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Medica Group PLC (MGP)


Tuesday 23 March, 2021

Medica Group PLC

Re-release: Proposed acquisition of US-based RadMD

RNS Number : 1078T
Medica Group PLC
23 March 2021

The 'Medica diversifies offering into clinical trials with proposed acquisition of US-based RadMD' announcement for Medica Group plc released yesterday, 22 March 2021 at 17:07 under RNS No 0897T has been re-released in the interests of market clarity.


The announcement text is unchanged and is reproduced in full below.


23 March 2021


Medica Group plc


Medica diversifies offering into clinical trials with proposed acquisition of US-based RadMD


Enables entry into USD 1 billion global market of clinical trial imaging


Able to leverage core teleradiology skills to broaden capabilities in new geography


Initial consideration of USD 16.3 million (c. £11.7 m illion)


Medica expects the acquisition to be accretive to earnings for the first full year of trading


Provides trading update: NightHawk growing, Elective resilient; hopeful of return to growth as lockdowns ease and health systems address patient backlog



Medica Group PLC (LSE: MGP, "Medica" or the "Company"), the UK and Ireland market leader in the provision of teleradiology services, today announces that it has conditionally agreed to acquire RadMD LLC (the "Acquisition"), a leading Imaging Contract Research Organisation ("iCRO") providing services to the fast-growing clinical trials market for a total cash consideration of up to USD 21.7 million (c. £15.6 million), subject to customary working capital and other adjustments at completion. The Acquisition is on a cash-free and debt-free basis.


The Company has today separately announced its intention to launch a 9.9% non-pre-emptive placing of new ordinary shares (the "Placing"), the proceeds of which will fund the initial cash consideration for the Acquisition. Completion of the Acquisition is conditional on admission to trading of the new ordinary shares being issued pursuant to the Placing and a further announcement will be made in due course.


The Company is also providing an update on current trading ahead of announcing its full year results for the year ended 31 December 2020 on 11 May 2021.


Transaction highlights: executing on strategy with acquisition of profitable business; able to leverage core skills to broaden capabilities


· Delivers on strategy to create upside revenue from new services/customers/international expansion; Accelerates Medica's entry into the fast-growing iCRO market providing high quality reading and interpretation of clinical trial images for pharmaceutical and biotech clients and opens up opportunity to enter a fast-growing, sizeable international market in telemedicine

· RadMD shares substantial similarities with Medica's business model in that it deploys a wide network of radiologists to read images for clinical trials within a highly regulated teleradiology service with strong clinical governance

· RadMD has a highly experienced management team with expertise in early phase imaging trial design across a range of therapeutic areas, particularly oncology, but with the full capability to support larger studies for market approval. RadMD has a network of over 250 expert US and internationally located radiologists. Medica can support growth in reader capacity for clinical trials with access to its expanding network of radiologists in UK, Ireland, across Europe, as well as in Australia and New Zealand.

· For the financial year ended 31 December 2020, RadMD had unaudited revenues of USD 8.9 million, an increase of 20% on the prior year, and an adjusted EBITDA of USD 1.2 million.

· Current annual run rate EBITDA is c. USD 1.5 million on revenues of c. USD 10 million representing an initial consideration of c.13x adjusted 2020A EBITDA and c.11x run-rate EBITDA

· Expected to be earnings enhancing in the first full year, after taking account of the Placing, and return on invested capital expected to be well above Medica's cost of capital


Dr. Stuart Quin, CEO of Medica Group stated:


"In line with our strategy, Medica has been exploring ways in which we can harness our leading expertise in teleradiology to underpin diversification in other areas. We are pleased to deliver this with the acquisition of RadMD, which accelerates our ambition to provide radiological image reading for pharmaceutical and biotech companies. This acquisition provides entry into a new and exciting market for Medica with opportunities for growth and penetration of new geographies and customers. Whilst RadMD serves different customers to Medica, the need to provide a highly specialised network of radiologists reading cases remotely, using excellent systems and supported by high quality clinical governance is akin to our existing core strengths and expertise. RadMD is a high-quality business strongly rooted in a passion for radiology and, as a result, many clients now trust the RadMD team to design and deliver important clinical trials to the highest quality standards."


Dr. Richard Patt and Dr. Kohkan Shamsi, Managing Directors, RadMD, jointly stated:


"RadMD has been our focus for many years and we are confident that in Medica, we have found a partner to help the company to move to the next level and accelerate growth. Medica will help to support the operations and business strategy allowing us to devote more time to supporting clients and driving new opportunities for the combined company. Medica shares the same ethos in terms of delivering high quality services and we have been impressed by the commitment of the Medica team to help accelerate the growth and evolution of our company and very much look forward to working together."



1.  Introduction and overview of RadMD


RadMD, based in Conshohocken, Pennsylvania was established in 2006 by two leading experts in imaging clinical trial design and execution, Dr Richard Patt and Dr Kohkan Shamsi, who will remain with the business at completion. Medica will support the team at RadMD to build on their success to date by providing more operational and strategic support. RadMD offers a broad spectrum of imaging clinical research services including the full management of all imaging aspects of clinical trials, expert image review and consulting services with expertise particularly in design of early-stage trials with imaging. Medica and RadMD both focus on providing specialist interpretation of CT, MRI and X-ray images. However, whereas Medica focuses often on highly time sensitive diagnostic reporting of images from patients in hospital, RadMD's radiologists and medical experts read images under strict regulatory protocols as part of multi-phase clinical trial studies. The business also includes an institute focused on the training of clinical trial sites and sponsors. The company has grown rapidly and now counts a wide range of pharmaceutical, biotech, medical device and contract research organisations (CROs) among its clients, with an excellent reputation in the market. The business employs a team of 16 full-time employees, a full-time consultant and 1 part-time employee in the US working alongside more than 250 radiologists specialised in reading scans for clinical trial purposes who are contracted to provide these services as required. Whilst the business covers a range of therapeutic areas including CNS, cardiovascular and medical devices, its particular expertise is in the rapidly expanding market for oncology clinical trials.


The global clinical trials market size was reported to be approximately USD 44 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 5.7% from 2021 to 2028 (source: Grandview Research). Within the total clinical trial market, the iCRO segment is c. USD 1 billion in 2021 and is expected to rise in line with the overall CRO market to c. USD 1.3 billion over the next 5 years. The majority of pharmaceutical companies do not have in-house imaging expertise and most CROs also outsource their imaging to iCROs such as RadMD. The reasons for this are two-fold: the first is operational; to collect digital images from research sites, to carry out quality checks, to construct a database and to create a systematic way to review the images. The second is for their expertise in designing the clinical trial, developing regulatory strategies, and having the experts to analyse and interpret the images and results.


The iCRO market is fragmented with a few large international players and many smaller, specialised expert organisations with therapeutic area focus. RadMD has expertise in the design and delivery of early stage imaging clinical trials with a particular focus on oncology, but also cardiovascular, CNS and medical device studies. RadMD's high value imaging expertise reduces costs and improves efficiency in drug and device development.


For the financial year ended 31 December 2020, RadMD had unaudited revenues of USD 8.9million, an increase of 20% on the prior year; adjusted EBITDA of USD 1.2 million; and profit before tax of USD 1.2 million (based on unaudited management accounts). This was a resilient performance despite the impact of Covid-19 in early 2020 which delayed site selection and patient recruitment for some trials and demonstrated the benefit of focusing in particular on oncology studies.


RadMD has a strong underpin of future earnings with an orderbook backlog of USD 40 million at the end of 2020 and a historical book to bill ratio for the following year of 25%. The company has strong visibility of revenue, with the orderbook extending out to 2024.


Since the year end, the business has continued to perform strongly, reflecting the positive impact of contracts won during the prior year, extensions to the scope of existing contracts, conversion of pipeline projects to contracted backlog and new contracts which have started this year. Current run rate revenues and adjusted EBITDA are c. USD 10 million and USD 1.5 million respectively. As at 31 December 2020, RadMD had total assets of USD 2.6m.



2.  Background to and reasons for the Acquisition


The Acquisition furthers Medica's ambition to leverage its existing expertise as a leader in teleradiology to broaden its capabilities and expand into new geographies. The imaging for clinical trials market is such an area that has been part of the Board's stated strategy. The US represents a new market for Medica and provides the Company with an exciting platform upon which to grow a diversified international clinical trials business focused on imaging services.


Significant similarities with Medica's core business model:

-  Acquisition in line with stated strategy announced in March 2020 to expand the range of allied telemedicine services and to enter new geographies

-  RadMD's success, like Medica's, has been driven by building a network of highly experienced international radiologists and medical experts. Designing imaging studies and reading images for clinical trials is highly regulated and so the RadMD business model shares the same need for high quality clinical governance of its radiologist network as Medica's core teleradiology reporting business


Customer and geographic diversification:

Entry into a new market with large, blue chip pharmaceutical, biotech and medical device customers

Entry into the US market; the focal point for global clinical trials

Builds on the recent acquisition of Global Diagnostics Ireland in November 2020 and the MedX joint venture with Integral Diagnostics in Australia and New Zealand announced last month

Following the acquisition of RadMD, over 25% of Medica's pro forma 2020 revenues would be derived from outside the UK

Good revenue visibility:

Clinical trial studies are by their nature long term. RadMD supports clients from study design and site selection all the way through to completion. Therefore, as studies progress, a backlog of work builds that provides multi-year earnings visibility with the current backlog extending to 2024

Significant repeat business so as clients grow, the company expands its pipeline of opportunities and conversion to backlog


Growth synergies:

RadMD will benefit from Medica's support to grow and develop the business as well as know-how and expertise in delivering radiology reporting systems including Artificial Intelligence. Medica plans to expand the senior management team to enable the founders to transition to focus more on 'high value' consulting and client engagement activities

In time, Medica can support international expansion and offer to train its current network of well over 500 radiologists to boost capacity for clinical trial reading, as well as expand client and radiologist reach into other parts of Europe, Australia and New Zealand


Strong financial metrics:

Expected to be earnings enhancing for the first full year of trading

Return on invested capital (ROIC) well above the Group's cost of capital

The orderbook of USD 40 million together with a strong pipeline of new opportunities strongly underpins future earnings and provides good revenue visibility



3.  Principal terms of the Acquisition and financial impact


The total consideration for the Acquisition of USD 21.7 million (circa £15.6 million) comprises the following elements:


· USD 16.3 million initial consideration payable in cash at completion for 100% of the members' interests in RadMD together with customary adjustments for acquired cash, debt and normalised working capital at completion;

· A maximum of USD 5.4 million deferred consideration based on 2021 EBITDA performance;


Costs of approximately £0.5 million will be charged to the income statement in the current financial year in respect of the Acquisition.


Completion of the Acquisition is conditional on the successful conclusion of the Placing which was also announced today. The Placing is expected to provide sufficient capital for the initial consideration with any deferred consideration paid out of the balance of the net proceeds of the Placing and group cash resources.



4.  Medica Trading and Debt Refinancing Update


The Company reconfirms that as stated in the trading update on 21 January 2021, it expects revenue for the year ended 31 December 2020 to be £36.8 million. Gross margins remained strong at 47.4%, with adjusted net operating profit margins of c.14%. Profits were in line with the Board's expectations. Gross cash as at 31 December 2020 was £13.9 million and net debt was £4.0 million.


As a result of active recruitment during 2020, Medica reports that it has increased its metric for reporter capacity (% increase in rostered reporting hours) in the UK by 13% year-on-year. This will provide significant additional capacity to support clients with the growing backlog of Elective procedures. Additionally, through our recruitment efforts in Australia and New Zealand, aided by the recent MedX JV, we have also increased our capacity of reporters for NightHawk thereby underpinning the capacity required for continued growth.


In January, Medica noted that whilst the lockdown would likely inhibit the recovery of Elective activity in the NHS, it was expecting NightHawk activity to remain resilient and continue to grow. This proved to be the case although there are early signs of improvement in Elective volumes as hospital admissions for Covid-19 have fallen significantly, allowing the NHS to start to focus on the next public health challenge of managing the millions of patients on elective waiting lists. Encouragingly, both NightHawk and Elective activity has continued to grow month-on-month so far in 2021.


In Ireland, we have also seen softening in activity from the Health Service Executive in early 2021 as a result of the latest lockdown, but a resumption in scanning following easing of restrictions, new contract wins and strong performance in our diabetic retinopathy (ophthalmology) screening service, provide confidence in the outlook for the remainder of FY 2021 and beyond with growth expected from Q2 2021 onwards.


In the UK, discussions with our clients indicate that radiology departments are planning now to start to focus on elective activity including trying to tackle the significant backlog that has built up, however it is too early to estimate the exact profile of the recovery except to note that as vaccinations are rolled out, this will continue to reduce the number of beds that are utilised for Covid-19. This will in turn allow hospitals to establish pathways to manage elective procedures and commence extended hours for imaging services, as well as potentially outsourcing to private hospitals and imaging companies to assist in processing the backlog of cases. Whilst the path to recovery is still taking shape and therefore the impact on H1 2021 is still uncertain, management are cautiously optimistic that the headwinds are abating and Elective activity is improving which should result in a strong performance in H2 2021.


Medica also announces that it is in advanced discussions with lenders for a new fully flexible revolving credit facility on competitive terms. This should provide significant headroom to support the Company's growth strategy. No material change to interest costs is expected. At 31 December 2020 the Company had net debt of c. 4.0 million representing 0.5x gearing. 





No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.


The person responsible for arranging for the release of this announcement on behalf of the Company is Richard Jones, Chief Financial Officer.


For further information, please contact:



Medica Group PLC

Dr. Stuart Quin, Chief Executive Officer

Richard Jones, Chief Financial Officer


+44 (0)33 33 111 222

Investec Bank plc (Joint Broker)

Sara Hale

Daniel Adams

Virginia Bull

Ben Farrow


+44 (0)20 7597 5970

Liberum (Joint Broker)

Bidhi Bhoma

Richard Lindley

Euan Brown


+44 (0)20 3100 2000

FTI Consulting

Victoria Foster Mitchell

Robert Winder


+44 (0)20 3727 1000

[email protected]



About Medica Group PLC


Medica intends to lead the way in telemedicine and is the market leader in the UK and Ireland for the provision of teleradiology services, providing outsourced interpretation and reporting of MRI (magnetic resonance imaging), CT (computerised tomography), ultrasound and plain film (x-ray) images. In addition, Medica is the market leader for the provision of retinal diagnostic screening in Ireland where it also provides selective managed services in diagnostics to the public and private sectors


In the UK, Medica currently offers two primary services to hospital radiology departments:


NightHawk, urgent reporting service, and


Elective which includes routine cross-sectional reporting on MRI and CT scans, and routine plain film reporting on x-ray images.


Medica contracts with the largest pool of consultant radiologists in the UK and Ireland, performing remote access teleradiology across its customer base of more than 100 NHS Trusts in the UK, the Irish HSE, private hospital groups and diagnostic imaging companies. This enables the Company to offer a fast, responsive service both during the day and importantly supporting urgent out-of-hours reporting.


Medica has developed a bespoke, secure IT platform that provides market-leading linkage between a hospital's Radiology Information System (RIS) and consultant radiologists who contract with the Company. Direct RIS access ensures that where the wider patient medical history is available, it can be reviewed by the consultant as part of every report. For more information please visit


About teleradiology

Teleradiology is the remote electronic transmission of radiological patient images, including plain film (x-rays), CT scans and MRI scans, from one location to another for the purposes of diagnostic interpretation and reporting.


About imaging Contract Research Organisations ("iCROs")

iCROs are experts in providing specific knowledge about medical imaging and its application in clinical trials. This includes expertise in imaging protocols, state-of-the-art image acquisition and analysis, data management and quality control.


Access to this knowledge is critical as medical imaging is a vital component of many clinical trials. It can be used to stratify patients to the most appropriate treatments and can allow early measurement of treatment efficacy. Standardisation of image acquisition across sites and a focus on quality control (QC) of images ensures that the required data can be obtained from the images. A central read (a process by which the image interpretation is not done by the local study site) minimises bias and subjectivity that might otherwise arise from the sponsor or study monitor's familiarity with patients.


The reliability and reproducibility of image data interpretation is realised through consistent data review (using standardised grading protocols) and the use of two readers. High quality data means faster, more efficient trials that reach completion sooner.


Trials are typically managed by a CRO on behalf of a pharmaceutical or biotech sponsor and are often global. Radiologists, known as readers, have to be specially trained to be able to report imaging studies for clinical trials as this is conducted under Good Clinical Practice protocols.

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