Investment in ASP and e-Billing Services

Microgen PLC
18 November 1999


                MICROGEN PLC

Investment in ASP and e-Billing Services

Microgen plc, the information management services
company, announces that it is to increase investment in
its application service provider ('ASP') and e-billing
services in order to accelerate the transition of the
Group from its legacy services into e-business sectors.

Microgen's e-business services are based on a core
technology, Microgen Axess, which has been considerably
enhanced in terms of capacity and capability during the
past year and now provides a robust infrastructure for
database management ASP services and has also evolved to
provide a platform for e-billing services. Over the past
six months, Microgen has noted the increasing demand for
such services and also the market position which it has
established in these sectors. As a result, in order to
develop these significant opportunities and to maximise
shareholder value, the Board of Microgen has decided to
invest up to £8 million in the Group's ASP and e-billing
services over the next two years. This investment will be
used to :

-    Increase sales and marketing resources in these new
     sectors in order to maximise the 'first-mover' advantage;
-    Establish a new central processing facility,
     integrating the processing of Microgen's outsource
     services; and
-    Continue developing the services and building the
     operational management infrastructure to deliver the
     potential from these opportunities.

With strong cash flow from the Group's legacy operations
and the Group's net cash balance (£11.5 million at 30
June 1999, after payment of tax for 1998), the investment
in these e-business services will be financed by the
Group's existing internal resources.

Application Service Provider ('ASP')
An update on the Microgen Axess ASP business was issued
on 5 October 1999, detailing the operating performance,
the growth in the blue-chip customer base and the
operating infrastructure established. In summary,
Microgen Axess now has over 33 customers for database
management ASP services, with over 120 million pages
stored. Annualised recurring revenue now exceeds £1
million and the contribution from this revenue now covers
the bureau level (fixed cost and direct customer support)
cost base. As a result of this success, the Board
considers Microgen Axess to be one of the leading ASP's
in the UK. A leading research organisation is forecasting
average compound annual growth rates in excess of 50% for
the European document hosting market, equivalent to
US$362 million by 2001.

Business-to-Business ('B2B') e-Billing
On 29 June 1999, Microgen announced a B2B outsource e-
billing service with two pilot customers, both of which
are now live and anticipate rolling out the service to
their customer base during the next few months. In
addition, Microgen has already received commitments from,
or is in advanced negotiations with, a further ten
customers, several of which should be live this year.
Furthermore the pipeline of prospects is strong across a
range of industries, including both existing Microgen
customers adopting e-billing services and potential new
customers. The Board believes that the increasing demand
for the Microgen service confirms the effectiveness of
Microgen's ASP outsourced model, which confers the
following benefits :

-    Reduced cost of invoice, statement and credit note
     distribution
-    Improved service to the biller's customer by
     providing detailed invoice distribution in document and
     spreadsheet format, enabling downloading into the
     recipient's accounting/ERP system
-    Improved cash flow to the biller through the
     'invoice tracking' and exception reporting provided by
     the Microgen service.
-    No capital expenditure is required by the biller or
     its customer (recipient)
-    The biller can introduce e-billing services very
     rapidly

Through the existing 'print & mail' infrastructure within
the Document Processing Services division, Microgen is
uniquely positioned in the UK in being able to transition
billers from paper print & mail into e-bill distribution,
or to manage distribution of billers' invoices via both
media. Furthermore, using the Microgen Axess ASP
services, the B2B e-billing service can be further
enhanced to provide a cost-effective sales ledger
document management application, integrating all
sales/debtor documentation with an option to provide full
supplier integration through a supply-chain extranet
hosted by Microgen.

The demand for B2B e-billing is expected to increase
dramatically during the next five years with Ovum Ltd
forecasting in excess of 1 billion bills per annum being
distributed between businesses electronically in the UK
by 2005. Microgen's experience in invoice processing
indicates a potential average revenue per invoice of 15-
20 pence, producing a potential UK B2B e-billing
distribution market in the order of £200 million by 2005.
Having now proven the B2B business model, the Board
considers that Microgen is well positioned to gain a
significant market share in this sector.

Business-to-Consumer ('B2C') e-Billing
Following the successful 'proof-of-concept' for multiple
media bill distribution through the B2B e-billing
service, Microgen has now developed a B2C model and is in
advanced discussions with a number of parties, including
major billers, financial institutions and distribution
portals. Based on an 'Aggregator' concept, the Microgen
model provides substantial cost reductions to the biller
(up to 50% of print & mail costs) and a new revenue
stream to the distribution portal, while overcoming the
major obstacle to B2C e-billing, namely the high levels
of consumer e-mail address churn.

In the first phase, B2C e-bills/statements will most
likely be distributed via suitable internet portals. Due
to the characteristics of the UK banking infrastructure,
and the increasing penetration of internet banking,
financial institutions are anticipated to play an
important role. However this channel is unlikely to
distribute more than a third of B2C e-bills and hence
Microgen is also currently in discussions with a number
of other potential distribution channels including
digital television and mobile phones. The UK B2C e-
billing market is currently forecast by Ovum Ltd to reach
150 million bills per annum by 2005. This slower adoption
rate reflects the greater complexity of B2C e-bill
distribution, although a similar Aggregation model is
anticipated for e-bill distribution to the SME sector.

In summary, the Board believes that Microgen is
positioned at the forefront of  rapidly developing e-
business market sectors in the UK and intends to maximise
the potential of these opportunities. With the
established Microgen Axess infrastructure and the
additional investment in sales, marketing and operational
resources, Microgen has the capability to establish
itself as a leading service provider in outsource ASP
database management and e-billing services.


Contact :

Martyn Ratcliffe, Executive Chairman, Microgen plc
01753-847177

Mike Phillips, Group Finance Director, Microgen plc

Steve Liebmann, Buchanan Communications           
0171-466-5000