Fresh off Omega Diagnostics confirming that it will be playing an instrumental part in the UK Government’s mass COVID-19 testing programme, we briefly caught up with CEO Colin King to discuss the significance of the DHSC contract and what the future holds for the diagnostics specialist.
ShareBuyers: How transformational do you believe the DHSC contract can be for Omega Diagnostics?
We’ve always been clear that having the demand to utilise the production capacity we are putting in place would have a significant impact on our revenue generation – as we’ve said in today’s announcement the DHSC contract is expected to have a significant impact on the future performance of the business and whilst volumes are unquantified at this stage it is likely to result in substantial revenue growth in the financial year beginning 1 April 2021.
It’s not our place to provide specific forward looking statements around revenues ahead of the confirmation on orders and volumes but the Government support for our production ramp up and recent public statements by the UK Government on the UK’s lateral flow test production (a target of 2m a day across the industry) shows that there is clear expected demand for these tests.
ShareBuyers: The contract appeared to be reliant on DHSC having access to a suitable lateral flow test. Does this mean this could be a test from Mologic and / or any other suitable provider the DHSC identifies?
ShareBuyers: How substantial are the key pieces of manufacturing equipment loaned and are there plans to potentially go beyond 2 million test per week?
All of the manufacturing equipment are essential in the lateral flow production process and will be used to ensure we reach the 2 million tests per week by the end of April. Hopefully we’ll be able to keep investors updated on progress with some photos of the machines as they are installed on site – so keep an eye out on twitter and follow us on @OmegaDiagnostic. Our focus is on reaching the 2 million tests per week production capacity by the end of April – and we’re happy to keep everyone focussed on that goal for now!
ShareBuyers: In your opinion, how long is demand likely to continue for lateral flow tests?
That is impossible to predict, but it the consensus is that COVID-19 is not going to go away and so we are going to have to learn have to live with this virus. It is clear that in the UK lateral flow tests are being backed by UK government as an important means of regular and daily testing which would allow a more confident return to our daily lives, providing an additional safeguard against the spread of the virus.
ShareBuyers: You noted that this deal could drive substantial revenue for FY2021. Could you provide any indication on the potential range of that revenue growth you’d expect?
Not at this stage – you’ll appreciate that until we know what test we’ll be producing and have a clear indication on volumes from the UK Government we can’t give a number. You will have seen that finnCap have published a note this morning and they suggest “this theoretically could generate c. £150-200m of annual revenues, assuming a price per test similar to that which Omega received form the UK-RTC for its AbC-19 COVID-19 Rapid test. Although volume-dependent, this contract should have a material effect on valuation.”
Thank you to Colin King for finding the time to discuss this promising development at what is clearly an incredibly busy period for the firm.