What the company does

Instem PLC (LON:INS) develops and sells software that aids data collection and the regulatory submission process for drugmakers.

In short, its tech helps its customers to bring their products to market faster.

The AIM firm owns more than a dozen software applications, including its flagship SEND technology. SEND stands for Standard for the Exchange of Nonclinical Data and is a protocol set up by the US Food and Drug Administration. It ensures that companies present data in a consistent format.

Among Instem’s other top products is Samarind – a software-as-a-service (SaaS) platform that enables companies to register and track their regulated products worldwide by maintaining a single integrated database, which is then used to update drugs watchdogs as products change over time.

Leadscope, which has developed a suite of products that use sophisticated artificial intelligence and machine-learning algorithms to predict potentially harmful drug side effects, was acquired in November.

 

How it is doing

In January, Instem reported that all areas of the business had done well during 2020 with revenues more than 11% ahead year-on-year and recurring revenues growing strongly as it makes the transition to software-as-a-service (SaaS) model.

There was an “excellent first full-year contribution” to the Informatics area from the November 2019 acquisition of Leadscope, it added.

Organic growth opportunities remain, especially within SEND (Standard for Exchange of Non-clinical Data) exploitation, as customers look to leverage their valuable historic studies for more efficient and effective research.

The company ended the year with net cash of £26.7mln.

In March, Instem acquired software group The Edge for up to £8.5mln.

The acquisition is expected to be earnings enhancing in 2021, Instem said, adding that it will also broaden its presence in the discovery study management market.

The Edge’s expertise is to make sure data from experiments is efficiently captured, stored and shared between scientists and technicians helping to reduce the time required to market a drug.

 

What the boss says: Phil Reason, chief executive

“The Edge has an excellent reputation with its clients and we believe their suite of products, and scientific and technology know-how will further enhance our industry reach and standing.

“We are particularly pleased to extend our coverage in Bioanalytical / Drug Metabolism & Pharmacokinetics, both of which are hugely important across other phases of R&D that Instem targets.

“Additionally, we continue to evaluate a number of potential acquisition opportunities and are well placed to build on this very exciting addition in due course.”

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What the broker says 

N+1 Singer said The Edge is a highly complementary bolt-on, further extending Instem’s offering into a closely adjacent market and offering substantial potential revenue synergies over time.

“There are a number of opportunities to drive revenue by leveraging Instem’s global infrastructure and sales and marketing capabilities,” said the broker, which has raised its 2021 and 2022 forecasts by 8% and 15% respectively.

“Instem is one of our Best Ideas for 2021 and we see the acquisition as adding to an already positive organic growth outlook.”