Proposed Acquisition of the OCT and Ultrasound Business and Assets of OPKO Health, Inc

Optos Plc

22 September 2011 – Optos plc (LSE: OPTS), a leading medical retinal imaging company, announces that it has entered into a conditional agreement with OPKO Health, Inc., OPKO Instrumentation, LLC, Ophthalmic Technologies Inc. and OTI (UK) Limited to acquire the assets and business of the instrumentation division of OPKO. OPKO Instrumentation is engaged in the development, manufacture and sale of optical coherence tomography (“OCT”) diagnostic devices and optical ultrasound scanners, each used by the ophthalmic and optometric professions in the diagnosis and management of eye disease and conditions.

Consideration

• The consideration payable for the Acquisition will be an initial cash consideration of US$17.5 million payable on Completion. As additional consideration for the Acquisition, the Group has agreed to pay the Sellers royalty payments calculated on future revenues

Strategic rationale

• Optos’ vision is to be the leading provider of devices for diagnosing and treating diseases and conditions presenting in the retina of the eye
• Optos’ widefield retinal imaging technology, combined with the specific data that can be derived from OCT images, has the potential to offer ophthalmologists and optometrists the most powerful tools for disease diagnosis and management and strengthens Optos’ offering into optometry
• The Acquisition brings access to established OCT and ultrasound products together with a product pipeline including a lower-cost OCT product (Falcon) nearing market launch
• Opko Instrumentation’s products are established, with revenues of $8.4m earned in the year to 31 December 2010, from sales worldwide predominantly through distributors
• Significant opportunities exist to accelerate sales through Optos’ direct salesforce of over 80 representatives and to derive selling, marketing and operational synergies from combining Optos’ business with OPKO Instrumentation

Banking facilities

• Optos has entered into a Facility Agreement with Lloyds Bank Corporate Markets in respect of the provision of bi-lateral multi-currency revolving credit facilities of up to US$30 million

Roy Davis, CEO of Optos, commented: “We believe that this transaction positions Optos at the leading edge of the rapidly growing retinal diagnostics market. By integrating Optos’ widefield retinal imaging technology with a widefield OCT capability, we aim to bring a new depth of imaging to the periphery, creating the ultimate retinal diagnostic tool.

“In addition, we will add an existing revenue stream with immediate cross selling synergies through Optos’ sizeable salesforce as well as future margin improvement through operational synergies. We believe these current and future products and business will make Optos a more robust player in the ophthalmology market.”

He added: “We are also delighted to have secured the support of Lloyds Bank Corporate Markets who have extended a $30m revolving credit facility to Optos to support this transaction and our operations going forward.”

There will be a conference call for analysts at 08.15 BST today. For details, call Mo Noonan at Financial Dynamics on 020 7831 3113.

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This announcement is for information only and shall not constitute an offer to sell or a solicitation of offers to purchase or subscribe for any securities, nor shall there be any sale or purchase of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Forward-Looking Statements

Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates and projections about its industry, its beliefs and assumptions. Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the Company's control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions shareholders and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company does not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.

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OPTOS PLC

Proposed Acquisition of the OCT and ultrasound business and assets of OPKO Health, Inc.

22 September 2011 – Optos plc (LSE: OPTS) (“Optos” or the “Company”) The Board of Optos is pleased to announce that it has entered into a conditional agreement with OPKO Health, Inc., OPKO Instrumentation, LLC, Ophthalmic Technologies Inc. and OTI (UK) Limited to acquire the assets and business of the instrumentation division of OPKO (the “Acquisition”). “OPKO Instrumentation” will be acquired through the Company’s US subsidiary, Optos Inc. OPKO Instrumentation is engaged in the development, manufacture and sale of optical coherence tomography (“OCT”) diagnostic devices and optical ultrasound scanners, each used by the ophthalmic profession in the diagnosis and management of eye disease and conditions.

The consideration for the purchase is to be satisfied by the payment of an initial cash consideration of US$17.5 million on Completion together with payment of royalties, at a rate of 2.5% or 5% on sales of certain products from the second anniversary of the date of Completion. The maximum payment of royalties is set at an aggregate amount of US$22.5 million. The Acquisition is subject to Shareholder approval further details of which are set out below.

Strategy & Summary

Optos’ vision is to be the leading provider of devices for diagnosing and treating diseases and conditions presenting in the retina of the eye. The Board believes that Optos’ widefield retinal imaging technology, combined with the specific data that can be derived from OCT images, has the potential to offer eyecare professionals the most powerful tools for disease diagnosis and management. The Directors believe the strategic rationale for this transaction can be summarized as follows:

• The combination of Optos’ core widefield technology and an OCT technology would provide a powerful diagnostic and disease management tool for ophthalmologists and optometrists
• The Acquisition brings access to established OCT and ultrasound products together with a product pipeline including a lower-cost OCT product (Falcon) nearing market launch
• There are a limited number of OCT device businesses on the market and available to Optos
• The addition of an OCT product range supports Optos’ market entry into ophthalmology and strengthens its offering into optometry
• Opko Instrumentation’s products are established, with revenues of $8.4m earned in the year to 31 December 2010, from sales worldwide predominantly through distributors, with limited sales in the US
• Significant opportunities exist to accelerate sales through Optos’ direct salesforce of over 80 representatives and to derive selling, marketing and operational synergies from combining Optos’ business with OPKO Instrumentation
• In the medium-term, the Directors believe integrating these two imaging technologies in a single future device offering both imaging and OCT in the widefield would be highly attractive and unique in the marketplace

Background to, and reasons for, the Acquisition

The Optos Group’s (the “Group”) principal business is the development, manufacture and sale of scanning laser ophthalmoscope (“SLO”) products that generate ultra-widefield digital images of the retina (“optomap^®”) which are used by optometrists and ophthalmologists to diagnose and manage eye-related diseases such as retinal tears, macular degeneration and diabetic retinopathies.

The Company’s strategy is to expand its business by adding complementary ophthalmic devices that can be marketed through its direct and indirect sales channels to optometrists and ophthalmologists on a global basis. The Company acquired an Australian business, Opto Global Pty Hdgs Ltd, in December 2010 which brought the Group sales from a range of devices used by optometrists and ophthalmologists, a direct sales business in Australia, a strong international network of distributor relationships and access to the supply of the devices for sale through Optos’ direct sales channel.

Leading eyecare professionals increasingly use spectral-domain OCT devices within their treatment regimes. They are viewed as essential tools in the diagnosis and management of eye disease. The OCT delivers an image that shows a three dimensional, cross-sectional view of the retina in any particular area, typically in the central pole area of the retina around the optic nerve and macula. This view is particularly useful in tracking the changes in retinal thickness caused by the onset and treatment of retinal diseases and in diagnosing and monitoring macular edema, macular holes, epiretinal membranes, retinal detachments and optic nerve cupping. OCT is used to detect the presence of and understand the severity of disease, determine treatment approaches and monitor post-treatment effect.

The worldwide OCT market for older-technology time-domain and the newer spectral-domain devices exceeds $300 million annually with over 25,000 devices sold and is forecast to continue to grow to some $450 million by 2016.

OPKO Instrumentation’s product portfolio includes the Spectral OCT SLO, a regulatory approved device that has been on the market in numerous territories since 2009, together with follow-on OCT products in late-stage development and some ultrasound products used in the management of retinal tumours, glaucoma and other diseases, such as the OTI Scan 3000 A-Scan, B-Scan and UBM Scan.

The principal reason for the Acquisition is to acquire the technology, know-how, manufacturing and distribution rights to these products, particularly the OCT devices which, being spectral domain, of a scan-quality equivalent to the market leading device, having SLO registration and a unique microperimetry capability, are believed to be technically competitive in the global marketplace. OPKO is currently scheduled to deliver two new products in the next 18 months; low-cost product without SLO (called Falcon) aimed at the general optometry market and a follow-on product with SLO (Falcon II), aimed at the more clinical market. The Directors believe the strong Optos sales channel will expand the market potential for the OPKO products and deliver enhanced revenues and returns when marketed alongside the Company’s established and developing ultra widefield retinal imaging products. The Directors further believe that manufacturing and operational synergies will improve the margins to be earned from the product sales.

Furthermore, the Directors believe that the combination of the two images, an optomap showing the widest view of the surface of the retina and an OCT image showing detail of the thickness of the retina in a particular area of interest, would allow Optos to deliver a unique and powerful diagnostic tool and treatment support to the Company’s market of optometrists and ophthalmologists. The Company’s aim in the medium term would be to integrate the capability to deliver OCT images of the periphery of the retina as well as the central pole area in a single device and to deliver a device that can create both the OCT and optomap images in the widefield which would be a unique offering in the marketplace. The OCT and ultrasound devices will be marketed by Optos on both an outright sale model and rental basis.

The Acquisition

Under the terms of the Acquisition Agreement, and subject to Shareholder approval and all relevant conditions being satisfied, the Company has agreed to acquire OPKO Instrumentation through the Company’s US subsidiary, Optos Inc. The Company has agreed to guarantee the obligations of Optos Inc under the Acquisition Agreement. Completion of the Acquisition is expected to take place on or around 11 October 2011.

The consideration payable for the Acquisition will be an initial cash consideration of US$17.5 million payable on Completion. As additional consideration for the Acquisition, the Group has agreed to pay the Sellers royalty payments calculated as:

(i) 5 per cent. of those Revenues derived from sales of OPKO OCT and ultrasound products to third party customers by the Group directly, by its affiliates or by its distributors (“Direct Revenues”); and

(ii) 2.5 per cent. of those Revenues by the Group directly, by its affiliates or by its distributors derived from sales of any products developed that combine the OPKO OCT technology within an Optos widefield retinal scanning device (“Indirect Revenues”).

Royalties will not be payable in respect of any Direct Revenues or Indirect Revenues arising in the two years following the date of Completion. Following this period, royalties will be payable within 45 days of the end of each calendar quarter and will be payable until the aggregate amount paid amounts to $22.5 million or the relevant products cease to be sold. To reach the maximum aggregate royalties, Revenues would have to accumulate to at least $450 million. There are no royalty minima nor any minimum sales targets under the terms of the Acquisition Agreement.

The Acquisition will be effected by the transfer of the Assets forming part of OPKO Instrumentation from the Sellers and the Company offering employment to the employees involved in OPKO Instrumentation. It is expected that approximately 40 employees (based in the UK and US) will be transferring to or joining the Company with effect from Completion. Under the terms of the Acquisition Agreement, the Group will acquire all intellectual property, intellectual property rights and related know-how of OPKO relating to OPKO Instrumentation. All other contractual arrangements in place as at Completion and relating to OPKO Instrumentation will be assigned or otherwise transferred to the Company, including those relating to the lease of premises in Florida and those in place with distributors and suppliers of products and services relating to OPKO Instrumentation.

Under the terms of the Acquisition Agreement, Completion is conditional upon, inter alia:

(a) the approval by Ordinary Shareholders at the General Meeting;

(b) there being no material adverse change suffered by the parties or OPKO Instrumentation since the date of the Acquisition Agreement;

(c) the representations and warranties of the respective parties under the Acquisition Agreement being true and accurate in all material respects unless such failure has not had, and would not reasonably be expected to have a material adverse change on Optos Inc. or OPKO Instrumentation respectively; and

(d) the parties undertaking various actions required to effect the transfer of OPKO Instrumentation to the Company and to enable the Company to operate OPKO Instrumentation following transfer.

Under the terms of the Acquisition Agreement, Optos Inc. has agreed to pay the Sellers US$750,000 in the event that the Sellers exercise their right to terminate the Acquisition Agreement as a result of, inter alia, Ordinary Shareholder approval of the Acquisition not being obtained at the General Meeting of the Company to be held at the offices of Maclay Murray & Spens LLP, at 10:00 a.m. on 10 October 2011, or Optos Inc. having committed a material breach of the Acquisition Agreement or any of the agreements entered into thereunder that is incapable of remedy prior to Completion.

Information on OPKO Instrumentation

OPKO Health is a multi-national biopharmaceutical and diagnostics company that seeks to establish industry-leading positions in large and rapidly growing medical markets by leveraging its discovery, development and commercialisation expertise and its novel proprietary technologies. The OPKO instrumentation products were brought into the OPKO group upon its acquisition of a Canadian company, Ophthalmic Technologies, Inc. (“OTI”) in 2007. Upon the acquisition, OPKO transferred the majority of the OTI operations to Florida although a small research and development team remains based within the UK in Canterbury, at the University of Kent. OPKO Instrumentation currently manufactures its products in a small, dedicated facility in Hialeah, Miami. The manufacturing process is principally a final assembly process with the components supplied through a range of third party manufacturers. A software research team based in Hialeah is focused on improving the operating systems underlying the OCT devices whilst the Kent-based research and development team is working on product design and development, in particular a smaller desktop sized device.

The Assets to be acquired include rights to the technology, know-how, intellectual property, manufacturing capability, supplier arrangements, development programmes and distribution arrangements of the OPKO instrumentation division relating to the OCT and ultrasound devices. Additionally, the Assets include the leases over the manufacturing facility in Florida and research facility in Canterbury, Kent, the tangible fixed assets owned by OPKO at both locations, inventories of parts and products and receivables and payables relating to OPKO Instrumentation.

OPKO Instrumentation’s products are sold directly in the US and through a range of distributors worldwide. The majority of revenues and sales are export sales, with the small, three person US sales team achieving modest sales in the US. Optos believes the strength of its 60 person North American sales organisation will enhance product sales in those core markets, and similarly its direct sales presence in Western Europe and Australia can bring additional momentum to product sales in those territories.

The gross assets acquired were stated at US$5.5 million in the audited accounts of OPKO Instrumentation as at 31 December 2010 and the losses of the division for the year then ended were US$5.7million.

Selected Financial Information on OPKO Instrumentation

OPKO Instrumentation’s revenues have declined approximately 7.5% from 2008 to 2009 and a further 4% from 2009 to 2010 due to increased technology and price competition and a lack of product promotion. OPKO Instrumentation has been investing in improving the software to make its devices more competitive and in improving efficiencies of manufacture to improve product margins. Furthermore, OPKO Instrumentation has been investing in the development of its next generation device to ensure it can meet and match price competition. Optos intends to continue and accelerate these development programmes which, together with increased marketing and sales efforts, it expects will reverse the sales trend.

Financing the Acquisition

The Company has entered into a Facility Agreement with Lloyds Bank Corporate Markets in respect of the provision of bi-lateral multi-currency revolving credit facilities of up to US$30 million. The Company proposes that the Acquisition and associated expenses will be funded from cash reserves and amounts drawn down under the Facility Agreement.

Key individuals

All of the employees of OPKO Instrumentation, including the Vice President of Operations and Senior Director of Research and Development to whom a majority of the relevant employees report, will be offered employment by Optos, in order that OPKO Instrumentation can continue to be operated by Optos following completion of the Acquisition. The 40-strong team supports existing products in the field, sells and markets the devices directly and through distributor groups, manufactures and ships the devices, develops hardware and software improvements to the existing products and researches and develops next generation products.

Financial effects of the Acquisition

The revenues, expenses and cashflows relating to the Assets acquired will be consolidated into the Group’s results following Completion and the Board of Optos expects the Acquisition to be loss-making in the first 12-18 months following Completion as the businesses are merged and investment continues in developing and launching the product pipeline of the two new Falcon devices and to be earnings accretive (excluding amortisation) from the second half of the year to 30 September 2013, with the objective of making the Acquisition earnings accretive (excluding amortisation) in the full second year following Completion.

One-off costs of US$0.9 million relating to the Acquisition will be expensed in the financial year ended 30 September 2011 with additional acquisition-and integration-related expenses falling in the next financial year. The tangible net assets of OPKO Instrumentation were valued at US$2.3 million as at 31 December 2010. The balance of the US$17.5 million initial consideration and the estimated net present value of the deferred consideration will be allocated to the intangible assets acquired with the Assets and goodwill.

Current trading, trends and prospects of OPKO Instrumentation

In its 10Q statement filed with the US Securities and Exchange Commission in August, OPKO reported selected unaudited results for OPKO Instrumentation. The US GAAP results disclosed sales for the division of US$1.7 million in each of its first and second quarters of calendar year 2011 (Q1 and Q2) compared to US$2.6 million in Q1 2010 and US$2.2 million in Q2 2010. Reported operating losses were US$1.0 million in Q1 2011 (Q1 2010: US$0.9 million) and US$0.4 million in Q2 2011 (Q2 2010: US$1.0 million), with the quarter benefitting from the write-back of certain share-based payment charges. The lower sales are believed to result from reduced demand in certain export markets and continued price pressure and limited marketing activities. The Board of Optos believes these declines can be reversed once current and planned development programmes are completed and with increased marketing efforts through the Optos sales channel.

Timetable to Completion

Assuming all conditions are satisfied, the Company currently expects Completion to occur on, or around, 11 October 2011.

Class 1 Transaction

The Acquisition constitutes a Class 1 transaction for the purposes of the Listing Rules. Accordingly, the Acquisition is conditional upon, inter alia, the passing by Ordinary Shareholders of an ordinary resolution approving the Acquisition which will be proposed at the General Meeting of the Company to be held at the offices of Maclay Murray & Spens LLP, One London Wall, London EC2Y 5AB at 10:00 a.m. on 10 October 2011 (the “General Meeting”). The Directors unanimously recommend that shareholders vote in favour of the acquisition at the General Meeting.

A circular prepared in accordance with the listing Rules in connection with the acquisition and the general Meeting is being published today and will be submitted to the National storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do.

A copy of the Circular will also be available on the Company’s website, www.optos.com.

Roy Davis, CEO of Optos, commented: “ We believe that this transaction positions Optos at the leading edge of the rapidly growing retinal diagnostics market. By integrating Optos’ widefield retinal imaging technology with a widefield OCT capability, we aim to bring a new depth of imaging to both the central pole and the periphery of the retina for the first time, creating the ultimate retinal diagnostic tool.

“In addition, we will add an existing revenue stream with immediate cross selling synergies through Optos’ sizeable salesforce as well as future margin improvement through operational synergies. We believe the current products, product pipeline and resources of the OPKO Instrumentation business will make Optos a more robust player in the ophthalmology market.

He added: “We are also delighted to have secured the support of Lloyds Bank Corporate Markets who have extended a $30m revolving credit facility to Optos to support this transaction and our operations going forward.”

Dr Simon Barnard, PhD FCOptom FAAO DipCL DipClinOptom, commented: “The combination of a widefield Optos retinal image (optomap) and an OCT image is the 'dream team' from a retinal diagnosis and disease management perspective”.

Peter Kaiser, MD Associate staff member at Cole Eye Institute Cleveland Clinic Foundation, added: “Although I don't see OCT replacing flourescein angiography (FA) , I believe it will soon become a standard imaging procedure for AMD patients. Currently, I use OCT to supplement FA interpretation. The integration of simultaneous OCT and widefield scanning laser ophthalmoscopy is also under investigation. The potential to both quantify and locate retinal pathology using a single instrument promises great benefits.”

Note to Editors: Images available upon request

About Optos Plc

Optos plc is The retina company. Our vision is to be recognised as a leading provider of devices and solutions to ophthalmic professionals for improved patient care. Optos' core devices produce ultra widefield, high resolution digital images of approximately 82% of the retina, something no other device is capable of doing in any one image. The images provide optometrists and ophthalmologists with enhanced clinical information which facilitates the early detection, management and treatment of disorders and diseases evidenced in the retina such as retinal detachments and tears, glaucoma, diabetic retinopathy and age-related macular degeneration. Retinal imaging can also indicate evidence of non-eye or systemic diseases such as hypertension and certain cancers.

Optos has a range of medical devices that support different customer segments and patient levels: the P200 and 200Dx devices are concentrated on wellness screening carried out by optometrists and ophthalmologists in primary care; the P200C devices are designed to meet the need for more exacting clinical imaging capabilities and standards in secondary care within the ophthalmology market and at optometric practices that are clinically managing a patient base with advanced ocular disease; and the P200MA and 200Tx devices supports ophthalmologists and retinal specialists in the medical care market. The acquisition of Opto Global, completed in December 2010, brings additional devices for both optometrist and ophthalmologist practices, (including the visual acuity products SmartChart and the AP100, AP200 & AP300 perimeters and treatment lasers) and expands the geographic reach outside our core North American and European markets.

For more information please visit our website www.optos.com.

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