The Scottish pioneer which makes bionic hands used by soldiers wounded in the war in Iraq has bought the American business which produces the skin which covers its inventions.

Touch Bionics has acquired Livingskin in a seven-figure deal which will give the firm control over key technology and boost its presence in the key US market, as it prepares to supply its 200th i-LIMB hand.

In a deal with an American pioneer of artificial skin products, Tom Passero, Touch Bionic has bought the intellectual property covering products developed to resemble human skin by simulating the three dermal layers of natural human skin. Livingskin claims this gives the most realistic aesthetic restoration available.

Livingskin's product met very challenging requirements set by the firm.

In addition to being lifelike in appearance, the artificial skin is flexible enough to cope with the huge range of movements offered by the digits on the hand developed by Touch Bionics.

Livingskin's products are supplied to clinics around the world for uses including facial surgery and limb amputations. With annual revenues of $2m (£1m) plus, the business is profitable.

Stuart Mead, chief executive of Edinburgh-headquartered Touch Bionics, said the firm had also been keen to buy the sales and production capability offered by Livingskin in the US and other markets.

Headquartered in New York state, Livingskin has clinics across the US and in Canada. The acquisition should allow Touch to make much faster progress in the US than if it had to build a sales and marketing network from scratch.

To finance the deal and support further expansion in the US, Touch Bionics has raised more than £1m additional capital from existing investors. These include the Archangel and TriCap business angel networks and the Scottish Co-investment fund.

John Waddell, chief executive of Archangels, said: "Touch Bionics is one of the most exciting technology companies to emerge from the UK in recent years and we are delighted to support its growth."

Although Mead is confidently predicting Touch will have turnover, he said: "The acquisition of a leading US development company in order to grow a vital area of Touch Bionics' business, and firmly establish its US presence reflects the success and confidence that permeates the company."

Mead said Touch Bionics had got off to a flying start since launching the i-LIMB last year. The company's hands have been fitted to patients in 25 countries.

Some 70% of the patients are in the US, with 5% in the UK and 25% spread across 22 countries ranging from Europe to Argentina.

Touch Bionics is on course for sales of £5m in calendar 2008. It has been making operating profits for the last two months.

The i-LIMB was invented by David Gow, director of rehabilitation engineering services at NHS Lothian and of the Smart (South-east Mobility and Rehabilitation Technology) Centre based at the Astley Ainslie Hospital in Edinburgh.

The first recipient of an i-LIMB was Donald McKillop, of Kilmarnock, who lost his right hand as the result of an industrial accident in 1977.