Monday, 6 April 2009

LMS Medical Announces Much Anticipated McKesson Deal

LMS Medical Systems (LMZ - TSX)
Shares outstanding: 25.8m
Fully Diluted: 30.7 million

Investors rewarded LMS’ McKesson deal announcement on Monday with a nice 114% jump in its share price. According to the release, LMS Medical sold its Clinical Information System (CIS) to McKesson for an undisclosed amount. However, the release did outline some of the terms of the sale, including LMS’ ability to continue to sell the CIS software outside of McKesson’s customer base and the fact that LMS will continue to provide maintenance & support services to McKesson’s CIS clients. The maintenance & service support will equate to up to $3 million per year at least until the end of fiscal 2010 (March 31, 2010).

Not covered in the arrangement were three Risk Management Tools (Shoulder, Calm, Patterns), which suggests that LMS still has considerable business that it can continue to develop on its own or potentially in partnership with other companies.

There are still a few unknowns out there that would completely assure shareholders of its future such as management’s perspective on future growth opportunities and the business going forward. Investors have been living with a great degree of uncertainty over the past six months as LMS’ financial position was shaky at best. We expect this development will be seen as a positive development by the TSX Exchange, which had the company under a watch with its continued listing on the senior board very much up in the air. However this announcement is a great first step to shoring up LMS’ future.

We’re looking forward to seeing what happens in the coming weeks.

To read the full release, please click here.