PerkinElmer UK completes acquisition of Immunodiagnostics Systems Holdings plc
On 13 July, the AIM quotation of Immunodiagnostics Systems Holdings plc ("IDS") was cancelled following its acquisition by PerkinElmer UK at a price of 382p per share.
Building on considerable success in the manual assays market for vitamin D testing, IDS entered the fully automated testing market through the launch of a new flagship analyser, IDSiSYS in 2009. The technology had been acquired from an insolvent German company. LGB arranged a placing of existing shares to our investing clients in 2008 at a price of 183.5p. After an initial dip to 130p in early 2009, the shares took off following the product launch and reached a high of over £12 in July 2011. The shares were a bright spot in a very difficult market. We were particularly appreciative as we were able to demonstrate that our investment approach could be successful even in extreme market conditions.
Unfortunately, the attractiveness of the vitamin D testing market encouraged competition and so IDS was never able to fulfil its promise. The shares fell back to our entry price in September 2016 before recovering to trade around a mid-point of 250p in subsequent years.
The experience of investing in IDS highlights the difficulty of knowing when to take profits in shares that go on a rocket ride. This is surprisingly common in the AIM market. In addition to IDS, our clients have participated in the significant ups and sometime downs of AB Dynamics, AFC Energy, BrainJuicer (now System 1), Futura, Omega Diagnostics, OptiBiotix, Scancell, SRT Marine, Surface Transforms, The Panoply and several others. Of these, only AB Dynamics has consistently maintained its loft share price (more than 20x its 2013 IPO price). In the last eight years, AB Dynamics has built a new factory to manufacture its automotive testing equipment, signed strategic partnerships and has benefited from new entrants to the EV market. The valuations of some of the other companies mentioned above have run far ahead of business developments. This often leads to a period of drift and consolidation as investors wait for the company to catch up with their expectations. Sometimes events intervene and it never does.
We believe that our investing clients should run their profits but within reason. A single shareholding should not dominate a portfolio even at an opportunity cost of premature sales. The key requirement is to put the excitement to one side and to consider what practical improvements a company is making to its business structure and financial model. One useful question to ask is whether a company is sufficiently robust to attract institutional as well as retail investors. This will help to guide profit-taking and then let investors know whether it is wise to retain a residual holding.