Epistem 2, a company where Genedrive director Dr Catherine Booth is also a director and substantial shareholder, is set to buy the business; Genedrive used to be known as Epistem before it changed its name.
READ: Genedrive surges after receiving £1.1mln in funding to finance development of its TB testing kit
"The disposal of the service business is in line with our stated strategy to focus fully on the near-patient molecular diagnostic market and will provide additional cash to continue to drive the Genedrive platform forward,” said David Budd, the chief executive officer of Genedrive.
"Our diagnostics operations are well positioned having established distribution agreements for our HCV ID kit in a number of major markets, and we have commenced commercial sales to our distributors,” he added.
“We believe Genedrive can play an important role in the diagnosis and management of HCV [hepatitis C) in territories where access to centralised laboratories is limited. We also plan to re-enter the large mTB market and expect to capitalise on other opportunities in markets where Genedrive's speed, cost and accessibility provide tangible benefits to end users," Budd declared.
The price - £1.5mln on the nose and up to £750,000 in deferred consideration – was a bit better than the £1.15mln evenly spread over two years that the house broker had been forecasting.
In terms of the effect on underlying earnings (Ebitda), the division contributed £260,000, including research & development credits, in the 12 months to 30 June 2017 on revenue of £3.16mln.
The first half of the current year saw revenue decline 23.5% from a year earlier to £1.35mln and it made a modest contribution to group profits.
The gross assets attributable to the Services business at the end of June 30 were £1.6mln and the gross liabilities were £831,000. By the end of 2017, the gross assets had declined to £1.05mln with the decline being mostly within the trade debtor balances, while gross liabilities had diminished to £401,000.
The sale will include the transfer of the Epistem name and the company will arrange for the name of Epistem Limited to be changed at completion.
Dr Booth will resign as a director of Genedrive on completion of the disposal and has agreed not to sell any of her Genedrive shares in the first six months after the sale goes through; she has a 5.2% stake in Genedrive.
In mid-morning trading, Genedrive shares were up 2.7% at 38.5p.
-- Adds share price --