Xcell looks to acquire European company

Perth based medical devices company Xcell Diagnostics (ASX: XEL) has signed a letter of intent to acquire German company Visiomed in a deal that includes a combination of shares, options, cash and royalties.

The acquisition will give Xcell access to Visiomed's proprietary Microderm skin cancer diagnostic system, which was launched in Europe last year.

CEO Dr Saliba Sassine said that the deal was an excellent opportunity for Xcell as there was a lot of synergy between the two companies. The acquisition would provide Xcell with approved products and a product pipeline as well as a position in the European market and the strategic alliances already developed by Visiomed.

"The deal effectively propels Xcell into the market as a key participant in the commercialisation of skin cancer diagnostic instrumentation through its control of Visiomed's proprietary Microderm system," he said. "This will provide the Company with a solid foundation to achieve our growth and profit objectives."

Under the terms of the acquisition, shareholders of Visiomed will be issued the equivalent of 19.9 per cent of Xcell's shares and 20 million options to be exercised before 30th November 2006 for 20 cents.

Xcell will also pay $1.5 million in instalments and royalties of 5 per cent on the sale of any products from the Visiomed pipeline and 2.5 per cent on any new products using Visiomed's technology platform.

The transaction is subject to the approval of Xcell shareholders, and a general meeting will be held by the end of September 2002.

microDERM uses a camera-based system to acquire images of skin lesions, which are then compared to a database. Neural algorithms provide a quantitative assessment and calculate risk of malignancy. The system also contains a management tool that allows doctors to track changes in lesions over time.

The system was developed using the Diagnostic and Neural Analysis of Skin Cancer study (DANAOS), a large, multi-centre study performed in Europe that generated more than 20,000 images of skin lesions between 1997 and 2000.

Since the Microderm system was launched last year, more than 100 units have been sold in Europe and Australia. Sassine said that US FDA approval was expected later this year.

He explained that the system was robust and versatile and could potentially be used for other diagnostic applications. Visiomed's platform technology is camera-based, unlike Xcell's, which is based on diffuse reflectance spectroscopy.

"There will be an immediate and fairly aggressive commercialisation plan and a review of the R&D projects," Sassine said.

"We'll be making an assessment over the next few months over changes to the two companies' R&D programs."