Companies: CEL   

Life sciences group Celsis International is proving that providing testing services to the drug and biotech industries can be a lucrative business. The Cambridge-based company, which last year bought US in vitro pharmaceutical and biotechnological testing specialist In Vitro Technologies Inc (IVT) for up to $35 million (£17.5 million), increased pre-tax profits 20.1 per cent to $8.7 million in the year to March on turnover 45 per cent ahead at $47.4 million and, insists chief executive officer Jay LeCoque, there is more growth to come.

LeCoque, who joined Celsis from US healthcare group Baxter International and helped it make its first profits eight years ago, aims to double the fully listed company’s present stock market value to more than £100 million, both by organic growth and by more acquisitions à la IVT. With the support of chairman Jack Rowell, a former boss of the Lucas group, and a board including bioscience entrepreneur Sir Christopher Evans, he is scanning the field for new acquisition opportunities and asserts: ‘We are looking at some very interesting things.’

LeCoque argues that Celsis has been repaying debt, cutting gearing and ‘could reload again’ if the right deal came along. The company’s ‘whole universe’ is in ‘saving customers time and money and we want to keep in that scene’.

The company’s rapid detection division uses proprietary technology to spot contamination, reducing the time needed to test and release raw materials in the production process and finished products. The analytical services arm provides a range of outsourced laboratory testing services, including drug development and discovery, analytical chemistry and biological sciences, and stability storage and testing.

Last year, rapid detection increased revenues a modest 4.8 per cent to $17.7 million, after a first-half drop caused by ‘a temporary slowdown’ in instrument sales. Business picked up in the second half-year and the company has been winning wider recognition, with two ‘Drug Master File’ acceptances from the all-powerful US Food and Drug Administration, which also gave it a pat on the back in connection with its approval of GlaxoSmithKline’s anti-allergy nasal spray, Veramyst.

Analytical services put in a stronger performance in 2006-07, with revenues rising 26 per cent to $20.4 million. The newly acquired IVT, which had previously increased operating profits 70 per cent to $1.2 million in 2005 on turnover up 20 per cent to $11.6 million, contributed $9 million to Celsis’s overall turnover last year.

LeCoque blames the narrowing of pre-tax margins last year on the cost of acquiring and integrating IVT, whose combined intangible assets and goodwill came to $27 million. Celsis, which made ‘no exceptional provisions’, now has high hopes for what it sees as an international market leader and pioneer.

IVT attracted Celsis because of its strong position in markets with encouraging prospects. It seeks to improve client companies’ drug discovery and development by focusing on the growing in vitro ‘ADME-Tox’ (absorption, distribution, metabolisation and excretion) market.

IVT offers a range of tools, including ‘cryopreserved cells’ and enzymes, to reduce potential risks and costs in a market where 50 per cent of drug compounds are estimated to fail during early-stage development because of ADME or toxicity. Celsis sees both opportunities for cross-selling to its own and IVT’s customers and benefits from absorbing IVT’s skills and expertise in the group.

LeCoque says the company has enjoyed a ‘very good’ first quarter, with particularly strong progress in Europe. As yet, Celsis has not paid dividends and he argues that would not be appropriate at this stage in the company’s development, when it is building itself up and paying out for acquisitions

Analysts at broker Numis see pre-tax profits reaching $10.2 million this year, with $12.1 million on the cards for 2008-09. ‘We have grown by commercialising US technology from Cambridge,’ comments LeCoque, ‘and we shall keep on growing organically and by acquisition.’

Celsis	LSE	£33.93m	155.00p	-1.00p
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