Shares of medical diagnostics company, Omega Diagnostics (LON: ODX) are rallying on Thursday after the company announced it has agreed a contract with the UK Department of Health and Social Care to provide manufacturing capacity for COVID-19 lateral flow antigen tests.
Omega’s stock price rose to highs of 118p immediately after the London open, although, it has given up most of those gains and is now sitting at 99p, up 6.48%.
The deal is part of the UK Government’s target of producing two million lateral flow testes per day.
As soon as the Department of Health and Social Care has access to a test that successfully passes a performance evaluation, it will be licensed for Omega to manufacture with the department loaning several vital pieces of manufacturing equipment to the company.
Omega anticipates the agreement will provide it with the capacity to produce approximately 2 million tests per week by the end of April.
The contract is likely to positively impact the company’s new financial year, ending the 31st of March 2022 with Omega saying it anticipates it will result in “substantial” revenue growth.
In a trading update alongside the contract announcement, Omega stated the current financial year, ending the 31st of March 2021, has seen its food intolerance division hold up well despite the pandemic, with sales expected to be around £7.5 million, down 19% compared to the previous year.
Omega is continuing to support the Clinton Health Access Initiative to accelerate its VISITECT® CD4 Advanced Disease test through the supply agreement signed with Clinton Health in April 2020 with sales expected to be between £0.2 million to £0.3 million.
Overall, Covid-19 related revenue is expected to be around £1.5 million, while group revenue is expected to be approximately £9.3 million with an EBITDA loss in the region of £2.1 million to £2.3 million.
“I appreciate that trading in our core business has been softer than expected for the current financial year, however the on-going opportunity for growth in CD4 testing and Food Intolerance revenues is unchanged,” commented Colin King, Omega’s CEO.
“The new financial year will see this growth opportunity realised, and will also see the full impact of COVID-19 antigen testing, and so we are likely to deliver substantial revenue growth compared to this financial year which ends next month,” added King.
Elsewhere, the company announced the appointment of Dr Simon Douglas as independent Non-Executive Chairman.
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