It’s another week and time to look at another biotech stock which has been shooting the lights out in recent days, this time Omega Diagnostics (LON: ODX). It has seen its share price pop from around 7p at the end of March to currently trade at around 60p. It is typical of the sort of dramatic moves we are seeing from small cap biotech stocks which come within sniffing distance of the efforts to develop solutions for COVID-19.
Much of the excitement surrounding Omega Diagnostics stems from its announced participation in the UK Rapid Test Consortium (RTC) which will see it working to develop and manufacture a COVID-19 point of care antibody test. This is to form part of the UK government’s five pillar national testing strategy.
The UK RTC was announced by the government on 8 April, and also includes the likes of Oxford University, Abingdon Health, BBI Solutions and CIGA Healthcare.
Omega Diagnostics joins coronavirus working group
Omega Diagnostics has signed a memorandum of understanding for an initial period of six months which will see the various parties to the MOU working together to develop their lateral flow test design and manufacturing expertise. The end point is the mass production of a fast and reliable COIVID-19 test.
BBI Solutions CEO Mario Gualano, one of the other members of the RTC group, said in an interview with BBC Wales at the weekend that the group is the working to a timescale of three months to have a test ready for mass production, although he admitted it was very difficult to predict a precise end point when the project would see a deliverable to the NHS and other health services.
Once the rapid test reaches what is called the design freeze, then the specification and standard operating procedures will be shared with each party of the consortium, enabling it to be manufactured at each site. This will include Omega Diagnostics’ facility in Scotland.
Material transfer agreement with Mologic
On 20 April the company also confirmed that it had inked a material transfer agreement with Mologic, which will support Mologic’s first generation ELISA (Enzyme-Linked Immuno-Sorbent Assay) diagnostics test which is being partly funded by the British government.
Mologic will have access to one of Omega’s facilities in Cambridgeshire and both companies are working to provide pilot batches and first validation batches. Omega said that it could make about 46,000 batches a day using its ELISA manufacturing facility in Littleport.
While most investors will be loading up on Omega Diagnostics shares because of the RTC project and the possibilities that holds out for the company, it is worth noting that the company is very focused on areas like food intolerance and the measurement of allergens.
Proven rapid testing technology could work for COVID-19
The company has developed rapid testing for HIV and other diseases which makes it a natural choice for the RTC scheme.
Unsurprisingly, with the stock price so high compared with historical performance we have seen some employees exercising share options with 90,000 shares being allotted this month.
Future share price action is going to largely depend on further developments with the RTC’s testing, approvals and eventual roll out. This is a highly speculative play, but looks well positioned from the perspective of getting a workable testing solution out into the UK and potentially other countries.
With so many other sectors languishing, biotech remains a very hot sector if you can get your picks right.