Escalon Medical Corp. (ESMC) Sells Clinical Diagnostics Business to ERBA Diagnostics, Inc.

Escalon Medical, founded in 1987, announced the sale of its Clinical Diagnostics Business (ECD) to ERBA Diagnostics. As part of the $6.5M cash sale, ERBA will acquire ECD, the business components of Drew Scientific, Inc., and its wholly owned subsidiaries JAS Diagnostics, Inc. (“JAS”) and Drew Scientific Limited Co. ECD develops and sells A1c and Hematology diagnostic instruments, reagents, and chemistries; Drew focuses on providing instrumentation and consumables for the physician office labs, small hospital labs, and veterinary research laboratories; and JAS specializes in the manufacture of a broad range of liquid stable, diagnostics chemistry reagents used in IVD tests.

“The sale of Escalon Clinical Diagnostics business was based on the continuing extensive strategic evaluation and enables us to better focus our efforts and resources on our Ophthalmic business” stated Richard J. DePiano, Jr., President of Escalon. “We expect to use the cash we receive in the transaction to strengthen our balance sheet, to provide additional working capital, enhance our ability to strategically expand our Ophthalmic business and provide the means to selectively pursue opportunities for synergistic growth.”

Since Escalon’s entry into the clinical diagnostics business, the strategic objective had been to expand their presence in the reagent segment of the IVD market. Drew, acquired in 2004, focused on the equipment side of the IVD business; and JAS synergistically expanded the company’s position into the clinical chemistry consumable market. Escalon restructured the business in an effort to position it for profitability. Management realized that further investment and focus was needed to move ECD into profitability and as the opportunity to seek strategic partners developed into opportunities for combinations, management pursued the opportunity presented by ERBA Diagnostics.

Escalon Clinical Diagnostics revenues from operations were $12,985,000 (2012), $13,708,000 (2011), and $18,077,000 (2010). The sale of this business will have a material effect on earnings in subsequent periods. Since 1997, the company has acquired selective business’s or product lines with a mission to enhance or expand such for the sole purpose of creating shareholder value. During this time Escalon acquired six separate businesses or product lines and has divested of five. Each divesture provided Escalon with a stronger balance sheet and provided additional working capital.

Escalon develops markets and distributes ophthalmic diagnostic and surgical products. They seek to utilize strategic partnerships to help finance its development programs and is also seeking acquisitions to further diversify its product line to achieve critical mass in sales and take better advantage of distribution capabilities. The company has headquarters in Wayne, Pennsylvania, and operations in Long Island, New York, New Berlin, Wisconsin, and Stoneham, Massachusetts.

ERBA Diagnostics develops, manufactures, and markets proprietary diagnostic reagents, instrumentation, and software, specializing in a full range of products from ERBA international group of companies in USA, Italy, Czech Republic, India, and Turkey, including not only the Autoimmune and Infectious Elisa product lines, but also the full line of biochemistry, clinical chemistry, and urine analysis products.

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