For further information, please contact:
Medical Solutions plc
Nick Ash
Managing Director
Tel: 0115 973 9010
www.medical-solutions.co.uk
Bishopsgate Communications Ltd
Nick Rome/Sophie Davis
Tel: 0207 5623350
www.bishopsgatecommunications.com
Nomura Code Securities Ltd
Richard Potts
Tel:0207 776 1212
www.nomuracode.com
7 June 2007
Medical Solutions plc
PROPOSED ACQUISITION OF GENESERVICE LIMITED
The Board of Medical Solutions plc (LSE: MLS), the diagnostics and healthcare
business specialising in histopathology and cytology services and products,
announces that it has conditionally agreed to acquire the entire issued share
capital of Geneservice Limited ("Geneservice") for a total consideration of
�3.86 million payable in cash and loan notes.
Highlights:
* Medical Solutions to acquire entire issued share capital of Geneservice for
�3.86 million;
* Geneservice is a profitable, expanding private UK-based company offering
genomic products and technology services for applications in life sciences
and clinical research and development;
* Geneservice revenue for the period ended 28 February 2007 improved by 35
per cent to �2.4 million compared with the period ended 31 March 2006 and
the business is cash generative;
* acquisition is in line with the Group's strategy to grow its healthcare and
diagnostics business ,by enhancing its portfolio of products and services
to include DNA and RNA based techniques;
* acquisition benefits Medical Solutions by providing an expanded service
offering and enhanced customer base, higher value quality assured service
and a one stop shop for diagnostic services as well as cost benefits to the
enlarged group including consolidation of operations to Nottingham;
* Board further strengthened by the proposed appointment of Dr Tom Weaver. Dr
Weaver, CEO of Geneservice, holds a PhD in Oncology and is a member of the
scientific advisory boards of Cambridge Genetics Knowledge Park, SmartBead
Technology and the UK Bio-Industry Association's panel on Bioinformatics;
and
* acquisition is conditional upon the approval of Shareholders at EGM.
Dr Nick Ash, Managing Director of Medical Solutions, commented: "We are delighted
to announce the proposed acquisition of Geneservice. There is an increasing
demand from within the pharmaceutical and biotechnology industry for gene
expression analysisas part of their research and development programmes. In
addition, the emergence of pharmacogenomic analysis to support clinical
development of therapeutics requires the type of molecular analysis offered by
Geneservice.Geneservice'sexpertise in this field will greatly enhance the
Group's offering and be a valuable addition to our growing portfolio of
diagnostic services. Medical Solutions and Geneservice bring together
complementary skills which will ensureMedical Solutions retainsits position as
aleading provider of diagnosticand healthcare serviceswithin the UK."
EGM Notice
The Acquisition is conditional upon the approval of shareholders of the Company
in general meeting. An Extraordinary General Meeting will be convened for this
purpose and will be held at the offices of Halliwells LLP, One Threadneedle
Street, London EC2R 8AY, on a date to be announced shortly. A circular to
Shareholders containing further information and a notice of the EGM will be
dispatched as soon as is practicable.
Background and Reasons for the Acquisition
The Group's strategy is to grow its healthcare and diagnostics business through
organic growth from existing operations combined with selected acquisitions and
reinvesting the proceeds from the disposal of its Dubai operations to broaden
the Company's portfolio of products and services. Medical Solutions has built
its business on histopathology expertise and is at the forefront of cervical
cancer screening in the UK, supplying liquid based cytology ("LBC") equipment,
consumables and technical support to NHS Hospital Trusts throughout the UK.
Medical Solutions also has an established diagnostics offering with particular
strengths in immunohistochemistry ("IHC") and fluorescence in situ
hybridisation ("FISH"). The combination of this and an extensive tissue bank,
and providing access to ethical tissue supplies, is a powerful offering for
both the healthcare sector and the drug development community, including
pharmaceutical and biotechnology companies, particularly with accelerating
interest in "targeted" therapies, which require the quantitative evaluation of
relevant biomarkers as part of the drug development process.
To broaden the healthcare and diagnostics offering, Medical Solutions has been
evaluating companies providing complementary or synergistic diagnostic,
prognostic and predictive tests. Much, but not all, of this new technology is
based upon gene expression analysis, i.e. measurement of mRNA levels for
(usually) groups of genes, and using quantitative real time PCR, a technology
which Medical Solutions does not currently possess. The Directors believe that
quantitative real time PCR is likely to be the favoured technology for a wide
variety of these tests for at least 5-10 years, and Medical Solutions has
identified it as being a useful technology and a gap in the Group's existing
offering.
There is significant demand from the pharmaceutical and biotechnology industry
for gene expression analysis in a range of cancers from a range of tissue
types. This is especially relevant to small and medium sized companies who lack
the in-house expertise and capabilities to deliver this type of analysis.
Geneservice is a private company based in Cambridge, UK, spun out from the
Medical Research Council ("MRC") facility in Cambridge on 1 August 2005.
Geneservice has approximately 35 employees, encompassing the management and
scientific teams, with wide-ranging genomic biology experience in gene
sequencing, genotyping and RNA expression. Its primary customer base has been
the academic and charity-funded research sector. Geneservice has a very strong
academic base and company culture, and benefits not only from its close ties to
the MRC, but also from its close physical proximity to a number of the UK's
premier academic and research centres. This has helped the company remain at
the cutting edge of its field, and has ensured the continued, valuable
relationship with major providers of molecular biology hardware such as Applied
Biosystems ("ABI") and Affymetrix, Inc. ("Affymetrix").
The services provided by Geneservice are particularly beneficial to
pharmaceutical companies which require molecular analysis as part of their
pre-clinical research and development programmes as well as the emerging
pharmacogenomic analysis supporting clinical development of therapeutics.
Pharmacogenomics is the study of how genomes affect the way people respond to
drug treatments and can be used to determine/understand, for example:
* patient metabolism of novel and existing drug therapies;
* disease associations and understanding patient predisposition to certain
diseases; and
* disease response to drug therapies.
Medical Solutions and Geneservice bring together complementary skills and
expertise. If Medical Solutions is to retain its position as a leading provider
of diagnostic services, it needs to broaden its portfolio to include the
additional technologies that Geneservice currently employs. Further, the
Enlarged Group will have the clinical expertise and credibility in the
healthcare and pharmaceutical/biotechnology communities that will broaden the
customer base for Geneservice's existing offering.
Benefits of the Acquisition
The Acquisition will have a number of benefits for the Enlarged Group
including:
Expanded service offering and enhanced customer base
Medical Solutions currently provides expert tissue analysis in conjunction with
IHC and FISH analysis for healthcare and pharmaceutical/biotechnology
customers. The acquisition of Geneservice will expand the offering by providing
both DNA and RNA based services, for example providing genetic variation/
mutation detection testing services for both inherited and acquired
characteristics. Medical Solutions has a core pathology and disease expertise
servicing the healthcare and pharma/biotech markets, whilst Geneservice offers
molecular biology and genomic expertise to mainly the academic and research
institution markets. This combination represents a powerful service offering to
existing and potential customers. Also, the customer bases of Geneservice and
Medical Solutions are largely exclusive and there are cross selling
opportunities to offer existing Geneservice products and services to Medical
Solutions' customers and contacts.
Higher value quality service
Medical Solutions is CPA accredited and operates a GLP compliant environment.
The transfer of these quality assurance standards to Geneservice's services and
practices realises significant new markets for Geneservice, particularly in the
NHS, private healthcare and pharmaceutical/biotechnology sector. The Directors
believe that there is only one other laboratory in Europe that is GLP compliant
for gene sequencing.
Human tissue sourcing and onestop shop service
The synergy between Medical Solutions and Geneservice is enhanced as a result
of Medical Solutions having access to tissue (via its own tissue bank and third
party suppliers), both control and diseased, from significant populations of
patients. The archival and distribution infrastructure of the human tissue and
genomic products can also be combined.
Cost benefits
Cost savings can be made in a number of areas largely based on the relocation
of some or all of Geneservice's operations from Cambridge to Nottingham,
consolidation of support functions and restructuring of operational and other
staff. Furthermore, the blend of skills and expertise of Geneservice's
directors and senior staff can create an extremely knowledgeable and effective
team.
Post Acquisition Strategy
Medical Solutions and Geneservice bring together complementary skills and
expertise, which will help Medical Solutions retain its position as a leading
provider of diagnostic and laboratory services. Medical Solutions will benefit
from direct access to the technologies and expertise which Geneservice
provides, and at the same time Geneservice will gain the clinical expertise and
credibility in the healthcare and pharmaceutical communities which Medical
Solutions can provide.
Medical Solutions' reputation for quality and expertise in association with
Geneservice serves to strengthen the Enlarged Group's service offering and
provides further academic kudos. The status of Geneservice as a leading UK
provider of Affymetrix and ABI technology is also important, as it maintains
Medical Solutions' cutting-edge research and technology capability.
Principal terms of the Sale and Purchase Agreement
Pursuant to the Sale and Purchase Agreement, which was executed and exchanged
on 6 June 2007, Medical Solutions has agreed to acquire the entire issued share
capital of Geneservice for an aggregate consideration of �3,855,000 (subject to
an adjustment based on completion accounts) to be satisfied by a combination of
cash payable on completion and secured redeemable loan notes.
The Sellers are the holders of all the issued A ordinary shares in the capital
of Geneservice, representing approximately 70 per cent of the equity, with the
remainder held by numerous individual holders of B ordinary shares in the
capital of Geneservice (predominantly employees of Geneservice). It is a
condition precedent to completion of the Acquisition that the Sellers procure
(by invoking the "come along" procedures contained in the articles of
association of Geneservice) the transfer by the B shareholders to Medical
Solutions, on completion of the Acquisition, of all the B ordinary shares in
issue.
The Sale and Purchase Agreement contains warranties for the benefit of Medical
Solutions which are usual for a transaction of this nature. The Sale and
Purchase Agreement also contains a tax indemnity and specific indemnities given
by the Sellers. The maximum amount of the liability of the Sellers under the
Sale and Purchase Agreement is limited to the total consideration to be
received by the Sellers (i.e. �2,673,370 in aggregate). Medical Solutions has
the right under the terms of the Sale and Purchase Agreement to set-off any
claims under the warranties or indemnities against amounts of interest and
repayments of principal due under the loan notes.
The Acquisition constitutes a Class 1 transaction for the purposes of the
Listing Rules and therefore requires, and is conditional upon, the approval of
the Shareholders in general meeting. Medical Solutions is entitled to terminate
the Sale and Purchase Agreement if the conditions contained therein are not met
or waived by Medical Solutions by 31 July 2007 (or such other date as the
parties may agree in writing).
Proposed Board Appointment
As an integral part of the transaction, it is proposed that Dr Thomas Andrew
Weaver, Chief Executive Officer of Geneservice, will join the Board of Medical
Solutions as Commercial Director. Dr Weaver has extensive experience in
genomics and molecular biology. Prior to joining the MRC, and subsequently
Geneservice, Dr Weaver was Director of Technology Development for Incyte
Genomics Limited. Before joining Incyte, Dr Weaver was Head of Biology at
Hexagen Limited, a genomics company spun out from the University of Cambridge
Department of Genetics. He holds a PhD in Oncology and is a member of the
scientific advisory boards of Cambridge Genetics Knowledge Park, SmartBead
Technology and the UK Bio-Industry Association's panel on Bioinformatics.
Current trading and prospects
Medical Solutions
As stated in the audited Annual Report and Accounts for the year ended 31
December 2006, and announced on 27 March 2007, trading within the continuing
Medical Solutions Group during 2006 improved compared with 2005. Revenue from
continuing operations for the year ended 31 December 2006 improved by 7 per
cent to�6.0 million compared with 2005 and the loss for the year from
continuing operations was �2.3 million, a reduction in loss of �1.3 million
compared with 2005. Moreover, on 7 November 2006, Medical Solutions completed
the disposal of its Dubai operations for a gross consideration of �16.5 million
and net cash proceeds of �13.2 million after transaction costs to date. Net
cash at 31 December 2006 was �15.2 million.
Geneservice
Revenue for the 11 months ended 28 February 2007 improved by 35 per cent to �
2.4 million compared with the period ended 31 March 2006. It should be noted
that the financial statements for the period ended 31 March 2006 are for a 55
week period from the date of incorporation of Geneservice, and as such are not
entirely comparable with the 11 month period ended 28 February 2007.
The profit before tax for the period ended 28 February 2007 was �216,274
compared with �599,063 for the period ended 31 March 2006. However, the result
for the period ended 31 March 2006 included two non-recurring sources of income
following the spin out of the Geneservice business from the MRC during 2006 as
follows:
* the MRC provided a one-off contribution towards business relocation costs
of �50,000 and
* on spin out from the MRC, Geneservice acquired certain trade and assets
from the MRC for consideration of �1. Under IFRS, business acquisitions
have to be accounted for in accordance with IFRS 3 Business Combinations,
and the purchase consideration has been allocated across the identifiable
assets and liabilities acquired. Under IFRS, the excess of the fair value
of the assets acquired over the purchase consideration is recognised
immediately in the income statement in the period of acquisition. The
income statement for the period ended 31 March 2006 includes exceptional
income of �426,838 arising from the recognition of the discount on
acquisition, being the excess of the fair value of the assets acquired over
the purchase consideration after the impact of accounting for deferred
taxation.
If these two items are excluded, the profit before tax for the period ended 28
February 2007 was �216,274 compared with �122,225 (excluding the non-recurring
sources of income) for the period ended 31 March 2006.
The Enlarged Group
There is increasing demand from the pharmaceutical and biotechnology industries
for providers of support services in drug discovery and development who offer
expertise in the more traditional laboratory discipline of histopathology as
well as in situ hybridisation and cutting edge DNA and RNA based genomic
techniques. The addition of Geneservice's genomic based techniques will also
enable Medical Solutions to develop clinical applications for healthcare
providers. With the acquisition of Geneservice, Medical Solutions will be able
to offer the latest diagnostic techniques and broaden both the portfolio of
services it provides as well as the customer base it can serve. The Board
believes that the Enlarged Group will develop and grow in an effective and
controlled manner, delivering value to its shareholders.
Financial information on Geneservice
A summary of the trading results for Geneservice for the 11 months ended 28
February 2007 and the 55 weeks ended 31 March 2006 is set out below.
11 months ended 55 weeks ended
28 February 2007 31 March 2006
�'000 �'000
Turnover 2,418 1,791
Profit before tax 216 599
Net profit 186 512
Total assets 1,406 1,246
Extraordinary General Meeting
Completion of the Acquisition is conditional upon, inter alia, the approval of
Shareholders at the EGM of the Company to be held at the offices of Halliwells
LLP, One Threadneedle Street, London EC2R 8AY, on a date to be announced
shortly.
--ENDS--
About Medical Solutions
Medical Solutions is a fully listed UK based diagnostics and healthcare
business specialising in the provision of pathology and cytology services and
products to the healthcare, pharmaceutical and biotechnology sectors. It has
internationally recognised expertise in histopathology with advanced technology
in image analysis, high throughput quantitative protein expression and
biomarker determination.
About Geneservice
Geneservice is a private UK-based company offering genomic products and
technology services for applications in life sciences and clinical research and
development. It offers rapid access to high quality, leading edge genomic
products essential for manipulating gene and protein function in the majority
of model organisms and offers a one stop shop for many genomic applications. It
has an international market for its products and services and its customers
include academic and charitably funded research institutions, government
laboratories and biotechnology and pharmaceutical companies. Geneservice's
activities fall broadly into four categories:
* Genomic based product
Geneservice is an international distributor for an archive of more than 16
million DNA samples mainly represented as cDNA, genomic, protein-expression,
antibody and RNAi libraries. These resources serve as essential biomarker tools
used for enabling gene structure and gene function studies. Through its on-line
portal, Geneservice can distribute these genomic based products, spanning a
wide range of species, for use in a broad spectrum of life science disciplines.
* Genotyping and sequencing
This is a suite of genetic services whereby DNA can be extracted, banked, typed
and analysed for the customer. Geneservice has established relationships with a
number of institutions and supplies sequencing services to, for example, the
Medical Research Council ("MRC") throughout the UK, as well as the Universities
of Oxford and Cambridge.
* Gene expression profiling
This service revolves around determining how gene expression changes
experimental or pathological conditions. Geneservice applies microarray and
quantitative real time PCR platforms and also provides an "expert analysis"
consultative service for large projects.
* Custom DNA handling and biobanking
Geneservice offers genomic DNA extraction, quantitation, amplification, sample
re-arraying and biobanking of human DNA. Geneservice also provides "whole
genome amplification", a technology enabling the processing of minute
quantities of DNA and RNA from difficult or rare samples, which can then be
sequenced, genotyped or expression profiled.
Appendix I
The following words and expressions have the following meanings in this
document, unless the context requires otherwise:
"Acquisition" - the proposed acquisition by Medical Solutions of Geneservice
pursuant to the Sale and Purchase Agreement
"Board" or "Directors" - the current board of directors of the Company
"Company" or "Medical and Solutions" - Medical Solutions plc a company incorporated
in England Wales with registered number 79136
"Enlarged Group" - the Group following the completion of the Acquisition
"EGM" or "Extraordinary General Meeting" - the extraordinary general meeting of the Company
to be held at the offices of Halliwells LLP, One Threadneedle Street, London EC2R 8AY,on
a date to be announced shortly
"Geneservice" - Geneservice Limited a company incorporated in England and
Wales with registered number 5355417
"Group" - the Company and its subsidiaries at the date of this document
"Nomura Code" - Nomura Code Securities Limited
"Ordinary Shares" or "Shares" - ordinary shares of 2 pence each in the capital of
Medical Solutions
"Sellers" - Roger Turner, Nicholas Leaves and Thomas Weaver
"Sale and Purchase Agreement" - the agreement for the sale of the entire issued share
capital of Geneservice dated 6 June 2007 and entered into between the Sellers
and Medical Solutions
"Shareholder(s)" - a holder or holders of Ordinary Shares
Appendix II
GLOSSARY
The following terms are used in this document:
biomarkers - Biomarkers often refer to substances found in blood, urine or
tissue, changes in which may be used to indicate presence of disease or
response to treatment. More generally the term biomarker refers to any molecule
that can be used to monitor a particular cellular process.
CPA - Clinical Pathology Accreditation
DNA and cDNA - DNA (DeoxyriboNucleic Acid) is a large, complex molecule which, by
virtue of a unique sequence of building blocks, contains all the genetic
information required to create a cell or organism. cDNA (complementary DNA) is
a simplified version of the original DNA, synthesised artificially using an RNA
template (see below).
fluorescence in situ - In situ hybridisation ("ISH") is a powerful technique, not
unlike hybridisation immunohistochemistry (below), for visualising the presence
of specific sequences of DNA and RNA in tissue sections. The technique uses
short synthetic sequences of DNA or RNA which will bind to the tissue with high
specificity for the DNA or RNA of interest. Fluorescent "tags" are attached to
these synthetic sequences, allowing them to be visualised with a special
microscope, even when present at very low levels ("FISH").
genomic products - In this instance, DNA or RNA extracted and purified from a
range of species, and provided in a variety of forms for research purposes.
genotyping & sequencing - DNA sequencing is the process of looking at the precise
order in which the building blocks of the patient's DNA are linked together.
Genotyping, in turn, is the process whereby an individual's DNA is tested for
mutations (single changes in the building block sequence) which might give rise
to disease or other abnormalities. This is normally carried out by sequencing.
Good Laboratory Practice - A set of principles that provides a framework within
which (GLP) laboratory studies are planned, performed, monitored, recorded and
reported.
histopathology - The study of changes in tissues and cells as a consequence of
some disease or toxic process.
immunohistochemistry - Immunohistochemistry is a technique for visualising
proteins and other molecules in thin sections of tissue. This technique uses
antibodies raised in other species against the protein of interest as a tool,
and exploits their exquisite sensitivity and specificity for binding to that
protein.
liquid based cytology - Liquid based cytology ("LBC") is a process for collecting
cytology samples from tissues such as the cervix or the lung, which provides
purer populations of cells, without the other materials which frequently
contaminate the sample such a blood or mucus
quantitative real time PCR - PCR (Polymerase Chain Reaction) is a method for
accurately amplifying DNA and RNA, from vanishingly small amounts into
quantities which allow further analysis and experimentation. Quantitative real
time PCR uses this same amplification principle to measure differences in the
relative amount of these molecules under different circumstances, such as in a
cancer cell compared to a normal cell.
RNA - RNA (RiboNucleic Acid) is chemically quite similar to DNA, but is an
intermediate product between the DNA of the gene, and the ultimate protein
product of that gene. The level of expression of a gene can be gauged by the
amount of RNA synthesised from that gene, a process usually measured by
quantitative real-time PCR (see above).
RNAi libraries - RNAi (RNA interference) is a natural process by which cells
control the expression of specific genes. Harnessing this process is now
recognised as a potentially powerful means of controlling abnormal cells, such
as in cancer. An RNAi library is a collection of short interfering RNA (siRNA)
molecules, which in principle contains a range of molecules capable of
suppressing expression of most genes in a cell.
END
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