Hamilton Thorne to accelerate acquisition program

David Wolf

David Wolf

Hamilton Thorne (TSX-V:HTL), a leading provider of precision laser devices and advanced imaging systems, plans to accelerate its acquisition program, mainly in the human clinical in-vitro fertilization (IVF) market, as part of a long-term growth strategy that also includes product innovation and organic growth.

“Our goal is to expand our product portfolio and capabilities with acquisitions of complementary products and businesses in order to provide a full range of instruments, consumables and services in IVF labs,” president and CEO, David Wolf, says in an interview with BioTuesdays.com.

“We are in active discussions on the acquisition front and have identified over 120 companies that fit into our strategy, of which 50-to-60 are in the Americas and northern and western Europe, and are realistic targets for 2016,” he adds.

In addition, he says the company is not trying to consolidate any segment of its business line but looking to add more products that its customers want to its product portfolio.

Hamilton Thorne took its first step in April 2015 when it acquired the Oosight product line from Perkin Elmer. As a long-term distributor of the Oosight system, Hamilton Thorne was able to complete the technical integration of Oosight with its laser products in mid-May.

Mr. Wolf says Oosight was a relatively small and simple deal and was accretive to earnings in 2015.

The Oosight system provides high-contrast live images of unfertilized eggs, or oocytes, capturing quantitative data of important structures using a patented non-invasive, polarized-light technique.

The Oosight system provides high-contrast live images of oocytes using a patented non-invasive, polarized-light

The Oosight system provides high-contrast live images of oocytes using a patented non-invasive, polarized-light

“We see human IVF as having the greatest growth impact on our business and we’re putting a lot of focus on the clinical market,” he adds. The company’s precision laser devices perform micro surgery at the cellular level during pre-implant procedures with embryos.

According to Mr. Wolf, the optimal profile of new acquisitions over the mid-term would have annual revenue of $2-million to $5-million, are synergistic with the company’s product portfolio and are profitable, or can be turned around quickly.

While the global IVF market accounts for some $15-billion in sales, Mr. Wolf says Hamilton Thorne’s addressable market for instruments, consumables, software and services used in the lab on a day-to-day basis is about $1-billion.

Worldwide, there are an estimated 1.8 million assisted reproductive cycles performed annually, growing at 5% to 7% a year, with an estimated global need for 10.5 million cycles a year, he adds.

“The IVF sector is consolidating and our strategic intent over the mid-term is to do a handful of acquisitions that progressively become larger in order to complete our product portfolio.”

In addition to acquisitions, Hamilton Thorne is actively working on new hardware innovations to serve existing markets and new software, services, consumables and delivery systems to meet growing worldwide demand in human fertility markets, as well as to further penetrate the animal and biology research markets, all with a goal of increasing sales of services and consumables.

The company serves hundreds of IVF clinics, research institutions and commercial customers through distributors in more than 60 countries, accounting for about 80% of sales, with a focus on established products and repeat sales. The company’s direct sales account for about 20% of sales, with a focus on new products and cutting edge applications.

Mr. Wolf says that while the company’s revenue has traditionally come from hardware and software sales and support, “we are now putting a lot of energy behind recurring revenue, with consumables, add-on software packages and kits.”

In animal breeding, Hamilton Thorne’s products are used in sperm analysis for multiple species

In animal breeding, Hamilton Thorne’s products are used in sperm analysis for multiple species

In animal breeding, the company’s products are used in sperm analysis for multiple species, with potential laser applications now being used in cloning, sexing and laser-assisted IVF research.

In the developmental biology research market, Hamilton Thorne’s advanced laser systems are used in stem cell derivation, regenerative medical research and genetic engineering of animal models.

For 2015, the company’s revenue rose 4% to $9-million, with growth impacted by currency headwinds. About 60% of the company’s business is outside of North America. Net income rose 17% to $1-million.

IVF represents about 70% of the company’s business, with animal breeding and biology research, about 15% each.

For 2016, Mr. Wolf says the company plans to continue investing for growth along the lines of product enhancements, proprietary consumables for recurring revenue, increasing its sales and marketing reach, growing its services business and strengthening its infrastructure.

“While we will invest to accelerate our growth, we are committed to maintaining the strong profitability and positive cash flow we have demonstrated over the past few years,” he adds.

Hamilton Thorne achieved profitability in 2013 and Mr. Wolf says strong growth in the past two years reflects a focus on the assisted reproduction market, with research fitting in behind IVF. The company also exited several small markets in the past two years.

Under the company’s business model, he suggests that annual revenue of $30-million is expected to result in EBITDA of 20% to 25%. “At that point, we will have the scale to consider a U.S. listing.”

According to Wolf, in-vitro fertilization represents about 70% of Hamilton Thorne’s business, with animal breeding and biology research representing approximately 15% each

According to Wolf, in-vitro fertilization represents about 70% of Hamilton Thorne’s business, with animal breeding and biology research representing approximately 15% each