Omega Diagnostics to raise up to £7 million, sell manufacturing facility

© Reuters.

By Samuel Indyk

Investing.com – Omega Diagnostics (LON:ODX) has confirmed it has raised gross proceeds of £5.0 million via placing and subscription to new institutional investors and a number of wealth managers at an issue price of 5 pence per share.

The company has also proposed to raise an additional £2.0 million by the issue of up to 40,596,089 New Ordinary Shares pursuant to an Open Offer to Qualifying Shareholders at the Issue Price.

The issue price represents a discount of approximately 31% to the closing mid-market price of 7.25 pence on 10th February.

The net proceeds of the fundraising, amounting to between £4.6-£6.6 million, depending on the take up of the Open Offer, will be used to drive growth in the Health and Nutrition Business, provide the necessary finance to relocate CD4 production to the new facility in Ely, Cambridgeshire, and support a transition to a sub-contract model for COVID-19 test manufacturing.

The confirmation of an equity fundraising follows yesterday’s RNS where the company said they were considering raising funds, conditional upon certain corporate actions.  

Omega also announced it has signed an agreement with Accubio Limited, a wholly-owned subsidiary of Zhejiang Orient Gene Biotech, in relation to the sale of Omega’s diagnostic test kit manufacturing business and facility in Alva, Scotland, for a cash consideration of £1 million, payable at completion.

The manufacturing business is being sold as a going concern with approximately 109 full-time employees based in Alva transferring across with the business, with no resultant redundancies.

The agreement to be entered into will contain transitional arrangements that address the ongoing requirements for the site to produce Lateral Flow Tests for Omega, in particular the VISITECT CD4 Advanced Disease test and the VISITECT COVID-19 antigen test. These arrangements will cover a transitionary period to December 2022.

“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,” Omega Diagnostics CEO Jag Grewal said. “We had previously highlighted our need to re-size our COVID LFT manufacturing capacity and it is hugely disappointing that having acted in good faith to establish UK manufacturing for Government-issued COVID tests, we find that these tests are, in the main, sourced from China instead.”

The company said the sale will “significantly” reduce the group’s fixed cost base and eliminate a number of potential future liabilities, whilst also generating funds for future growth.

“The focus of the Omega team is on delivering significant growth in the profitable Health & Nutrition division, determining the best way to deliver shareholder value from our CD4 product, which is now building momentum, and executing on a sub-contract production model for COVID-19,” Grewal added.

At 09:03GMT, shares in Omega Diagnostics were trading lower by 20.7% at 5.82 pence per share.