Medical testing kit company Immunodiagnostic Systems (IDS) saw its share price rise to a 14-month high after announcing a distribution deal with a Chinese firm.
The Boldon business, which creates testing kits for the clinical and research markets, has appointed Beijing Leadman Biochemistry Technology Co as distributor for its IDS-iSYS product, an automated testing kit which can diagnose a range of diseases within hours.
The announcement is welcome news for investors in the firm – which listed on the Alternative Investment Market (AIM) in 2004 – as it follows three profit warnings and last month’s announcement that it expects revenues to be lower this year as its market continues to tighten.
The company, which employs 100 people, says clinics and laboratories are gradually turning away from using manual testing kits, which make up around two-thirds of IDS sales, and buying the automated variety, prompting them to focus more on their iSYS product. Teaming up with Beijing Leadman in the three-year distribution deal is the second such deal made by IDS in successive months coming after its agreement with Omega Diagnostics Group to give it exclusive rights to distribute that company’s allergy tests on the iSYS worldwide, meaning it can work its way into more countries including the US, Germany, France and Scandinavia.
A positive reaction to yesterday’s news was reported on the stock market, when the IDS share price rose to 356p – peaking at one point at 360p, its highest price since February 2012.
While yesterday’s announcement was pleasing for the Boldon-firm, chief executive Patrik Dahlen does not expect to see results from the partnership until financial year 2013 because the agreement won’t commence until the China Food and Drug Administration approve the IDS-iSYS instrument and the first IDS assay, a process which will take between 12 and 14 months.
Sales for the year to the end of March are likely to be around £49.8m, down from £53.7m in the previous year, in line with its expectations and the first fall since the company listed on the AIM nine years ago. But analysts predict turnover to rise above £50m in the coming year.
IDS’s iSYS kit tests for bone metabolism issues, growth deficiencies and disorders and hypertension related to heart problems, while Beijing Leadman Biochemistry Technology’s products are used in the thyroid, tumour, fertility, cardiac, diabetes and infectious disease areas.
As part of a research and development agreement, Beijing Leadman will adapt the iSYS so it can be used for tests within these health areas.
Chief executive Patrik Dahlen said: “For a while we have been looking at the Chinese market as a large and growing market for the diagnostic industry. It’s an industry that’s growing much faster than the rest of the world.
“I think the share price has been stabilising for a while now. We had three profit warnings in a row and the confidence in our path forward was not so clear to our investors so they discounted us for a while and we traded below par.
“Confidence is coming back to IDS and our immediate future. This announcement is certainly evidence that we are broadening our strategy of diversifying our geographical spread, but also we are looking to diversify away from the vitamin D test that has been our focus for many years. This is why they are reacting positively. It’s another step in the right direction for us.”