBS) is an international diagnostic and genetic analysis services business serving the healthcare and research markets.  The LifeSciences division provides core laboratory research support from conceptualisation to implementation, calling upon a wide range of cutting-edge technology platforms including an online catalogue of biomolecular tools.  The Group is a trusted provider of a complete range of sophisticated microarray, next generation and conventional sequencing services.  GLP, GCP and CPA accreditations make the sequencing offerings also very attractive for applications in regulatory studies or clinical settings.  Its Healthcare operations provide screening and reference laboratory diagnostic testing for cancer and other diseases and additional predictive testing for treatment optimisation for clinicians and patients.  The Group has its headquarters in Nottingham, UK.  Further information about Source BioScience can be found at www.sourcebioscience.com.

 

Issued for and on behalf of Source BioScience plc.

To contac the Source BioScience team at College Hill, email sourcebioscience@collegehill.com

 

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Melanie Toyne-SewellManaging Partner