SourceBio to scale COVID-19 testing services
(AIM: SBI ) said that funds from its IPO are enabling it to further scale its COVID-19 testing services to deliver against expected increases in future testing.
Due to a ‘considerable ramp-up’ in COVID-19 testing during 2H20, SourceBio said it expects to report total revenue of around £50m (FY19: £21.2m) and EBITDA of c.£14m (FY19: £3.0m) for the year ending 31 December 2020, with the vast majority of this increase in expected earnings driven by the contribution of COVID-19 testing revenues.
The integrated laboratory services and products provider has provided COVID-19 testing services as part of its newly formed Infectious Disease Testing business unit since May 2020.
These services passed all of the auditing requirements of the NHS and the Department of Health and Social Care ("DHSC") in April 2020, one of SourceBio’s key COVID-19 customers.
Under the DHSC contract, which is set to expire on 12 December 2020, SourceBio successfully processed over 330,000 COVID-19 PCR antigen tests. The group also procured a testing services contract with private healthcare group Spire Healthcare Limited ("Spire").
The DHSC contract is expected to be extended through Public Health England's ("PHE") National Microbiology Framework Lot 4 - Clinical Laboratory Diagnostic Testing Services ("Lot4"), however this framework is now not expected to be awarded until February 2021.
This anticipated timeline may be subject to further change, having originally been expected to be awarded in November 2020. This delay is expected to impact testing volumes into Q1 2021 but the Board ‘remains confident in its financial outlook for FY21 as a whole.’
Funds have underpinned scale-up plans for COVID-19 testing since SourceBio’s admission to AIM last month. It has since submitted an updated Lot 4 application based on its assumption of increased testing capacity beyond their original target of 10,500 tests per day.
The company’s Directors highlighted to investors that they believe SourceBio is ‘well placed to bid for this framework given its capability, track record and high level of accreditation.’
SourceBio has also announced that it has been accepted into the Increasing Capacity Framework Agreement for cancer testing services to NHS England, a framework designed to reduce the significant backlog of elective surgeries impacting the NHS due to the pandemic.
This is expected to support the growth of the Healthcare Diagnostics business unit in 2021.
"A key part of our investment case has always been our positioning to deliver against an unprecedented COVID-19 testing opportunity,” said Jay LeCoque, Executive Chairman.
He added, “We believe we are in a very strong position for the Lot4 bid, and when awards are made in the New Year we have the potential to increase our testing volumes over the course of this framework."
Shares in SourceBio have ticked up at 7% since its IPO back in October 2020 to open 5.57% higher this morning at 193.20p following the announcement.
Reasons to Follow SourceBio
SourceBio International is an international provider of laboratory services to clients in the pharmaceutical industry, the NHS and to private healthcare providers. The Group is headquartered in Nottingham, with additional facilities in the UK, Ireland and the US.
The company saw a positive start on its first day of trading on AIM, adding around £8m to its initial £120m market capitalisation while the £35m raised at 162p is intended to be used by it to scale up COVID-19 testing capacity as well as paying off shareholder and bank loans.
“We are delighted by the strong support we’ve received from institutional investors. Our IPO on AIM allows us to significantly increase our COVID-19 testing capacity, accelerate earnings growth in our core business and execute on potential M&A opportunities,” said LeCoque.
He added at the time of the IPO that, “It’s an exciting time for our business and we look forward to executing on our ambitious growth plans and delivering value to our shareholders.”
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