NETpark based Kromek to get $37.5m in cash over four years
NETPark-based Kromek makes the special materials (CZT detectors) used in medical imaging, particularly for scanning the body to detect diseases early, and the agreements with medical technology company Siemens Healthineers means they will share their knowledge and patents on making CZT detectors as well as selling some of their equipment – 15 furnaces – to Siemens.
The multi-year deal will net Kromek $37.5 million in cash over four years, with $25 million upfront, which will help them grow and reduce debt – and they can still sell to other companies.
In its results also out today for the six months ending on October 31, 2024, Kromek earned £3.7 million during this period, down from the £7.1 million they earned in the same period the previous year.
Their gross margin improved to 56.9%, up from 54.2% the previous year, so they made a bit more profit from each sale, but the loss before tax was £5.7m compared to £3.5m.
CEO Arnab Basu said: “We are delighted to have entered into these agreements with Siemens Healthineers, a move that underscores Kromek’s position as the largest independent producer of CZT and CZT-based detectors.
“We both have an ongoing commitment to innovation that is critical for developing superior detector solutions that play a vital role in the early detection of serious illnesses. Both Siemens Healthineers and Kromek are aligned in our vision to enhance healthcare through technological advancements, and we eagerly anticipate collaborating to bring this vision to fruition.
“The initial $25m payment will be used to support the delivery of various milestones under the agreements, significantly reduce our debt and strengthen our balance sheet, ultimately enhancing our operational capabilities.
“These significant agreements enable Kromek to report FY 2025 profit ahead of market expectations and lay the groundwork for further growth in revenues and sustainable profitability beyond that period.
“These agreements also enable Kromek to continue its leadership in CZT production for SPECT and CT markets, as we maintain the flexibility to explore further collaborations in advanced imaging.”
Kromek says the new multi-year agreements with Siemens will “provide know-how and use rights of IP on a non-exclusive basis, as well as furnaces and related services, under an Enablement Agreement and Patent Licensing Agreement.”
The group will also supply CZT-based detector tiles to enable the production of CZT detectors for SPECT – single-photon emission computerized tomography – for the early detection of conditions such as cancer and heart issues through medical imaging.
Under the agreement, the Group will be paid a total of $37.5m in cash in four installments over a four-year period, with the first installment of $25m to be received in the current financial year, a material amount of which will be recognised as revenue.
Over four years, Kromek will transfer 15 of its existing 174 furnaces for CZT production to Siemens Healthineers, license to Siemens Healthineers its patents related to CZT production for SPECT applications, and offer “know-how and IP” on a non-exclusive basis.
Under the terms of the Supply Agreement, Kromek will manufacture the CZT-based detector tiles and will be responsible for providing all necessary capital equipment, engineering, manufacturing technology, as well as the equipment and facilities required.
As a result of the agreements, the Group expects to become profitable in the current year, with profit significantly ahead of market expectations. The Group also expects to achieve further revenue growth beyond FY 2025 while delivering sustainable profits.
“Bringing this production technology in-house is a key step to optimizing the process and material for our own applications,” said Jim Williams, head of the Molecular Imaging business at Siemens Healthineers.
“We are vertically integrated in all our molecular imaging detector material technologies for both positron emission tomography (PET) and SPECT. This vertical integration allows us to precisely tune performance and optimise cost for our clinical systems.”