Omega Diagnostics has sold the Clackmannanshire facility that has been its headquarters for the past 19 years as the company prepares to vacate Scotland and distance itself from what has been a volatile foray into manufacturing Covid testing kits.
The manufacturing facility in Alva has been sold for £1 million to Accubio, a wholly-owned subsidiary of Zhejiang Orient Gene Biotech. The Chinese company is one of four major suppliers of lateral flow tests supplied for free by the UK government throughout the pandemic, and also holds an exemption from the government’s Coronavirus Test Device Approval (CTDA) regulations.
CTDA regulations came into effect in November in the wake of Brexit to regulate the approval of testing devices in the UK. A total of 16 devices have so far received approval, and 49 have been granted exemptions. Omega’s test kits are neither approved nor exempted.
The business is being sold as a going concern with approximately 109 full-time employees based in Alva transferring across. The agreement also covers the sale of certain fixed assets, but not any of the government-funded equipment on the site.
Omega’s share price has lost more than 90 per cent of its value this past year as a contract to make Covid testing kits for the UK’s Department of Health and Social Care (DHSC) has come unravelled.
READ MORE: Investors pour their scorn on Omega
The company has been in discussions with the DHSC about government-funded equipment supplied to help Omega ramp up for high volume manufacturing during the pre-production phase of the contract, as well as a £2.5m pre-payment that the government is seeking to have returned.
As part of the exit from Alva, Omega is facilitating discussions with manufacturing partners who may be willing to purchase the government-funded equipment. Omega is aiming to sub-contract manufacturing of its Covid antigen test and does not intend to purchase the equipment for its own use.
The company added that it remains in discussions with the DHSC about the £2.5m pre-production payment.
Chief executive Jag Grewal said the sale and an accompanying fundraising round will allow Omega to focus on driving growth in its health and nutrition division and its CD4 line of tests to help manage patients with HIV.
CD4 tests will continue to be made at Alva for up to nine more months, after which Omega may transfer manufacturing to its new purpose-built facility Ely, Cambridgeshire. This site is also home to the health and nutrition division.
READ MORE: Omega Diagnostics hit by confirmation of fundraising speculation
Omega first established its presence in Ely through the 2007 acquisition of Cambridge Nutritional Sciences. The facility was refurbished following an £11m fundraising by the company in June 2020.
Mr Grewal said the collapse of the DHSC contract left Omega with more space, staff and equipment than necessary in Alva, with the site generating a £4.9m loss during the nine months to December 31.
“Today’s news is the first stage of a planned strategy to deliver on our stated objectives to see an increase in revenue across the group and to reduce losses,” he said.
“We had previously highlighted our need to re-size our Covid [lateral flow test] manufacturing capacity and it is hugely disappointing that having acted in good faith to establish UK manufacturing capacity for government-issued Covid tests, we find that these tests are, in the main, sourced from China instead.”
READ MORE: ‘No surprise’ as battered Omega share price prompts CEO’s exit
The disposal plans were announced alongside confirmation that Omega has raised gross proceeds of £5m via a placing and subscription of 100,000,000 new ordinary shares to new institutional investors and a number of wealth managers at an issue price of 5p each. This is being accompanied by proposals to raise up to an additional £2m through the issue of up to 40,596,089 new ordinary shares to existing investors.
The issue price represents a discount of approximately 31% to Thursday’s closing mid-market price of 7.25p. Assuming full take-up of the open offer, the new shares will represent approximately 77% of the company’s issued share capital.
The AIM-listed stock finished yesterday’s 1.38p lower at 5.88p, a decline of nearly 19%.
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