£10m deal sees a new market open for Emis

The Leeds-based group will pay up to 9.95m for 78.9 per cent of Rx Systems, which has developed a range of systems and services for pharmacies to increase efficiency and record data.

"What we have got between the two of us is all the individual parts of the jigsaw," said Emis chief executive Sean Riddell. "The job to do will be to stitch them together."

Emis, which floated on AIM earlier this year, computerises patients' records and links GPs and other medical professionals, allowing them to share data.

Hertfordshire-based Rx counts 2,500 pharmacies as its customers, representing a 20.5 per cent share of the market. Emis said there is more market share to be gained among the UK's 12,200 pharmacies.

"We would see small multiples and some independents being able to bring in technology that only huge chains have been able to afford," said Mr Riddell, who is also a non-executive director of Leeds-based internet pharmacy Pharmacy2u.

He said Emis will work with Rx to streamline repeat prescription ordering, linking GPs, patients and pharmacies. This could mean pharmacies are able to increase their buying power, thus cutting costs and increasing efficiency both for pharmacies and GPs.

"If you can see what drugs are going to be ordered typically over the next six months for pharmacies within an area, you can manage your ordering to be hugely more efficient," said Mr Riddell.

An initial 9m payment includes 8.3m in cash and 216,683 shares worth 700,000. Another 950,000 will become payable dependent on Rx hitting profit targets.

Mr Riddell said: "Since inception, Rx has made rapid progress in penetrating the pharmacy market, demonstrating superior customer service levels and a commercial and innovative approach to its product offering.

"The opportunity to purchase a majority stake in Rx fits perfectly with our strategy of supplementing organic growth with diversification through acquisitions, where felt appropriate, into related areas of healthcare IT.

"We look forward to working with the management team to take the company forward as we build our 'joined-up healthcare' proposition."

Rx's core product, ProScript, is a dispensary management system. It handles tasks such as labelling and endorsing, patient records, ordering, and stock control. The company also provides information required under the NHS IT programme for pharmacist audit and remuneration purposes.

For the year ended January 31, Rx reported revenues of 9.97m and earned normalised profits before tax of 1.5m.

Emis said the acquisition is expected to be earnings enhancing in the first full year of ownership. Rx has an annual licensing model and about 80 per cent of its revenues are recurring.

Rx is also highly cash generative and net cash balances on completion are expected to be about 5.1m.

Emis said: "The acquisition of Rx represents a unique strategic opportunity for Emis to develop further its presence in this adjacent segment of the healthcare IT market."

The remaining 21.1 per cent of Rx's issued shared capital will continue to be held by Phoenix Medical Supplies, a global pharmaceutical wholesaler which has 500 pharmacies. Phoenix itself is a significant user of Rx's systems and services.

Following the acquisition, Phoenix's appointed representative, Paul Smith, will continue as non-executive chairman of Rx. Its co-founder Ian Taylor will continue as the company's managing director and its other co-founder Simon Ward will continue in a consulting role for 18 months.

Mr Riddell and Emis finance director Phillip Woodrow will join the Rx board.

WEAVING A WEB FOR DOCTORS

Emis is rolling out its new software tool for medical professionals.

Emis Web will connect GPs with other NHS professionals by enabling secure and shared access to patients' electronic records.

The aim is for staff – from chiropodists to neurosurgeons – to have access to patients' cradle-to-grave medical histories at the click of a button, allowing them to make faster and better-informed decisions.

The first GP practice to use Emis Web went live in May. The software has also been through a rigorous testing process, which involved running about 17,000 test scenarios. It is currently being tested by four GP practices.

Emis is also preparing GPs for the software roll-out with a familiarisation service.