Proposed Acquisition Of Applied Imaging Corporation

New Milton, UK - Genetix Group plc, the cell biology, proteomics and genomics health technology group, today announces that it has signed a definitive agreement to acquire all the issued and to be issued share capital in Applied Imaging Corporation ("AI") in an all cash transaction valued at US$18.3m (£9.6m) subject to, amongst other things, approval by AI stockholders.

Founded in 1986, AI has approximately 65 employees and is a publicly traded company with shares quoted on the OTC Bulletin Board (OTCBB AICX), based in San Jose, California USA, and Newcastle, UK. AI develops and manufactures automated imaging systems for the analysis of cells and tissue samples used for genetic testing and cancer pathology. AI's audited results for the 12 months ended 31 December 2005 stated revenue of US$20.0m with a loss before tax of US$0.9m; unaudited results for the 6 months ended 30 June 2006 showed revenue of US$9.9m with a loss before tax of US$0.4m. Net assets as at 30 June 2006 were US$3.4m.

The transaction is expected to be completed in the fourth quarter of 2006 subject to, amongst other things, approval by AI's stockholders. The relevant documentation is expected to be sent to AI stockholders shortly.

The proposed acquisition of AI, which is to be financed entirely through the Company's existing cash resources (£24.7m as at 30 June 2006 (US$46.9m) (unaudited)), fits well with Genetix' strategic objective to broaden its competencies in cell imaging and analysis. AI has a leading market position in the manufacture of automated image capture and analysis systems for use in cytogenetics laboratories in the key US market and an emerging presence in the growing cancer pathology market.

Key benefits to the Company of the proposed acquisition are as follows:

• Combining AI's expertise in cell analysis software with Genetix' core skills in imaging and analysing cells will strengthen Genetix' ability to offer a broader range of products in both the drug discovery and clinical diagnostics markets
  
• Provides an expanded sales force and customer support in the key US market allowing enhanced opportunities for selling and supporting Genetix' existing products, with corresponding expanded selling opportunities for AI products in UK & Europe
  
• Over the last 3½ years AI has generated consistent gross margins in excess of 55% with 63% achieved in the six months to 30 June 2006
  
• Opportunities for cost synergies and operational enhancements

Commenting on the acquisition, Mark Reid, Chief Executive of Genetix said,

"Joining together these two respected businesses focused on cell imaging and analysis will help us strengthen our position and exploit the growth opportunities in both the drug discovery and clinical diagnostics markets. The expanded product portfolio as well as AI's strength in the key US market will help with cross-selling opportunities and an improved level of support for our wider customer base. We believe that the investment associated with this transaction will enhance shareholder value."

SOURCE: Genetix Group plc