Omega Diagnostics (ODX ) has confirmed that it has won a contract with the Department of Health and Social Care ("DHSC") to manufacture COVID-19 lateral flow antigen tests, as part of the UK Government's target of producing two million lateral flow tests per day.
The confirmation follows speculation in recent days following a report published by the Financial Times which named the healthcare provider as one of three companies that had been selected by the UK Department of Health to produce additional Covid-19 rapid tests.
The intention is that as soon as the DHSC has access to a test that has successfully passed a performance evaluation, the test will be licensed for ODX to manufacture. DHSC will loan a number of key pieces of manufacturing equipment to enable ODX to expand its capacity.
By facilitating the necessary expansion in production capability in ODX’s Alva-based facility, this will ensure that the COVID-19 lateral flow tests are made available ‘as soon as possible.’
Omega said it will be able to produce c.2 million tests a week by the end of April when combining the Government-loaned equipment with its own manufacturing equipment.
It also highlighted to investors that it expects that this capacity will be ‘sufficient’ to meet the expected demand for lateral flow COVID-19 antigen tests, with enough remaining capacity to be used for VISITECT® CD4 or COVID-19 antibody tests according to demand.
"We are delighted to formalise our relationship with the UK Government and to utilise our lateral flow test production capacity to support the COVID-19 mass testing programme being rolled out across this country,” said Colin King, Chief Executive of Omega Diagnostics.
Shares in Omega Diagnostics have nearly doubled in value over the past three months from 59p in November 2020. Today, the stock is trading 8.60% higher at 101p following the news.
King also acknowledged the Group’s recent trading, stating, “I appreciate that trading in our core business has been softer than expected for the current financial year, however the on-going opportunity for growth in CD4 testing and Food Intolerance revenues is unchanged.”
Omega said the significant contribution to its future performance expected as a result of the DHSC contract above ‘will impact the new financial year ending 31 March 2022.’
The Group’s Food Intolerance division has ‘held up well, despite the impact from pandemic lasting longer than originally thought,’ with sales expected to be in the region of £7.5m for the year ended 31 March 2021, which is a reduction of 19% over the previous year.
The Board said it remains encouraged by this performance given that food intolerance sales in the first quarter of this financial year were 47% down over the first quarter of the prior year.
COVID-19 has had an impact on the roll-out of its VISITECT® CD4 Advanced Disease test with sales for the year ended 31 March 2021 expected to be in the region of £0.2m to £0.3m.
Despite delays, 7-10 countries are expected to have initiated roll out plans for the test by the financial year-end so ODX expects to see ‘an acceleration in the deployment of the test and remains confident that the test will deliver significant value in the new financial year.’
Group revenue is expected to be c.£9.3m with an EBITDA loss in the region of £2.1m- £2.3m. Despite the considerable investment in the scaling-up of its production capacity, the year-end cash position is expected to be in the region of £5.5m to £6m (FY20: £0.6m overdraft).
ODX said the timing of the antigen supply contract with the DHSC coming so close to the deadline of the financial year-end means that it will have ‘very little impact, if any, on the results for the year ended 31 March 2021’, however it expects that this supply contract will lead to ‘significant volumes of tests being delivered over the coming weeks and months.’
Commenting on outlook, King said, “The new financial year will see this growth opportunity realised and will also see the full impact of COVID-19 antigen testing, and so we are likely to deliver substantial revenue growth compared to this financial year which ends next month.
These are very exciting times for the business, and I am delighted that we can play a part in supporting the UK Government's national effort to control the spread of the Coronavirus."
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