TIDMINS
RNS Number : 9423S
Instem plc
22 March 2021
Instem plc
("Instem" or "the Company" or "the Group")
Earnings Enhancing Acquisition of d-wise and Investor
Presentation
Acquisition of clinical trial technology & consulting leader
and Issue of Equity
Instem plc (AIM: INS), a leading provider of IT solutions to the
global life sciences market, announces that, on 20 March 2021, it
exchanged contracts to acquire US-based clinical trial technology
& consulting leader d-Wise Technologies, Inc ("d-wise") for a
total consideration of up to $31m, net of any cash acquired and
adjusted for a normalised level of working capital, to be satisfied
by a combination of cash and ordinary shares in the Company (the
"Acquisition").
Completion of the Acquisition is anticipated to take place on,
or around, 31 March 2021, following the satisfaction of certain
post signing formalities.
Highlights
-- The Acquisition provides the Group with a platform for:
o Growth in software, technology enabled services and high value
consulting
o Broadened relationships with existing clients
o Development of new technology solutions and new revenue
streams
Phil Reason, CEO of Instem, commented: "We are delighted to have
completed this acquisition. Access to a broad array of data is key
to aiding and speeding up drug research and development. We believe
that the enlarged Group is now even closer to becoming a
one-stop-shop for life science companies looking for a long-term
relationship as we assist them across the drug discovery and
development landscape. We have known d-wise for nearly a decade and
have been impressed with their growth, as well as the position they
have developed as highly trusted thought leaders in clinical trial
analysis and regulatory submission technology.
"This is an exciting addition to the Group, significantly
enhancing our scale and market reach. We very much look forward to
building on this as part of our ongoing strategy."
Acquisition Rationale
d-wise adds a market leading position to the Group in an
attractive adjacent area of clinical trial analysis and submission,
with good future visibility through recurring revenue streams and
already contracted, high value consultancy projects. Like Instem,
d-wise enjoys high levels of client retention, opening up the
potential for cross selling of solutions to the combined client
base.
The Acquisition, which is expected to be earnings enhancing in
2021, is an integral part of the Company's transformational growth
strategy. It will enable the Company to deliver solutions that meet
the rapidly expanding needs of life science organisations for
data-driven decision making, leading to safer, more effective
products.
The consolidation of key application areas will help customers
streamline and accelerate their research and development processes,
while access to a broader range of data from across the R&D
continuum will increase the power of future in silico modelling and
predictive analytics solutions.
About d-wise
Founded in 2003, d-wise is a well-respected clinical trial
technology domain expert that advises on and builds clinical trial
analysis & data anonymisation solutions, leveraging open-source
and cloud technologies. d-wise has had a significant impact on the
creation of operational and clinical data efficiencies that have
accelerated clinical trial analysis and regulatory submissions for
19 of the top 20 global pharma companies. It supports its global
customer community through its US headquarters based in the
Raleigh-Durham area, North Carolina along with an additional office
in Manchester, UK. Approximately 70 of the d-wise staff are based
in North America and 20 in the UK or mainland Europe and the Board
expects to broadly maintain this split following the Acquisition.
The d-wise team will join approximately 350 existing Instem
staff.
d-wise has three, market leading lines of business:
-- High value technology consulting, primarily helping clients
to evaluate, implement and manage the next generation of
statistical computing environment (SCE) for large scale clinical
trial analysis
-- A standardised, hosted SCE architecture for small to mid-sized companies
-- A Software -as-a-Service (SaaS) solution and technology
enabled outsourced services, which enable clients to anonymise
their clinical trial data and clinical study reports for internal
and industry data sharing initiatives, as well as to meet the
requirements of government regulators, such as EMA (European
Medical Agency) Policy 0070 and Health Canada's Public Release of
Clinical Information
In the year ended 31 December 2020 d-wise had unaudited adjusted
profit before tax of $3.1m and adjusted EBITDA of $3.6m on sales of
$24.1m. Approximately 30% of revenue was recurring SaaS, hosting
services and software support and maintenance. As at 31 December
2020, d-wise had net assets of $4.8m.
Combined Organisation
The combined strength of Instem & d-wise positions the
enlarged Group as the foremost authority and driving force in
generating, analysing and leveraging data from Discovery through
late-stage Clinical Trials. Instem and d-wise will be poised to
deliver unique value to clients as one, unified, technology-driven
powerhouse.
The d-wise team and its solutions will create a new business
unit at Instem known as Clinical Trial Acceleration Solutions, led
by the d-wise CEO John Leveille (who is also one of the company's
two founding shareholders), with all management and staff to be
retained following the acquisition. Finance and HR functions will
be immediately integrated with the rest of the Group, with the
d-wise Chief Financial Officer retiring after a suitable hand-over
period. Further integration will be phased over a 12-month period
post completion.
Terms of the Acquisition
The total consideration of up to $31m comprises $20m on
completion (the "Initial Consideration"), $8m of deferred
consideration (the "Deferred Consideration") and up to a further
$3m which is payable contingent upon the future financial
performance of d-wise (the "Earn Out"). Further information on the
terms of the Acquisition is set out below. Completion of the
Acquisition is anticipated to take place on, or around, 31 March
2021, following the satisfaction of certain post signing
formalities. A further announcement will be made in due course.
The Initial Consideration is being satisfied by $13m in cash and
$7m in new ordinary shares of 10 pence each in the Company (the
"Initial Consideration Shares") equating to 868,203 shares at a
deemed price of approximately GBP5.81 pence per share . The cash is
being funded from the Group's existing financial resources.
Immediately prior to completion of the Acquisition, d-wise will
become a wholly owned subsidiary of DWT Holdings, Inc ("DWTH"), a
company formed specifically for the transaction, whose shares will
principally be held by the two founding d-wise shareholders. DWTH
will receive 868,203 Initial Consideration Shares as part of the
consideration. Subsequently, DWTH will transfer all of the initial
Consideration Shares to the two d-wise founding shareholders and a
further seventeen (17) employees (collectively "Individual
Shareholders"). DWTH and the 19 Individual Shareholders will be
subject to lock-in agreements covering the Initial Consideration
Shares and any shares issued pursuant to the Earn-out (as described
below).
The lock-in agreements provide DWTH with the ability to
distribute the Initial Consideration Shares and any shares issued
pursuant to the Earn-out to the Individual Shareholders. The
lock-in agreements also provide for the progressive release of
shares from lock-in commencing 4 December 2021, at which point
288,208 Initial Consideration Shares in aggregate will be released.
There are two subsequent dates of 7 June 2022 and 19 March 2023 to
release the lock-in for the remaining shares.
The Deferred Consideration will be payable in two tranches, the
first tranche will comprise $3m in cash and $1m in ordinary shares,
payable on the 12-month anniversary of completion. The second
tranche, comprising $4m in cash, will be payable on the 24-month
anniversary of completion.
The Earn Out comprises $3.0m contingent upon d-wise achieving
certain EBITDA targets in the financial year ending 31 December
2021. If achieved, the Earn Out will be paid as $1.5m on 31 March
2022, in any combination of cash or Instem shares at Instem's
discretion, and $1.5m in cash payable on the 24-month anniversary
of completion.
The number of shares issued in settlement of the Deferred
Consideration and Earn Out will be based on Instem's average
closing share price for the five (5) business days immediately
preceding the relevant future payment date.
Issue of Equity
Application will be made to the London Stock Exchange for the
admission of the 868,203 Initial Consideration Shares to AIM
("Admission"). It is expected that Admission will occur and that
dealings will commence at 8.00 a.m. on or around 14 April 2021. The
Initial Consideration Shares will rank pari passu with the existing
ordinary shares in the Company.
Investor Presentation
Management will be providing a presentation on its acquisition
strategy and hosting an Investor Q&A session at 14.00hrs on
Tuesday 30 March 2021 through the digital platform Investor Meet
Company. Investors can sign up for free and add to attend the
presentation via the following link
https://www.investormeetcompany.com/instem-plc/register-investor
Questions can be submitted pre-event via your Investor Meet
Company dashboard up until 9am the day before the meeting or at any
time during the live presentation.
Phil Reason, CEO of Instem, commented: "More than a growth-based
acquisition, this can truly help us transform the industry
landscape. Our combined capabilities will help us meet the demand
by our clients to create a more connected ecosystem across the life
sciences in the global effort to bring life enhancing products to
market faster. Behind all of the technology is a highly talented,
experienced and motivated d-wise team that shares our mission and
values. They are widely trusted industry thought leaders and
practitioners, committed to delivering an exceptional client
experience.
"d-wise is well known for its drive to transform the life
sciences through open and flexible access to data. It acts as
strategic advisor to many of Instem's existing clients and is one
of the leading IT solution engineering and integration partners in
the market today. We are extremely excited about future
opportunities to leverage wider areas of data and knowledge, backed
by leading technologies and services, to maximise client value in
ways we and the industry have only dreamed of in the past."
John Leveille, CEO of d-wise added: "Our mission has always been
to help our clients navigate technology change in pursuit of human
health and wellbeing. Today is a watershed moment in our journey as
we take d-wise products and services to the next level and achieve
even greater reach and impact. We are excited to be part of Instem,
a growing global organisation of over 400 professionals with a
shared purpose of helping our clients in their life changing
missions."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
For further information, please contact:
Instem plc Via Walbrook
Phil Reason, CEO
Nigel Goldsmith, CFO
N+1 Singer (Nominated Adviser
& Broker) +44 (0) 20 7496 3000
Peter Steel
Alex Bond
Rachel Hayes
Walbrook Financial PR +44 (0) 20 7933 8780
Tom Cooper instem@walbrookpr.com
Nick Rome
Nicholas Johnson
About Instem
Instem is a leading provider of IT solutions & services to
the life sciences market delivering compelling solutions for Study
Management and Data Collection; Regulatory Solutions for
Submissions and Compliance; and Informatics-based Insight
Generation.
Instem solutions are in use by over 500 customers worldwide,
including all the largest 25 pharmaceutical companies, enabling
clients to bring life enhancing products to market faster. Instem's
portfolio of software solutions increases client productivity by
automating study-related processes while offering the unique
ability to generate new knowledge through the extraction and
harmonisation of actionable scientific information.
Instem products and services address aspects of the entire drug
development value chain, from discovery through to market launch.
Management estimate that over 50% of all drugs on the market have
been through some part of Instem's platform at some stage of their
development.
To learn more about Instem solutions and its mission, please
visit www.instem.com
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END
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