STRATEC Biomedical AG (DE:SBSG), a designer and builder of automated OEM diagnostic systems, has announced its intention to acquire an Austrian business that designs and manufactures complex precision consumables for high-end biomedical and diagnostic systems. This is an excellent strategic fit as it will allow Stratec to integrate high-value consumables into system designs and accumulate recurring revenues: Stratec expects a 20% CAGR to 2020 on DADC 2015 sales of €17m. Stratec is experiencing reduced Chinese orders and the guided 5% EBIT of DADC may lower the 2017 EBIT margin to 17%.
Consumables fit into Stratec’s system solutions
Consumables are often taken for granted and seen as low value. In reality, for the advanced new systems now in use, they are an integral part of the test and crucial to accuracy. For example, if liquid biopsy for cancer becomes mainstream, users will need millions of high-precision consumables costing €30-100 each. As yet DADC BioSciences, a Sony subsidiary, is waiting for developed systems, like the Stratec-produced Simoa from Quanterix, to build sales and use rates. Once this happens, Stratec should see major benefits but timing is uncertain. DADC sales are now annualised at €17m with about 5% EBIT margin according to Stratec. This makes the €30m cash acquisition price 1.8x sales and about 25x EBIT (exact figures are not disclosed). This appears a good price for an acquisition with major opportunities and excellent strategic fit. Short term it will limit the EBIT margin.
To read the entire report Please click on the pdf File Below