Uncertainty in the global pharmaceutical market is still taking its toll on Instem, the AIM-listed provider of IT applications to the ‘early development healthcare market’. The company warned today that ‘timing delays in new order placement’ meant revenue and profitability for the year to end of December 2012 are likely to be materially lower than market expectations. Moreover, first half revenue is set to be marginally below that of the same period last year.
Structural changes in the large pharma market are still creating uncertainty and as a result Instem’s clients and prospects continue to defer investment decisions. But underlying demand for its software and the fundamentals of the business appear pretty solid. Instem has a broad customer base (over 130 clients including 16 of the top 20 pharma and biotech companies), high recurring revenues and remains profitable and cash generative (net cash was £1.8m as at 30 June 2012, up from £1.3m the same time last year). It can point to several large multi-site prospects in the pipeline and has just completed the last major phase of the redevelopment of its core Provantis product suite, which ought to stand it in good stead longer term. In the short term, however, the outlook is far more uncertain and the Board rightly cautious.