MedaPhor acquires Inventive Medical, as it announces sales growth

MedaPhor have announced the acquisition of Inventive Medical Limited (IML), a UK company which is the global supplier of cardio ultrasound simulation products under the HeartWorks brand, for a total consideration of £3m payable in shares (MedaPhor, 2016).

IML’s HeartWorks simulators and online training materials have been developed by leading cardiac anaesthesiologists at University College London Hospital and are owned by the University College London Hospitals Charity. They are recognised as one of the most true to life and comprehensive simulation tools for transthoracic and transoesophageal echocardiography training. Using HeartWorks, medical practitioners can learn, through interactive online content, the complete anatomy of the heart, viewing it from all angles and recognise patient cases with pathological conditions. They can then practise acquiring ultrasound images though correct probe positioning on a manikin-based simulator, interpret those images to determine correct diagnosis and treatment, and finally be tested to ensure that all required competencies have been achieved to the highest standard.

On June 24th 2015 MedaPhor announced a new collaboration with IML. This was the first step in an association that has resulted in the acquisition of IML by MedaPhor. IML’s HeartWorks simulator is used in cardiology related ultrasound training (echocardiography, cardiac anatomy and lung ultrasound) and is a complementary technology to MedaPhor’s ScanTrainer simulator which specialises in female pelvis (obstetrics and gynaecology) and upper abdomen (general medical and emergency medicine) ultrasound training. This strategic partnership focussed on lead generation and joint marketing opportunities that required full torso ultrasound scanning solutions. The acquisition of IML will enable this positive collaboration to be developed even further.

MedaPhor entered into a sale and purchase agreement on August 2nd 2016 with the incorporated trustees of University College London Hospitals Charity and certain option holders to acquire IML and the benefit of shareholder loans owed by IML totalling £2.7m. The £3m consideration will be satisfied by the issue of 6,976,745 new ordinary shares in the company at 43 pence each, representing 20% of the enlarged share capital of the company.

The issue of one third of the consideration shares will be deferred for 12 months and the issue of these shares will be contingent on no seller warranty or indemnity breaches, as specified in the sale and purchase agreement, arising during that 12 month period. Each of the sellers has agreed not to dispose of their consideration shares, except in certain limited circumstances, for a period of 12 months from completion. Application will be made for admission of 4,651,164 of the consideration shares to dealings on AIM and it is expected that admission will occur on August 8th 2016 when the transaction will complete. Following admission and completion of the acquisition, the total number of voting rights of the company’s ordinary shares will be 31,898,576.

The Directors believe that the enlarged group will benefit from the addition of a complementary suite of ultrasound training products, an expanded sales team providing wider coverage across the US, UK and Europe, a larger combined reseller network and cross-selling opportunities across a wider customer base and enlarged revenues.

For the year ended March 31st 2015 IML recorded audited revenue of £1.9m and a loss before tax of £0.3m. The net liabilities of IML at March 31st 2015 were £1.2m. The pro-forma completion balance sheet for IML has net assets, excluding intangible fixed assets and inter-company indebtedness to its sister company, of £0.3m. The Directors believe that, while the acquisition may result in a greater working capital requirement initially, the investment will be earnings enhancing in the short to medium term and net funds of £3m raised by the placing of MedaPhor shares in April 2016 are still expected to finance the enlarged group through to profitability and positive operating cash flow for the combined business (MedaPhor, 2016).

Commenting on the acquisition, Stuart Gall, CEO of MedaPhor, said:

Having worked closely together for a year, both teams have recognised the opportunities that a closer alliance will bring, not just in combining sales and reseller networks and cross-selling across our customer base, but by offering an integrated and complementary solution. Increasingly, medical simulation centres are requesting full torso ultrasound training and we believe the coming together of our two technologies paves the way for this to become a reality for clinicians seeking to acquire the highest levels of competence in ultrasound practice.

Ian Whittaker, CEO of Inventive Medical, said:

It is tremendously exciting that Inventive Medical will now be part of the Medaphor Group and without doubt great news for customers. Together, we look forward to sharing our expertise in simulation practice and continuing to drive innovation in ultrasound education for the benefits of clinicians needing to develop competence in such skills and ultimately the patients they will serve [MedaPhor, 2016].

The announcement comes as MedaPhor also made an announcement, containing inside information, that its unaudited half year results to June 30th 2016 show sales increased 17% to £1.26m, compared to £1.08m in H1 2015. The cash balance at June 30th 2016 was £3.5m, compared to £1.3m at December 31st 2015.

Commenting on the results, Riccardo Pigliucci, Chairman of MedaPhor, said:

This has been an excellent period of trading for MedaPhor. The agreement with the ABOG, the successful £3m fund raising and the acquisition of HeartWorks; combined with our growing sales, encouraging pipeline and expanded sales team in the US; all point to an exciting future for the Group.

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