The potential for growth is enormous here with the added incentive of Roche involvement

Osmetech wins $700,000 sales deal in China
By Marianne Brun-Rovet
Published: April 29 2003 12:07 | Last Updated: April 29 2003 12:07


Osmetech, the manufacturer of "electronic nose" sensors for healthcare applications, has secured a sales deal with China to assess Sars patients.


The deal, worth an initial $700,000, will use Osmetech's OPTI blood gas analysers to aid in the monitoring of Sars, which has so far infected more than 2,000 people in China.

James White, chief executive, said the deal with China was "a bit of a moving feast" as the government increased orders by the day. "There has been some interest from other governments in the region but there is much uncertainty."

The OPTI analysers are portable instruments incorporating optical sensors for blood gas, electrolyte and metabolite analysis. One of the instruments can be used for measuring the oxygen saturation and acid-base balance in Sars patients. Osmetech said this would be particularly useful in cases where treatment required the use of a ventilator of supplemental oxygen therapy.

The instrument can also be used to detect blood gas variations that frequently occur in Sars patients, but Osmetech said it was not a diagnostic tool. Osmetech acquired Roche's Atlanta-based OPTI product line of blood gas analysers in a deal worth $3.5m three weeks ago.
Tris

from another poster on the light side :0) with thanks.

Osmetech
Remains as: OUTPERFORM
2.6p (12m range: 15.75-1.75p)
Acquisition and company update 5 March 2003

Business:
Development of point of care diagnostic products with a focus on infectious disease

Dr Ceri Morgan
+44 (0) 20 7071 4355
ceri.morgan@evbg.com
Sales: Russell Kerr
+44 (0) 20 7071 4424

Company description
Osmetechs core IP uses polymer sensor array technology to detect
volatile metabolites. It has received FDA approval for two of its
products exploiting this technology. Its recent acquisition has
expanded its product base into blood gas analysers, which are sold
into the same market as the targeted position for its core products.

Market position
Osmetech will be first to market with its POC instrument to screen,
diagnose and differentiate between the five most prevalent vaginal
infections. Prior to the acquisition, OPTI held a 1% share of the
$780m blood gas analyser market.

Asset based deal fits
The assets based deal to acquire the point of care blood gas analyser
product line, OPTI, from Roche introduces strengths into the company.
The deal includes the installed base of blood gas analysers
(approximately 4000), with the associated reagent sales, a manufacturing
facility, and 50 employees comprising sales, marketing and R&D teams.
Clearly a tie up with a major diagnostics company, Roche, is good news
for the company and with Roche expressing first distribution refusal
rights on a handheld device (currently in development with an expected
launch 2005/6) it has a vested interest in the future success of this deal.

Cost saving opportunities
There are a number of synergies with this acquisition in which Osmetech can make a number of cost savings. The associated project costs of the VIP5 (point of care vaginal infection) device are expected to reduce by 25% with its launch expected CYE 2004. Additional 30% savings are expected in the overall group with manufacturing, R&D, sales and marketing integrations.

Market share to be gained
The OPTI line has already established a 1% share of the $780m blood gas
analyser market despite not being the lead product for the two years
under Roches control. With focused attention from Osmetech, we
should expect to see the OPTI line achieve profitability FY04
consequently bringing forward the groups profitability and cash
generation timescales. We expect sales of OPTI to facilitate the sales of
VIP5 product as both products share the same targeted market (hospital
casualty departments). Roche division had a large US presence.
Osmetech therefore gains immediate access into the largest geographical
market for point of care.

Roche stands by deal
Whilst it has been difficult to split out historical data surrounding the
OPTI product line, the commitment from Roche post deal encourages
confidence. The next set of results (FYE April) will be an opportunity to
guide us on the integration progress. We remain optimistic of the
acquisitions success.

The story so far
Historically, Osmetech was an R&D focused company. The core technology is
based upon conducting polymer sensor array technology that allows the
detection of volatile metabolites, (compounds produced when microorganisms
metabolise). The acquisition of the OPTI product line has transformed the
company into a revenue-based company with an R&D division. We now have
earnings visibility.

This origional platform technology has a number of potential applications e.g.
urinary tract infections (UTI), bacterial vaginosis (BV) and pneumonia.
Osmetech believes that both the clinical and economic opportunity is with the
VIP5 product. Osmetechs strategy is to exploit the Point of Care (PoC)/ near
patient diagnostic market specialising in infectious diseases. Point of care is the fastest growing division within the diagnostic market. Moreover, growth of infectious disease testing is estimated to be 2-4x faster than the next growth division.

Osmetech has received FDA approval for two of its devices, UTI and more
recently BV. The BV test is the first component of five within the VIP5 device to gain regulatory approval. We expect regulatory approval for the remaining
tests to be relatively straight forward and expect updates during 2004.
VIP5 Launch of the VIP5 product is expected Q4 04/Q1 05.

The associated 700k development costs with this device are expected to reduce to 500k post acquisition per year. This product will be the first of its kind to reach the market. Of the $19.5 billion diagnostics market, vaginal infections represent an approximate $1.4 billion opportunity.

The VIP5 device is single platform POC instrument which can be used to diagnose and differentiate between five of the most common vaginal infections. It is often difficult to distinguish clinically the difference between the top five infections, thus the patient is often treated blind i.e. without a definitive diagnosis.

This can lead to inappropriate treatments in particular, over prescribing of antibiotics. A near patient diagnostic kit would allow fast diagnosis and thus appropriate treatments with obvious economic benefits.

In the US, the diagnosis and treatment of such infections occur in a number of
settings; the physicians office, specialist clinics, and the large majority in the casualty departments. In the insurance led healthcare system of the US,
casualty departments are primary care centres. Thus unlike in the UK, the first
point of call for many patients with STDs is this department. Due to public
health implications of such infections, once diagnosed (or suspected), the
patient must be treated.

Prior to the acquisition, Osmetech lacked any sales and marketing expertise.
The acquisition has introduced a sales and distribution infrastructure whereby,
because of product synergies (potential use in the same hospital departments)
VIP5 can be sold alongside OPTI.

UTI
We await news regarding a partner for the commercialisation of this product.
The UTI device received FDA 510 (k) approval November 2001 and is aimed at
replacing the current definitive culture based test. Osmetechs device can
provide a 15 minute diagnostic time much reduced from the 24 hour culture
test. Osmetech intends to license out the UTI test and is currently in
discussions with a number of potential partners to manufacture and distribute
the product. We expect Osmetech would sacrifice higher royalty payments for
a larger upfront payment. We have not introduced any anticipated deal within
our current forecasts for this product and await an update from the company.

Roche Divisional Acquisition
The asset based acquisition of the blood gas analysis line (OPTI) from Roche
for $3.5m, gives Osmetech an immediate revenue line and an operational cash
advantage to support its core activities. The accumulative benefit of an R&D,
sales and marketing team with manufacturing facilities, allows substantial cost
savings to be made.

In total 800k savings are expected for the combined group during 2004 FY. Synergies within the R&D and manufacturing divisions are likely to reduce burn related to the VIP5 device by 25%. We have forecast that the OPTI division alone to become operationally profitable in 2004.

As a combined group, we now forecast (CYE) EBITDA positvity 05 (previous 06),
cash generation early 06 (previously 07). To achieve these figures, we are
looking for Osmetech to sell at least 600 analysers per year.

Roche has shown its commitment to the deal. It will invest $1m in Osmetech
via a subscription for new shares. Furthermore, Roche has retained first refusal to distribute the OPTI IV handheld device, a development product, which is expected to come to the market 2005/6. This commitment from a major
diagnostics company is good news for Osmetech and recognition of its
confidence in the success of this acquisition and new product developments.

The products
Blood gas analysers are used to establish the levels of oxygen, carbon dioxide
and bicarbonate in addition to blood pH. The results of which, gives an
indication to the effectiveness of respiration. Such measurements are crucial for diagnostic evaluation and the management (quantifies the patients response to therapeutic intervention) of severely unwell patients e.g. severe respiratory conditions, and ventilated patients.This is a $780m market.

Over 65% of US analysers are found on the intensive care units within
hospitals. We believe such devices should be necessity devices within hospital
respiratory and casualty departments Portable OPTI equipment allows near
patient testing and can easily supply departments outside intensive care. OPTI
has a 5% share in the POC segment of this market so far. We believe there is
more market share to be gained.

Roche acquired its POC OPTI line together with a laboratory based OMNI
blood gas line in 2001. The OPTI line under Roche was used as a closing tool
for sale of the lab line and neglected as a product with its own opportunities.
Approximately 4000 instruments have been placed in hospitals. This installed
base has also been acquired by Osmetech. Within the first year of the
integration, Osmetech has forecast 33% sales of new instruments (capital
equipment purchases, not placed) and 66% sales of the consumables. We
would expect the ratio to weight more in favour of consumables after the
transition year.

It is difficult to gauge the growth of this acquisition since it has
been split away from a combined cost and revenue base. However, we can
safely assume revenues from the installed analyser base and receive confidence
that Roche, with a vested interest in its success, has not simply walked away
from this business.

Thanks K

M

Interesting post from another site....hope he wont mind ( rob molloy - 12 May'03)

There is no disguising an element of good fortune for Osmetech in the way the SARS panic has boosted sales of the new OPTI acquisition. The management, though, can claim some credit. Chief executive James White and his board obviously found a promising revenue-generating opportunity when they agreed to buy OPTI.
It has always looked a good, low-cost acquisition. Before the SARS revenue boost, it looked as if the purchase could be pretty much self-financing in the first year. It cost $3.5m before Roche ploughed $1m back into buying 21.8m (4.4%) Osmo shares at around 2.8p each. The prospective annual revenue of $7.5m will be boosted significantly by the orders from the SARS panic which will have cleared stocks.
Cash should come in quickly. The Chinese have been waiving usual bureaucratic nonsense in an effort to get as many of the machines into the country as quickly as possible. The $700,000 sales reported now could be the first of a nice little boom. Other Asian countries are potential buyers, and there must be more to come around the world. Crucially, a good chunk of the order comes in the form of consumables. Some 2/3 of OPTI's annual revenues are in consumables, so anything which boosts the population of machines should generate an improved repeat flow of consumables. The panic has obviously boosted consumption of consumables in the established community of machines.
There appear to be no problems in producing machines to meet orders.They are used in emergency rooms, critical care, and operating rooms, and require relatively little training for the operators.
OPTI is clearly set to build a valuable ongoing revenue stream for Osmo, cutting back the cash burn as development of the eletronic nose devices continues. Follow-up tests continue encouraging, and there appears to be no significant rival product out there. It is important, however, to bundfle several tests into one in order to establish maxiumum penetration of the bv device.
The estimate of a pre-tax loss of 3.2m for the year to April 2003 is unchanged, but the estimate of a loss of 2.6m for the current year is "under revision".
originally written by M. Walters 09/05 and taken from the MWBB.

What I cannot understand is despite all this apparent good news for OMH we still see the stock falling in value. Why, when thre is so much to look forward to , is this the case? I bought on the 14/4/03 at between 2.48 and 2.55 and have seen the bid price according to selftrade drop back to 2.5 today

Whats everyones view on this stock now? Has it peaked or is there any good news to come? The price has fallen rapidly of late! Getting a bit worried as i'm in at 3.05!

tris is renowned for picking duds


( an in joke by the way )

RS4GW

I'm in with nearly 1/2 million at a average 3.35p and i'm not worried in the least, these are not going anywhere far (north or south) untill the results, last year they were on the 8 July so around that date. I know you never can tell but i think that the results and news are going to be great!!

lol Rod...this time next year etc etc :0)
Tris

Thanks Tris, i'm in with 350,000, have you anything on your hunch that the results will be good? (nice to see Rod has faith !! :o) ) They should certainly have much better results than last year, i think its just a question of weather the city has already anticipated that! Any idea where i can find out hen they are anounced?

wouldnt mind a few of these but as is so usual with penny stocks, the spread is a real killer .

JOBS LOST IN FIRM'S U.S. MOVE

DAVID ELKS

12:00 - 02 July 2003

A Medical research company has shut down its South Cheshire headquarters, despite winning 900,000 of orders for technology to help fight the deadly Sars virus. An undisclosed number of staff at Crewe-based Osmetech have been made redundant after the company transferred its research operations to America.

The news comes as the company reported a boom in sales of a blood gas analyser to China over the past month to monitor patients with Severe Acute Respiratory Syndrome (Sars).

A spokesman for Osmetech, which employs 38 staff at the town's business park, said the decision followed a 2.2 million deal to take over pharmaceutical giant Roche's sensor division OPTI in March.

He said: "When they bought the company they also took on about 50 new staff involved in research and marketing.

"It was felt that Osmetech is still a fairly small company and having research operations split between the two sites was not efficient."

Following the move, the majority of research will now be conducted at OPTI's headquarters in Atlanta, while the company's registered headquarters has shifted to London.

This will enable the company to continue its listing on the London Stock Exchange's Alternative Investment Market. The executive directors will also be based in London.

The spokesman said that a number of workers in the North-West of England will remained involved in research while working from home.

The news comes as the company confirmed it had picked up 910,000 of orders for its equipment following the Sars virus outbreak in the Far East.

The handheld device cannot diagnose the virus, although it has optical sensors which can measure vital bodily conditions during treatment of its pneumonia-like symptoms. It measures blood gas, electrolyte and metabolite levels and can be used for measuring the oxygen saturation and acid-base balance in Sars patients.

Osmetech said this would be particularly useful in cases where treatment required the use of a ventilator for "supplemental oxygen" therapy.

The deal will help Osmetech, which is estimated by analysts Evolution Beeson Gregory to suffer losses of 3.2 million in the current financial year, push its way towards profitability. The orders received this month are already 10 times higher than the last financial year.

In January the company confirmed it had won approval from the U.S. Food and Drug Administration for its sensor, which uses electronics technology to 'sniff' out bacteria which can cause miscarriages - a market worth between 900 million and 1.2 billion in the U.S.

The group cut losses by 20 per cent to 533,000 in the six months to January and is due to report its annual figures on July 30.

david.elks@thesentinel.co.uk

from another board ... quote


"Just spoken to David Sandilands he confirms USA rumours ... to cut a long story short this will SPEED UP product development, CUT OVERHEADS AND COSTS further and is seen by the company as an excellent move forward. He sounded extremely happy and full of it, positively brimming at the success of the OPTI device so far (and hinting that it is being very sucessfully sold for Non sars countries as well) and I got the distinct impression we are going to hear a lot of bullish things in the results at the end of the month. He also said that now money is being generated, the risk profile of the company has fallen considerably and they intend on having a big drive in attracting Institutional investors both in the UK and the USA - noting that the company are indeed frustrated by the lack of share price movement".

Osmetech says further China orders brings OPTI total sales to 1.5 mln usd
null


LONDON (AFX) - Osmetech PLC said further orders for Osmetech OPTI blood gas analyser instruments and consumables from China have been received and shipped bringing the total to approximately 1.5 mln usd, principally comprising instrument sales.

This increases the installed base of instruments in use throughout the world from which future reagent sales will flow, the company said.

The company also said it will be releasing results for the 12 months to end-April on July 30.

newsdesk@afxnews.com

slm/

Link to Michael Walters site, open to non subscribers following the theft of his server in New York. Good write up on OMH

http://www.michaelwalters.com/comments.phtml

His site will be restricted soon !

cheers Loafy.see your dyor.its a big help to many a lurker. I'm sure they appreciate your efforts..well done
Tris

Tris !!

have you been on your hols ?

what about the American move, got to be good (post 42)

Hi loafy. Dont post here much these daysI remain very optimistic for OMH long term, as you know the MMs manipulate this one of late. Our frustrations should soon be over
pushing its way towards profitability. The orders received this month are already 10 times higher than the last financial year.

Guess we need to see those results pdq..beware tho loafy the MMs will have there pound of flesh given the chance!long term no problemo :0)
Tris