Covid testing roundup: Omega Diagnostics, Novacyt, Abingdon Health

Victor Parker
Vox Newswire
15:40, 4th July 2022

While diversified pharmaceutical giants have benefited from Covid-19, with Pfizer, AstraZeneca, and Moderna shares all significantly higher since February 2020, many smaller UK testing companies have followed a boom and bust cycle. As the need for testing has waned, these smaller-cap diagnostics companies have been left fighting battles with the DHSC and struggling to remain relevant to investors, through continued innovation or pivots to related sectors. Amid a broader risk-off climate, many of their investors, still holding onto greatly depreciated shares, are left weighing their options.

Here is a roundup of recent news from three of them, Omega DiagnosticsNovacyt, and Abingdon Health:

Omega Diagnostics

Omega Diagnostics (ODX Follow | ODX), a medical diagnostics company, announced today it is spinning off its CD4 business to a preferred bidder, with an agreement signed between the two entities on 2 July 2022. CD4 manufactures and supplies VISITECT CD4 and VISITECT CD4 Advanced Disease tests.

The selected bidder has 4 weeks to fulfill the terms of the agreement, involving talks with key customers and suppliers. The transaction is expected to complete shortly thereafter, and will include a significant up-front cash payment and a future royalty stream linked to VISITECT CD4 test sales.

Omega has previously indicated it believes its CD4 business will fare better under separate ownership that can focus solely on product development. This will leave Omega to focus entirely on its Health and Nutrition business where it sees significant growth opportunities. CEO Jag Grewal added "The net proceeds from the sale of the CD4 Business will enable our product and geographical expansion ambitions to be realised."

Omega has now withdrawn from the Covid-19 market. In March 2022, the Company sold its diagnostic test kit manufacturing business in Alva, New Zealand for £1m. CD4 has been loss-making, which is the primary reason the move was welcomed by investors, with Omega shares up 9.2% in early trading.Nevertheless, shares in the company are down 86% YTD after they ballooned to over 100p in the months following the start of the pandemic in 2020.

Stock Chart | ODX

In April 2022, Omega updated on FY21 performance. The Company reported a 41% increase in revenues, with its Health and Nutrition division contributing the majority of it. Back then, the Company indicated its Health and Nutrition division was its key focus, with substantial growth opportunities in both China and the US, and that ongoing Covid-related income was expected to be minimal, leading to today's announcement. Having shed its Covid-19 business, and with the pandemic bubble behind it, the company appears to be on track for recovery and growth.

Novacyt

In related news, Novacyt (NCYT Follow | NCYT), another international diagnostics business, updated markets on 28 June 2022 on the launch of its research-use-only (RUO) polymerase chain reaction (PCR) monkeybox assay, in response to the recent outbreak of the virus in non-endemic countries. The launch of this assay expands Novacyt's diagnostic product portfolio and follows the Company's strategy of maintaining its position as a leader in infectious diseases. Novacyt's RUO monkeypox assay has been developed in two forms, genesig easy and genesig advanced.

Shares rose around 5% on the news and are up 16.7% in the last 5 days to 163.61 today.

Stock Chart | NCYT

Novacyt shares are down 52.2% YTD, following a similar boom and bust pattern as Omega. Unlike Omega, however, Novacyt has remained focused on developing its diagnostics business, and the Company's shares are still up 950% since January 2020 (15.5p to 163.46p), just before the pandemic hit Europe. They reached as high as 1,194p in October 2020.

In April, Novacyt announced it had been notified of a DHSC claim against them for £134.6m in relation to their second supply contract with DHSC announced on 29 September 2020. Then in June, Novacyt filed a defence of the claim and a counterclaim of £81.5m against DHSC.

Abingdon Health

A third testing company, Abingdon Health (ABDX Follow | ABDX), saw its shares soar by as much as 50% on 28 June after announcing a £8.9m settlement with the DHSC, a familiar pattern with small-cap testing companies.

The agreement concerns outstanding invoices payable by DHSC for lateral flow tests and component stock. In March,  Abingdon Health reported it had not been paid invoices totalling £8.5m. Then, on 28 June, the Company confirmed DHSC had agreed to settle for £8.9m, excluding interest. This will include an initial cash payment of £6.3m, to be paid on or before 22 July 2022.

Since then shares have consolidated to 10.75p today, and are up a more modest 10.26% in the days since the announcement. Abingdon Health shares are down 65% YTD and have remained in a range not far from their all-time low since February.

Stock Chart | ABDX

The settlement, once received, will provide additional working capital and be deployed to help fund Abingdon Health's various growth initiatives, the Company said. This includes a supply agreement with Taiwan’s Arise Corporation for 10 million Covid-19 antigen tests.

Additionally, in May Abingdon Health signed a contract to manufacture lateral flow device (LFD) components for a Covid-19 antigen test for a European customer. The contract, which is for an initial period of 12 months with an option to extend, will start with the primary production of the key biochemical-sprayed nitrocellulose component of the LFD.

Follow News & Updates from Omega Diagnostics: Follow | ODX, Novacyt: Follow | NCYT and Abingdon Health: Follow | ABDX

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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