Wellington-based med-tech Volpara Health Technologies says has entered an agreement to buy 100 per cent of US company MRS Systems for US$14.6 million ($22m).

The deal will see Volpara jump from around 7 per cent to more than 25 per cent of the US breast screening market.

The purchase, and further international expansion over the next three years, will be funded by a A$55m rights issue, which will top up the company's $14.4m cash.

The ASX-listed Volpara makes software for analysing breast images to aid in the early detection of breast cancer, plus cloud-based software for running a breast screening clinic.


Buying MRS (Medical Reporting Software) will boost Volpara's presence in the latter market, where it's current at a single-digit per cent.

MRS' software is used to run around 1700 clinics, giving it a 20 per cent of the practice management market, with most of the balance split between four rivals of roughly similar size.

The Seattle-based MRS is described as a "bootstrapped" startup that was founded in 1987 and now has 50 staff.

In an ASX filing, Volpara says MRS is "profitable" with a gross margin of 90 per cent and "relatively flat revenues."

It's never had any outside investment.

Volpara is forecasting annualised revenue of US$5.3 million for 2020, while MRS is guiding US$7.5m, meaning the Kiwi company's revenue will be boosted by 142 per cent to US$12.8m if the deal goes ahead, trumping its forecast 50-80 per cent.

The ASX filing says the MRS acquisition gives Volpara a "pathway" to increase its average revenue per breast screen from US$2.20 to US$10.00, though no time-frame is given.

Volapra lost, which is still in the early stages of commericalising its software, made a $2.6m loss in its March quarter.


Speaking to the Herald in April, Volpara co-founder CEO and major shareholder Dr Ralph Highnam would not give any forecast on when it would break into the black - and there was no updated guidance on that front in documentation around the capital raise.

Source / ASX filing.
Source / ASX filing.

Volpara shares closed flat yesterday at A$1.85, giving it a market cap of A$333 million.

One Australian commentator called that valuation "scarily high," but investors have been buoyed by a series of positive developments.

The med-tech listed on the ASX at A$0.50 a share in in June 2016 and shares were relatively flat until a bull run that began in October last year on several pieces of good news, including a law change it compulsory for all US screening facilities to provide women with information about their breast density - a key indicator of cancer risk (no equivalent provision exists in NZ), and expansion of Volpara's partnership with X-Ray machine maker GE from the US to Europe, Asia and other territories.

Source / ASX filing.
Source / ASX filing.

The US accounts for around 90 per cent of Volpara's revenue, and for the foreseeable future will be its most important market.

That's because of the 75 million or so women who are screened for breast cancer each year, around 40 million are in the US.

Volpara had been aiming to lift its share of the US market from around 7 per cent to around 10 per cent during its 2020 financial year.

With the MRS acquisition, that will jump to more than 25 per cent.

Volpara's biggest institutional shareholder is Kiwi fund manager Harbour Asset Management, which owns a 5 per cent stake. It's expected to participate in the rights issue.