This from "respected" UK invesment magazine Investors Chronicle.
4 November 2005
Sniffing out value
Once upon a time, Osmetech was best known for developing sensing technology that emulates the human nose. This is still a substantial part of its business, and the origin of its name (osme is Greek for smell). But a series of well-executed acquisitions over the past couple of years have turned it into a broader based diagnostics company. Today’s trading update, which has sent the shares 20 per cent higher, shows some of the rewards of those deals.
Osmetech bought the OPTI range of blood gas analysers from Roche, the Swiss healthcare giant, for just $2.5m at the start of 2003. The devices are used in operating theatres and emergency rooms to give quick read-outs of critical gas and electrolyte levels in patients’ bloodstreams. Although formerly owned by a Swiss company, OPTI had a US-based sales force.
And look what they’ve done: sales in the first six months were £3.74m, up 52 per cent on last year and considerably more than the price paid for the business. The growth came from a new version of an existing product, and strong sales of a related product used in the veterinary market.
The company says it’s not over yet, either: two new OPTI products are due to be launched shortly and management is talking about ‘a very strong end to the year.’ Market expectations for OPTI sales are likely to be ‘significantly exceeded’ in 2005 and 2006.
Osmetech has another division, Molecular Diagnostics, where acquisitions have also played a part. It bought Clinical Micro Sensors (CMS) from Motorola for around £3.7m, a deal which gave it access to more complex genetic diagnostic technology. The first products from this division are due on market in the first half of 2006.
It’s noticeable that both Roche and Motorola were happy to be paid partly in Osmetech shares. Roche ended up with $1m worth of them, and Motorola invested £3.7m and has warrants over more. The shares were issued at a penny each to Roche and 1.75p apiece to Motorola. The company has since had a 10-into-1 share consolidation, so at 17.5p (latest share price here) the shares are effectively unchanged since the CMS deal. House broker Evolution Securities was forecasting 2006 sales of £8.63m, giving a loss of £7.74m (check forecasts here) but those numbers are now likely to be upgraded. The shares look good value
