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Additional	Information
Market:	LSE
Sector:	Pharmaceuticals
Epic:	ATD
News:	Latest news
Web Site:	Asterand
Other Articles:	18-02-201009-02-201004-02-2010

Asterand to buy US drug discovery services group BioSeek, 9 mths trading ‘encouraging’

Asterand PLC (LSE: ATD) reported encouraging trading for the first nine months of the financial year and announced it plans to buy privately-held drug discovery services company BioSeek Inc for up to US$14 million in cash and shares, dependent on sales performance in 2010.

During the nine months to September 30 2009, Asterand achieved revenue of £9.1 million, up from £8 million in the corresponding period last year. Cash resources stood at £5.2 million as at September 30, compared to £5.8 million a year earlier.

Asterand provides  human tissue and human tissue-based services to pharmaceutical and biotechnology companies engaged in drug discovery research.

Chief executive Martyn Coombs commented: "These results, when many CROs (Clinical Research Organisations) are reporting retraction, are encouraging.  However, we are seeing some changes in the buying behaviour of some of our largest customers - whilst demand for human tissue is increasing, some customers appear to be delaying larger purchases, or breaking larger purchases into smaller units bought over time.  This may restrain Asterand's growth over the coming quarter."

The proposed acquisition of BioSeek will be Asterand's first step in its "buy and build" strategy to consolidate leadership in the global human tissue and human tissue based services market. It believes  BioSeek is highly complementary to Asterand's business in terms of both products and services offered.

Asterand signed an agreement to buy BioSeek for an initial US$1.0 million in shares and a further up to US$13 million in 2011 depending on the level of sales growth achieved by BioSeek in the twelve months ended December 31 2010.  The the first US$3.0 million of such payment will be made in Asterand shares, and any additional payment will be in cash or shares, at Asterand's discretion.

BioSeek is has developed proprietary human primary cell based, high throughput assay systems (BioMAP) designed to replicate the intricate cell and pathway interactions present in inflammatory, autoimmune and cardiovascular diseases. The system predicts clinical activities of a potential drug candidate through comparison of assay results to a proprietary database of data profiles for known compounds. The BioMAP platform provides pharmaceutical companies with actionable data to guide their lead selection and optimization programmes.

BioSeek is located in South San Francisco and has 14 employees.

In addition to service revenue, BioSeek's growth has been financed by venture investors Bay City Capital and Fremont Ventures and a research collaboration and strategic investment by Amylin Pharmaceuticals Inc (Nasdaq: AMLN).  In addition to Amylin, BioSeek has had collaborations with numerous pharmaceutical and biotechnology companies including Merck-Serono, UCB, and Dainippon Sumitomo.

Asterand intends to maintain the South San Francisco site and staff, and BioSeek's key managers will be joining Asterand's senior management team.

In the year to end-December 2008, BioSeek reported revenues of US$3.2 million and a pretax loss of US$4.1 million. The audited value of the gross assets being acquired is US$10.1 million.

BioSeek's sales to date have been achieved with limited resource - Asterand brings scale to the selling process. Asterand has strong connections with many pharmaceutical companies where BioSeek has historically had little or no exposure or penetration. This expanded global sales coverage should increase awareness and adoption of BioMAP. The platform is automated and easily expanded, and investment has been made in equipment and facilities so that additional demand can be met with relatively smaller additional costs.

Asterand anticipates that the proposed acquisition will be marginally loss-making or break-even in the first year of ownership and will increasingly contribute to earnings thereafter.

At the end of August, the company issued its first half results, showing revenues climbing 28 percent year-on-tear to £6.6 million, which, combined with a higher gross margin, led to a first half profit of £0.08 million compared with a loss £0.06 million previously. It also posted positive earnings before interest, tax, depreciation and amortisation (EBITDA) of £0.4 million, against a loss £0.08 million in the previous first half.

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