Avacta Group PLC on Tuesday announced a £62.0 million fundraise, which will be partially used to finance its acquisition of Launch Diagnostics Holdings Ltd for up £37 million.
Launch Diagnostics was founded in 1990 and is headquartered in Longfield, Kent, with a French subsidiary and operational hubs in Ireland, Belgium and Luxembourg. It is an independent distributor in the in vitro diagnostics market within the UK.
Avacta, a clinical stage oncology drug company, said it will pay £24 million upfront on a debt-free, cash-free basis, with an earn-out based on future business performance capped at £13 million.
The earn-out is based on 50% of the gross margin on sales exceeding £2 million per annum of Launch Diagnostics’ Covid-19 related products for three years, Avacta explained.
Avacta said that the acquisition is part of its merger and acquisition-led growth strategy for its diagnostic division. It expects this to be a ‘significant’ commercial opportunity in the EU and UK markets.
The global IVD market is projected to reach sales of $113.1 billion by 2026, which comprises a wide range of test products into multiple healthcare settings from hospitals to home testing, Avacta explained.
In 2021, Launch Diagnostics generated £14.2 million of non-COVID-19 related revenue, with total revenue including Covid-19 related products of £32.8 million. It reported £9.4 million in pretax profit
Chief Executive Alastair Smith said: ‘This acquisition will add an established distribution channel to Avacta with three decades of customer relationships and deep market knowledge to drive future product development, strategy and growth. It is the landmark first step in our ambitious M&A-led growth strategy for Avacta’s diagnostics division that has been a year in the making.’
In a separate release early Tuesday, Avacta said it plans to raise around £62.0 million from a £5.0 million share placing, £2.0 million open offer, and £55.0 million sale of convertible bonds.
It plans to place the new shares at an issue price of 95 pence per share. This represents a 4.0% discount to Avacta’s closing price of 99.00p on Monday.
Shares in Avacta were down 1.3% to 97.70 pence each in London on Tuesday at midday.
The open offer shares will also be at the issue price.
The company said that the convertible bonds will be conducted with an issue price of 95% of the principal amount, resulting in gross cash proceeds of £52.3 million.
‘The funds raised pursuant to the fundraise will also provide Avacta the balance sheet flexibility to continue to execute an M&A led growth strategy for its Diagnostics business, invest in those acquired businesses to drive growth, and to provide working capital for the wider Avacta group,’ the company said.
Later on Tuesday, Avacta said it had placed 7.4 million new shares, raising around £7 million.
Chief Executive Alastair Smith said: ‘We are delighted to announce the successful financing and would like to thank all of our existing and new investors for supporting the company in connection with the strategic acquisition of Launch Diagnostics.’
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