Going for growth: Omega Diagnostics AIM to revolutionise the COVID-19 testing market

Shares in Omega Diagnostics have been on a meteoric rise this year, we sit down with CEO Colin King to discuss revolutionising COVID-19 testing and more as the business gears up for rapid growth.

As part of the ShareBuyers’ going for growth series, we take a look into the growth prospects of Omega Diagnostics shares (ODX) – an AIM-listed specialist in diagnostic testing, aiming to make a material difference to the health and well being of populations across the globe.

With the share price of Omega Diagnostics gaining by over 300% in the year-to-date, shares in the company have caught the eye of many investors with an interest in the health sector.

Find out why Omega Diagnostics Chief Executive Officer Colin King is buoyant on the future of ODX and also what he’d say to Warren Buffett if he unexpectedly bumped into him!

Firstly, could you tell us a bit about Omega Diagnostics and its value proposition?

Omega Diagnostics is a specialist in diagnostic testing and has a focus on two areas: Global Health (incorporating its VISITECT CD4 test, a unique instrument free point-of-care diagnostic test used to manage HIV treatment, and a number of exciting opportunities in the COVID-19 testing space) and Food Intolerance testing.

“It is important to note that whilst the COVID-19 opportunities are exciting, there is a solid core business at the start of a growth curve.

Colin King, CEO of Omega Diagnostics

In terms of our core business our VISITECT CD4 Advanced Disease test which monitors if a patients CD4 count drops below 200, a key measure for treatment of HIV patients, especially as they then become more susceptible to other infections like TB. Our test is the only instrument free test on the market and we expect to see strong demand for our product which is now nearing the end of the WHO prequalification process. Our Food Intolerance business focuses on tests to identify foods that people are intolerant to so that they can be removed from diets.

These are not allergy tests, but tests to determine which foods are the cause of longer term chronic illnesses such as IBS. This is a well-established business which has grown to revenues of £9.2m, producing an EBITDA of £3.9m. We also see China as a strong growth market where we already have approval for lab use since March, and we are now seeking self-testing approvals – we believe we have the potential to double our food intolerance with china growth alone.

In terms of COVID-19 testing, Omega is now involved with five opportunities relating to COVID-19 testing – four are related to manufacturing agreements with Mologic for their range of antibody and antigen tests, and one is associated with the UK Rapid Test Consortium (UK RTC), which was formed to produce a rapid antibody test for home use for the UK Government. A summary of the opportunities are provided below:

  • UK RTC home-use lateral flow test
  • Mologic lab-based ELISA antibody test
  • Mologic lateral flow antibody test
  • Mologic lab-based ELISA antigen test
  • Mologic lateral flow antigen test

We offer investors an opportunity to invest at a timely moment ahead of commercial ramp up of many of these products.”

Colin King, CEO of Omega Diagnostics

The UK RTC test has achieved design freeze and gained CE marking for professional use at the end of July. This is the first step towards achieving self-test accreditation and to do this we require pre-approval to perform self-test usability studies, which would then be followed by a 2,000 person study which would allow us to seek final approval from MHRA for self-test use. The UK-RTC are currently in negotiations with the UK Government over a supply agreement, and in terms of Omega’s manufacturing plans we aim to have initial production capacity of 100,000 tests per week in place in September, scaling up to 200,000 tests a week in October.

The Mologic lab-based ELISA antibody test is CE marked and we have received first orders with the test being evaluated in 18 countries. India has approved the test and we hope to realise sales this month.

The Mologic lateral flow antibody test is undergoing technical transfer and we are looking to gain CE marking and commence product evaluations in August with commercial sales expected late September / early October.

In terms of antigen testing, both the lab based test and the point-of-care test is in the final stages of development and with the ELISA test we are targeting CE mark in September with sales in October or November, with the lateral flow test be available approximately two months after the ELISA test, so December or January.

The current climate is presenting challenge and opportunity – how has this applied to your business?

COVID-19 certainly has raised a number of challenges for businesses, but with our strong position in the global health diagnostics market we have a number of exciting opportunities for use. Our core business continues to perform well and our recent financial results showed a pattern of growth in revenues and EBITDA as well as positive cashflow from our operations. We have made the decision to stop the development of our allergen product lines and our food intolerance revenues has seen some slowdown due to COVID-19, however with the support of our recent fundraise we have been able to deploy our resources into the development of exciting new COVID-19 testing products and the necessary ramp-up of our manufacturing capacity to be able to produce significant numbers of these tests on a weekly basis as we expect to see considerable demand for these tests.

Growth catalysts are crucial to business growth – what do you believe yours are?

We think that we’ve entered the new financial year in a very strong position to drive growth across all of our business units. Our VISITEXT CD4 Advanced test is well positioned for commercial ramp-up give our agreement with the Clinton Health Access Initiative to accelerate deployment of the test and with the WHO prequalification process proceeding in line with expectations and nearing a conclusion. In the area of food intolerance we see China as a strong growth market where we already have approval for lab use since March, and we are now seeking self-testing approvals – we believe we have the potential to double our food intolerance with china growth alone. We also have an excellent opportunity in the COVID-19 testing arena where we have a unique position in both antibody testing and antigen testing covering lab use, use in clinical and community settings and for home-use self-testing.

What are the biggest headwinds you foresee to achieving growth in the coming months and years? How will you tackle them?

The challenge for us, particularly in the COVID-19 space, is to manage investor expectations, particularly with the timings for regulatory approvals and then how quickly we can generate commercial traction for these tests. In terms of regulatory approvals to a certain extent this is beyond out control and the process of gaining approval, ensuring the necessary validations and studies, does take time, but we are confident with the performance data that we’ve generated to date which shows that we have gold standard tests with high sensitivity and specificity. In terms of commercial traction, we are again confident of future take up of our products. As I’ve mentioned we’re in active negotiations with the UK Government regarding a supply agreement for our UK RTC test, and the defensive nature of our wide portfolio of Mologic products will mean that if we have a slow pick up with one product line then this can be offset by the performance of others to ensure that we utilise the manufacturing capacity that we’ve built.

Imagine you find yourself in a lift with Warren Buffett. What would be your ‘elevator pitch’ to summarise why he should invest in your business?

We are an exciting diagnostic testing business with a number of huge opportunities ahead of us – we have a solid core business delivering good growth in revenues and EBITDA and is cash flow positive, and with exciting prospects for future growth. Equally we also have a number of exciting opportunities within the COVID-19 testing market, and an enviable breadth of testing solutions covering antigen and antibody testing, from lab tests through to home-use finger prick tests. The business is well funded for growth and we have invested these funds to expand our manufacturing capacity which will be up and running next month and ramping up from October onwards. We offer investors an opportunity to invest at a timely moment ahead of commercial ramp up of many of these products and a chance to invest in a company that is genuinely making a major difference to people’s health and well-being during this unprecedented time and beyond.

Please note: this discussion with Colin King of Omega Diagnostics forms part of the ShareBuyers’ going for growth series – helping companies on AIM to share their growth story. It is not a recommendation to buy or sell shares in Omega Diagnostics.

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