Omega Diagnostics has completed an agreement with Accubio, a wholly-owned subsidiary of Zhejiang Orient Gene Biotech, in relation to the sale of its diagnostic test kit manufacturing business and facility in Alva, for £1m.
The manufacturing business has been sold as a going concern, with approximately 93 full-time employees based in Alva transferring across with the business, with no resultant redundancies.
The agreement also covers the sale of certain fixed assets, including plant and equipment - although not any government-funded equipment on site - as well as the assignment of the lease for the Alva site.
As previously announced, the transitional services agreement addresses the ongoing requirements for the site to continue to produce lateral flow tests (LFTs) for Omega, particularly the Visitect CD4 Advanced Disease test. These arrangements cover the period to December 2022.
Jag Grewal, chief executive of Omega, commented: “We are extremely pleased to confirm the sale of the historical Alva site today, ensuring job security for all employees transferring to Accubio.
“This is the first step in our planned strategy to reshape and restructure the business.”
The company has also been forced to seek new sources of funding after shareholders rejected its plan to raise £7m through a share issue.
By the closing date of the offer, it received acceptances for just 23.5% of the new shares.
Grewal added: “The board is encouraged that resolution 1, increasing the directors’ authority to allot shares, was approved by shareholders and notes the views of some retail shareholders with regards to resolution 2 and their pre-emption rights.
“Accordingly, the fundraise will not proceed and the company will look at other strategic and funding options.”
Omega shares closed at 1.08p (24.29%) higher at 5.5p yesterday, but have fallen significantly in the last six months.
Last February, Omega was awarded a contract with the Department of Health and Social Care (DHSC) to provide manufacturing capacity for Covid-19 antigen LFTs.
As a result, and with pre-production funding provided by the DHSC as well as the group’s own cash resources, Omega expanded the manufacturing site in Alva, increasing the site footprint, staffing levels and equipment, as well as installing government funded-equipment to seek to support UK-based manufacturing capacity for LFTs.
This substantially increased the cost base of the Alva site and for the company as a whole.
The DHSC failed to licence a third-party developed test to technology transfer to Omega’s Alva site for Omega to manufacture on their behalf and allowed the contract to expire.
As a result of the DHSC not progressing the contract to the phase two manufacturing stage, Omega was left with insufficient demand for production volume and a manufacturing cost-base at Alva became unsustainable.
The Alva site generated a £4.9m loss in the nine months to 31 December 2021. In the interim results announcement on 25 November 2021, Omega highlighted the need to re-size its lateral flow test manufacturing capacity, to improve operational efficiency and substantially reduce costs.
The sale of the Alva site and the corresponding step-change in the company’s cost base represents the first stage of the implementation of this strategy.
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