Instem (LON:INS), which provides the software used to log clinical trials, said it is raising £5mln that it will use to fund acquisitions.
It placed 2.5mln shares at 200p – a very small discount to the market price of the stock, which closed Tuesday night at 202p.
In a statement Instem said the proceeds would be used to “accelerate” the company's consolidation strategy.
It said having the funding in place would be a “significant benefit for the company in negotiating acquisition terms and give it greater flexibility in completing acquisitions”.
Chief executive Phil Reason added: "This fundraising comes at the ideal time as both Instem and our life sciences clients enjoyed great success in 2015.
“With record levels of potential new drugs moving through the earlier stages of the research and development pipeline, the industry is keen to deploy proven and innovative technologies that can increase their efficiency and effectiveness while maximising patient safety."
"Deploying the capital raised on acquisitions that complement our existing market leading software products and services will ensure that we will continue to help our clients bring life enhancing products to market faster."
"We are delighted that the placing was oversubscribed, with demand from both existing shareholders and new institutional investors."
Instem’s business is cornerstoned by Provantis, which electronically automates the process of collating the data from testing drugs and chemicals on animals.
These pre-clinical studies are important in identifying any ill effects a new compound might have before it comes into contact with humans.
Provantis is used to capture the data used for regulatory submissions both for an investigational new drug application, which marks the start of the clinical study phase, and new drug applications at the end of the human trial process.
The software is so sophisticated it will even carry out the statistical analysis that accompanies this pre-clinical research as well as allowing the scientist to provide his or her own narrative.
It is part of the early development market, which in the pharmaceuticals industry covers the period up to phase IIa clinical trials, and is worth up to £450mln (US$700mln).
The bigger bucks would be made tapping into the £2.6bn (US$4bn) spent each year on data capture and analysis in the clinical trials phase, but this space is dominated by two 800-pound gorillas: Medidata Solutions and Oracle.
Each has tens of millions to invest in sales and marketing, which makes them formidable adversaries for a firm capitalised at just £22mln.
The key then is to find niches in this market. Instem is already addressing one of these - early phase clinical trial management - with its Alphadas product suite, the result of an acquisition of Logos Technologies in 2013.
The company is also seeing significant traction for Centrus-Submit - technology that allows companies to comply with the new US Food & Drug administration rules for the electronic submission of non-clinical data.
Submit may eventually open up another niche in the lucrative clinical trials market, but first Instem will offer the product to organisations involved in pre-clinical studies that have been told they must start to adhere to the US Food and Drug Administration's (FDA’s) SEND protocol when submitting data electronically to the watchdog.
The rule changes, which will come into full force in the next two to three years, have created 3,000 potential customers for Submit.
Broker Singer reckons the new SEND initiative offers the potential of “material upside” over the coming years.