Anticipated acquisition by Clinisys Solutions Limited of Torex Laboratory Systems Limited

Affected market: Laboratory information management systems

No. ME/1393/04

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

The OFT's decision on reference under section 33 given on 26 January 2005

PARTIES

Clinisys Solutions Limited (Clinisys), formerly known as Sysmed Solutions Limited (and prior to that as William Woodard Associates), is a member of the Varleigh group of companies.  Clinisys is active in the market for Laboratory Information Management Systems (LIMS) and clinical applications for oncology, sexual health and diabetes.

Torex Laboratory Systems Limited (Torex) was a wholly owned subsidiary of Torex Plc, which acquired the business in 2002; Torex Plc is currently owned by iSOFT Group Plc (iSOFT).  Torex comprises all employees, IPRs and existing contracts associated with the LIMS business of Torex Plc.  In the year ending 30 April 2003, Torex's turnover was approximately £3.2 million (see note 1).  

TRANSACTION

Clinisys proposes to acquire 100 per cent of Torex's shares. 

Clinisys intends to integrate features of the Torex LIMS business with its own LIMS business to form Clinisys Pathology.  In particular, Clinisys will incorporate some of the functionality of the Torex LIMS product in the Clinisys LIMS product.  Clinisys intends to provide support and maintenance for existing users of Torex's LIMS product and to continue contractual arrangements with these customers for as long as it is commercially sensible, for both Clinisys and the customer, given that the expected remaining life of the Torex LIMS product is approximately 5 years. However, in respect of new customers, Clinisys intends to offer only one LIMS product.

The transaction was notified to the OFT on 22 November 2004.  The 40 working day administrative deadline is 27 January 2005.

JURISDICTION

As a result of this transaction Clinisys and Torex will cease to be distinct.  The parties overlap in the supply of LIMS in the UK.  The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met since the parties have a combined share of supply of LIMS to private hospitals in the UK in excess of 25 per cent.  The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation. 

ASSESSMENT

Further developments in the NPfIT since the iSOFT/Torex Decision indicate that there is now no realistic expectation that LIMS providers such as Torex which have not been selected by an LSP would be able to compete effectively for new LIMS contracts to NHS hospitals in England in the short to medium term. 

In view of the fact that it is in practice very difficult for Torex to make sales to NHS hospitals in England under the NPfIT, and given the relatively low value of contestable LIMS business in the rest of the UK, Torex's incentives to develop its LIMS product independently have been significantly reduced.  The importance of Torex as a continuing independent competitive constraint in the LIMS market has been reduced accordingly.

To the extent that competition remains outside the NPfIT, a sufficient number of credible bidders for UK LIMS contracts remain.  These include iSOFT, Triple G, TrakHealth, Cerner, Misys and Technidata.  Due to their multinational presence and their activities in the wider IT healthcare sector most of these companies have a greater incentive than Torex to maintain the competitive edge of their LIMS products and to compete for LIMS contracts outside the NPfIT.  Moreover, the merger strengthens the ability of Clinisys to compete for these LIMS contracts and perhaps also to compete with iSOFT for contracts within the NPfIT.  

While many third parties were concerned, the majority of these were Torex customers and their concerns were related more to the effect that any change of ownership might have on maintenance and support for existing Torex contracts than to any perceived lessening of competition as a result of the merger.  While such concerns are understandable, existing Torex LIMS contracts are not part of the contestable market.  Moreover, the OFT believes these concerns have been addressed by Clinisys's commitment (and incentive) to maintain the current support levels for existing Torex LIMS customers during the expected life of the product.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

NOTES

1.Torex plc was re-registered as Torex Limited on 14 September 2004.

Back to top