It hasn’t been a good fortnight for Omega Diagnostics [LON:ODX] shares.
The AIM-listed medical diagnostics company was propelled into the stratosphere earlier this year, rallying from 9.65 pence last November to 113.50 pence, after it became part of a government-sponsored consortium tasked to develop a rapid antibody testing kit. The group, UK Rapid Test Consortium (UK RTC), was brought together by the government’s life sciences advisor John Bell and also includes Oxford University, Abingdon Health, BBI Solutions and CIGA Healthcare.
UK RTC’s focus was on developing the AbC-19 Rapid Test which uses only a drop of blood from a finger-prick and provides results within 20 minutes, eliminating the need for a lab. The idea behind it was to have a quick test that will make it possible for people with antibodies to move about freely without the need to close businesses and restrict travel. By October the government had signed a contract with the group worth £75 million for one million testing kits.
Is anybody else here questioning the cost of each test?
However, last week the British Medical Journal published an article questioning the accuracy of the test, arguing that while it is fairly reliable in cases when people show Covid symptoms, in asymptomatic cases one in five were wrongly diagnosed. The company responded with a press release today saying that the Department of Health and Social Care is satisfied with the performance of the test, as is the UK-RTC, and that it will continue to roll out the use of the product.
Richard Sneller sells his shares
Unfortunately for shareholders, this coincided with one of Omega Diagnostics’ largest shareholders, Richard Sneller, a former Baillie Gifford fund manager, pulling out of the company. Over a number of months Sneller whittled down his stake from close to one quarter the company’s shares to zero, the last tranche sold on Monday.
Sneller explained that he had supported the company in tough times and saved it from bankruptcy.
“Since it has moved to a surer financial footing I have been recycling (for a number of months) the proceeds into other businesses and charities that are struggling for funds,” Sneller said.
To complicate things further, legal activists The Good Law Project launched legal action against the government over the purchase of AbC-19 Rapid Tests. GLP argues that the contract was signed without a public tender and without evaluating the accuracy of the tests, raising serious concerns about the maladministration of public funds.
What will be left when the storm clears?
A separate closer look at the company’s finances has not revealed a pretty sight as Omega Diagnostics oscillated between losses worth between £6-7 million and small profits over the last four years. This could all be surmounted with good sales in the UK and US but with the political heat generated from judicial proceedings it may not be a straight forward ride.
Despite the article in the British Medical Journal there is still validity in the UK RTC tests although not sufficiently to use them on as large a scale as the government initially intended. The initial plans have been toned down into using the test for a surveillance programme that tracks the spread of the virus across the country rather than a reliable tool that could be used instead of lockdowns.
US distribution is also in the pipeline after Abingdon Health, one of the firms in the UK RTC, received approval from the US Food and Drug Administration to distribute the AbC-19 Rapid Test to laboratories and health workers in the US. The company is also in the process of ramping up production aiming to manufacture one million units per week of the Elisa Covid-19 test produced for Mologic, a commercial partner.
The success of most of the company’s plans could end up influenced by the Good Law Project’s legal action.
Shares closed down 4.42% at 54.19 Tuesday.