Due to strict regulatory requirements and the need for approvals, it is difficult to rapidly scale even highly innovative healthcare businesses. Nonetheless over the past 9 months, Avacta (AVCT) has taken huge strides in achieving this goal.
Hot on the heels of the £24m transformational acquisition of Launch Diagnostics Limited in October 2022, which brought distribution coverage across Europe for its cutting edge diagnostics division, it's announced the £7.4m purchase (excluding a £3.0m earnout) of CORIS BIOCONCEPT, a developer of novel rapid diagnostic tests sold via third party channels across Europe (80%), the US (12%) & RoW (8%).
These kits primarily cover respiratory, gastro-enteric and blood-borne pathogens - such as bacteria, viruses and parasites - and are also used in the detection of antibiotic resistance markers. Coris also sells its own COVID-19 lateral flow test, which in future will replace Avacta’s own AffiDX® SARS-CoV-2 antigen LFT, thus optimising group resource and saving on R&D spend.
The £7.4m price tag looks reasonable, too, represents attractive FY22 revenue (£4.6m) and gross margin (50%) multiples of 1.6x and 3.2x respectively. Moreover, once integrated, both cost and sales synergies should be found, based on the reasonable assumption that some of Coris’ volume can in future be serviced by Launch Diagnostics. Coris currently employs 35 staff (with management remaining post completion), and has recently completed the construction of a new 10,700ft2 production, offices and warehouse facility in Gembloux, Belgium.
CEO Alastair Smith commented: "The acquisition of CORIS BIOCONCEPT provides the Group with a broad, professional-use rapid test product portfolio. The deal represents an important step in establishing a full-spectrum in-vitro diagnostics business covering centralised, pathology laboratory diagnostics, as well as decentralised, point-of-care testing solutions outside the hospital setting."
"Antibiotic resistance is a major global challenge and we strongly believe that the market for antimicrobial resistance ("AMR") testing is one with good future growth prospect.”