Instem Plc (LON:INS), which provides the software to log clinical trials, said it is paying up £2.5mln in cash and shares to acquire Samarind, a deal that is expected to be immediately earnings enhancing.
Samarind is a specialist in regulatory information management and, according to Instem chief executive Phil Reason, “aligns perfectly with our strategy of expanding organically and acquisitively into adjacent market areas”.
The Deeside-based business generated £1.2mln in sales the year to March 31 and operating profit of £400,000. It is sitting on £680,000 in cash.
Instem is handing over £1.5mln in cash and shares on completion, followed by deferred payments over the next two years.
CEO Reason said: Although the Samarind solutions have relevance to product research and development, the larger segment of the market is for marketed drugs and medical devices, enabling Instem to tap into new areas of market expenditure. Our global presence is also a key asset to the Samarind business."
Analysts at N+1 singer said the acquisition of Samarind was a “good fit” with the group’s existing regulatory submission expertise and broadened its offering in into post-marketing
“This deal fits perfectly with Instem’s ambition to consolidate the life sciences IT market and to become a strategic partner of choice,” said the broker.
“We see a fair value for the shares at 310p, based on a composite EV/Sales analysis and a DCF. Further upside to this could come as organic growth opportunities are delivered and on further accretive acquisitions.”
The deal is earnings enhancing from the outset, said analysts.
“We upgrade our FY16 EPS forecasts by 5% assuming a 7 month contribution this year,” said N+1 Singer.
“We also believe there are a number of niche functional and geographic sectors that Instem will focus on to develop market leading solutions.”
In the eyes of the broker, the acquisition means Instem is ideally placed to take advantage of a potentially substantial outsourced translation services opportunity.
Instem’s software delivers solutions for data collection, management and analysis for healthcare research and development.
The software is designed to increases client productivity by automating study-related processes.
Samarind helps to achieve and maintain compliance for pharmaceutical, biotech and medical device products. The Samarind RIM software and services provide the security, flexibility and ease of use that regulatory affairs teams need to achieve regulatory and commercial requirements. Deployed on-site or accessed on-line to manage the acquisition and maintenance of product licences.
“We still have a pipeline of other candidates and we are still hopeful that we can potentially add another deal before the end of this year and continue to add bolt-on acquisitions almost indefinitely," said chief executive of Instem, Phil Reason.
Shares rose 3% to 238p.
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