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Has the government just triggered Novacyt’s big contract extension?

Investors jumped for joy yesterday as the Department of Health and Social Care published a £406m contract award for Novacyt subsidiary Primer Design Limited on 20 November.

The contract was noted to start on 28 September 2020 and last until 28 Jan 2021. It covered diagnostics and radiodiagnostic devices and supplies, machines and apparatus for testing and measuring and miscellaneous evaluation or testing instruments.

The big question was whether it was confirmation the UK government has triggered the even more lucrative second part of the contract.

Is this confirmation that another £256m is coming Novacyt’s way?

We’re don’t think it is…yet. Novacyt’s announcement of the original £150m contract award was made to the market on 29 September – one day after the respective DHSC contract award was due to start. The announcement from Novacyt noted the first phase will last for 14 weeks which would be nearing towards the end of January on these timescale (as per the end date of the published contract award). It added there was an option to extend this phase as well as add an even bigger second phase.

There was a similar experience with a government ‘award’ for Abingdon Health for £75m a while back – this was confirmed as an ‘estimate’ as to how much they could order in future (Did the UK government just place a £75m order with the UK RTC? Not just yet…).

However, this does also suggest there are still reasons for Novacyt holders to be plenty cheerful. This confirms the government has set aside a potential £406m of revenue for Novacyt – so that’s an additional £256m of revenue that could be coming Novacyt’s way (in addition to the £150m that’s committed).

With a string of director buys, soaring cases and a realisation that the testing will be needed in volume until at least April at the earliest – it could still very much be game on, although not just yet!

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