Omega Diagnostics shares plummeted on government contract expiry

Shares in London-listed medical-diagnostics operator Omega Diagnostics Group fell from a cliff after the company reported a widened loss in H1 and confirmed that its contract with the UK Department of Health and Social Care (DHSC) has expired.

Shares were down 26% at £26.25 after the bell on 25 November. Since then, the Omega Diagnostics share price has been pushing higher, trading at £32.10 at the time of writing.

A spokesperson from Omega Diagnostics tells HealthInvestor UK: “We suspect that the reason for the sharp drop was around our lack of progress with Covid-19 and in particular the disappointment over our contract with DHSC. Once we have self-test approvals, commercial orders will follow and I am sure this will provide a positive outlook for shareholders.”

Results for the six months to the end of September show revenue increased by 81%, year on year, to £5.73 million.

But, astonishingly, statutory losses for the period amounted to £2.75 million, compared with just £280,000 in H1 2021. Omega Diagnostics reported an adjusted underlying loss of £2.45 million, compared with a deficit of £1.29 million previously.

Commenting on the loss, the spokesperson says: “Our losses were from within our Global Health division, primarily around building capacity for Covid-19 antigen demand and CD4 [testing for the management of people living with HIV].”

The company’s Global Health division provides HIV immune status tests to low and middle-income countries, and Covid-19 tests to the UK Government and agencies around the world.

The second phase of the Omega’s contract with DHSC wasn’t activated but the company has agreed a partnership with DAM Health, a Covid-19 testing solutions provider.

“Whilst we were disappointed not to receive any work from DHSC and we didn’t expect demand for own Covid-19 Antigen test to take off until H2, we were however really encouraged with the performance of our core business. Our Health and Nutrition business not only increased by 62% to £4.2m but more importantly revenues returned to pre-pandemic levels. Our CD4 testing has also started to gain market acceptance in the 7 ‘early adopter’ countries and already have an order book of £1m and we are confident more orders will be forthcoming.”

The shock is followed by hope for recovery: “Once we gain approvals in the UK and EU for our Covid-19 test, demand for our antigen test will be forthcoming, driven by DAM Health and our commercial partner Landsdown. We also expect our Health and Nutrition business to continue its recovery this year to pre-pandemic levels and then return to double-digit growth in the coming years, fuelled by our focused expansion strategy.”

Date published: December 9, 2021

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