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Amphion Innovations surges as Kromek prepares to fly

Kromek, in which Amphion Innovations has a substantial stake, is to spread its wings and seek a listing on AIM.
Amphion Innovations surges as Kromek prepares to fly

Shares in Amphion Innovations (LON:AMP) surged as one of its portfolio companies, Kromek Group, revealed it is to list on AIM.

Amphion, which specialises in backing medical and technology businesses, has a 13.3% equity stake in Kromek, a digital colour x-ray imaging technology company. The size of the stake in the company may change, however, as a result of new capital being issued by Kromek.

Amphion shares shot up on the news and were changing hands over the lunchtime session at 3.35p, up 41% on the day.

Richard Morgan, chief executive officer of Amphion and chairman of Kromek, said: "Amphion was the first institutional investor to commit to Kromek in 2005, soon after its formation and spin-out from the University of Durham. Since then, we have been closely involved with its development and are delighted to see it is making the transition to a public company.

“We believe Kromek has substantial growth opportunities and this transition to the public markets should provide the needed capital to accelerate its growth while deepening and broadening its internal resources and external reach."

X-ray technology is over a century old, but Kromek is taking medical x-ray and gamma ray imaging into the colour, digital and 3D era using a material called cadmium zinc telluride, or CZT for short.

The company was originally set up to commercialise the cadmium telluride family of materials. Recognised as the premier materials for digital and spectral radiation detectors, these compounds proved very difficult to produce in a commercially viable way.

Kromek’s technique has overcome these limitations thanks to some two and half decades of research by Durham’s physics department.

Initially, the group set out just to produce the material, but over time the business plan evolved and instead the group looked at the potential applications for CZT. It moved along the value chain to produce the “driving engine” electronics and detectors for the next generation of imaging devices as well as its own finished products.

Kromek’s technology capabilities are being refined to focus on three areas: security, medical and nuclear. Each provides an entry into a multi-billion dollar market.

Its explosives detection devices are able to differentiate between liquid, solid and powder.

The clearer definition provided by Kromek’s technology lowers the potential for false alarms when scanning the baggage that is heading for a plane’s hold, and this has a potentially huge economic impact in saving time and money.

A Europe-wide relaxation of the rules on carrying liquids through checkpoints at airports due in 2014 should provide the bedrock of demand for products such as Kromek bottle scanners.

Used in CT scanners, the firm’s cadmium zinc telluride detectors produce a significantly better image than the existing units, and, in particular, the Kromek technology that goes inside the scanners has been honed initially to provide early and more reliable detection of cancer and osteoporosis.

Further applications will arise as development continues.

Kromek’s expertise is also being deployed in the world of nuclear detection, where it is highly accurate in measuring radioactivity and very precise in identifying isotopes.

Potential uses for the technology range from consumer devices (it developed a handheld gizmo) through to homeland security and all points in between (think health physics, university research, defence and even the scrap metal industry).

In the 10 years since incorporation Kromek has grown from a tiny office with a second hand computer to a firm that now has three facilities on two continents with 60 employees, 19 of them holding PhDs.

The acquisition of California-based chipmaker Nova in 2010 gave it a presence and facilities in the all-important American market and was augmented by its purchase of Pittsburgh-based eV Products in February this year.

In all, it has spent around £26mln on acquisitions, around £2mln more than has been ploughed directly in the business over the last decade.

However, the valuations of business similar to Kromek suggest it is worth significantly more than the £50mln so far invested, and the group is also understood to be at an inflection point in terms of orders, revenues and, importantly, profits.

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