I just had to chuckle. There it was, nestling in its maiden P&L after its (re-)listing on the London Stock Exchange. Pharma and biotech industry analytics software firm, Instem Life Sciences, had included a ‘non-recurring cost’ associated with the opening of its China operations – a £0.24m sum which included ‘management time’. Wow – that’s the first time I’ve seen organic growth alluded to as ‘non-recurring’.
But I digress.
Many long-time HotViews readers (in all its current and prior incarnations) will know Instem – and if you don’t, here is a good place to start. They play in a highly fragmented market which they estimate has about 80 players sharing some $500m in opportunity – small pickings for each player. So with FY10 revenues (to 31st Dec.) flat at £10m ($16m), Instem probably figures among the top ten by sales.
Although the market in which these players operate is apparently growing, Instem’s distinct lack of organic growth clearly points the direction of travel. Indeed, when I spoke to Instem's extremely affable CEO, Phil Reason and CFO Jim McLauchlan just a short while ago, it was pretty clear that acquisition number two is not that far off (see Instem finds bio wisdom in BioWisdom for acquisition #1!).
I have to say, I think I have found a natural target for them (or perhaps vice versa!) in privately-held IDBS (see Onwards and upwards for IDBS), a company we like to think we brought to the market’s attention almost exactly a year ago. IDBS’ revenues are nearly four times larger than Instem’s and it seems to have very complementary products (to my distinctly untrained eye). Not surprisingly, Reason is well aware of IDBS - indeed it appears on his M&A target ‘wheel of fortune’. But I got the distinct impression he thought there were other prizes to go after first.
Well, I wonder if it might actually be worth giving the wheel a quick spin in the other direction?