FOR THE YEAR ENDED 31 MARCH 2021
Omega (AIM: ODX), the medical diagnostics company focused on CD4, infectious diseases and food sensitivity testing, announces its audited results for the year ended 31 March 2021.
Omega provide high quality in-vitro diagnostics products for use in hospitals, clinics, laboratories and healthcare practitioners in over 75 countries and specialise in the areas of health and nutrition and global health.
Financial Highlights:
· Revenue decreased by 11% to £8.73m (2020: £9.82m)
· EBITDA loss of £2.20m (2020: £0.89m profit)
· Statutory loss for the year of £2.10m (2020: loss of £6.83m)
· Adjusted loss before tax* of £3.15m (2020: loss of £0.40m)
· Adjusted EPS (1.0p) (2020: (0.2p))
· Statutory EPS (1.2p) (2020: (4.9p))
· Cash balances of £5.8m (2020: overdraft of £0.6m)
* Adjusted for amortisation of intangible assets, share based payment charges and exceptional items.
Operational & Post-Period End Highlights:
· Chinese regulatory approval of Food Detective® test for both laboratory settings and self-test use
· Supply agreement signed with Clinton Health Access Initiative (CHAI) to accelerate access of VISITECT® CD4 Advanced Disease in low and middle-income countries
· VISITECT® CD4 Advanced Disease test received WHO prequalification
· Placing and open offer which raised £10.5m net of expenses to enable capacity increase of lateral flow tests
· Contract signed with the Department of Health and Social Care (“DHSC”) to provide manufacturing capacity for COVID-19 lateral flow antigen tests
· Appointment of Dr Simon Douglas as Non-Executive Chairman of the Group
· CE mark and launch of Mologic’s lateral flow antigen test for COVID-19, to be sold for professional-use under Omega’s VISITECT® brand and FDA Emergency Use Authorization submitted
· Over £2m invested in facility refurbishment and new equipment to accommodate increased capacity expected from both COVID-19 and CD4 manufacturing throughput
· As announced separately today, Kieron Harbinson has notified the board he will step down from his position as Group Finance Director in August 2021. The Company has agreed to appoint Christopher Lea as Chief Financial Officer
Commenting, Simon Douglas, Non-executive Chairman, said: ” While conditions in the UK and in many parts of the world have improved significantly over the past few months, there remains considerable uncertainty around the world as countries ease or increase restrictions to manage the global COVID-19 pandemic. Challenges remain for much of our international customer base but the Board believes the Company has the expertise to meet these challenges and capitalise on opportunities as we have done over the past year. CD4 is a unique product and gaining traction in countries where HIV remains a serious challenge. We intend to build on this in the short term through further country registrations and international distribution. In addition our strategy and focus to deliver high value instrument-free diagnostic products will be enhanced over the next 36 months through the introduction of a further range of lateral flow tests for diseases often associated with Advanced HIV and a damaged immune system. The recovery of the Health and Nutrition business should continue with growth in China and the USA anticipated over the next two years as their economies open up. COVID-19 antigen testing still remains a significant opportunity for us, although very much dependent on the UK Government’s decisions as to test selection and timing.”
The information communicated in this announcement is inside information for the purposes of Article 7 of EU Regulation 596/2014.
Contacts:
Omega Diagnostics Group PLC
Tel: 01259 763 030
Colin King, Chief Executive
Kieron Harbinson, Group Finance Director
Chairman’s Statement
I joined Omega Diagnostics as Non-Executive Chairman in February this year having recognised that the Company has an exciting potential for growth in all its business areas and is headed up by a skilled, dedicated and experienced team. Joining in the middle of a global pandemic brings its challenges but after only a few months in the Company I have not been disappointed and we continue to provide high quality in-vitro diagnostics products for use in over 75 countries.
Our VISITECT® CD4 Advanced Disease test, targeting patients with advanced HIV, is a unique product in the market and the result of a significant investment of both time and money. As you will read later, it has successfully met the most stringent regulatory requirement of WHO prequalification. In-country registrations also continue to proceed, with 17 countries now well prepared to make the product available this year. We are encouraged and excited by the uptake we are seeing in the market where it will make a real difference in monitoring the progression of HIV.
The Health and Nutrition business has a range of high-quality products for assessing food sensitivity and is also a market leader. The global economy has struggled in light of the pandemic and with that the growth in this division has been affected but, as we see many parts of the world opening up more, I am pleased to see a strong recovery in this division in the second half of this financial year just ended.
COVID-19 testing
I am pleased to report that Omega moved very rapidly at the onset of the pandemic and along with selected partners identified the opportunity to be part of the UK’s fight against the growing threat of COVID-19. Under a government contract and in conjunction with Abingdon Health plc as part of the UK Rapid Test Consortium (“UK-RTC”), we have co-developed and are producing lateral flow test kits for COVID-19 antibody testing (branded as AbC-19TM). Additionally, we have accessed a COVID-19 antigen lateral flow test from the UK company Mologic Ltd which, following a detailed technical transfer, has been regulatory approved for professional use with self-test approval anticipated this year and is now ready for commercialisation under our own VISITECT® brand.
We believe that the ability to supply tests that are produced within the UK remains a key priority for the Department of Health and Social Care (“DHSC”) and to that end the DHSC had facilitated initial commercial discussions between Omega and potential partner companies with lateral flow antigen tests to potentially provide UK manufacturing services. Currently this selection process by the DHSC is taking longer than we originally expected and we are waiting for confirmation on which test we will be required to manufacture. While we are not in control of this process, we remain in regular dialogue with the DHSC to provide manufacturing capacity for COVID-19 lateral flow antigen tests, utilising the key pieces of manufacturing equipment loaned by the UK Government for that purpose.
I am grateful for the support shown from both existing and new shareholders in supporting the Company’s placing and open offer, where we raised £10.5 million net of expenses in June 2020, to support our goals to develop and produce these new COVID-19 tests.
Board and employees
On behalf of the Board, I would like to take this opportunity in thanking Bill Rhodes, our outgoing Non-Executive Chairman. He stepped up to lead the Company in December 2018 and although he had the title of interim Chairman his leadership, guidance and commitment to the role was exemplary and he has steered the Company successfully through a very difficult 12 months. I am delighted that he is staying on the Board as a Non-Executive Director and I am looking forward to working with him.
I would also like to express my thanks and gratitude on behalf of everyone to Kieron Harbinson, our long-serving CFO who is stepping down after 19 years with the Company. He has worked tirelessly over the years to ensure that we controlled our financial resources and successfully steered us through many financial and corporate governance challenges as we grew as a Company. We wish him every success in his next venture, wherever that may be. As announced separately today, he is being replaced from 30 August by Chris Lea, who I would like to welcome to Company and to the Board of Directors. Chris has significant public company experience having most recently worked as CFO of IndigoVision Group plc and I anticipate that he will make a significant contribution to Omega over the coming years.
Due to the pandemic, this year has been a difficult year for all of our stakeholders, including the Company, our staff and many of our customers. I would like to thank all of our staff for their commitment and dedication for continuing to deliver both products and services throughout the year. We have worked hard at putting a number of processes in place to ensure the safety and health of our staff in both our UK sites and in India. Where possible, staff have worked from home and in the case of the technical and R&D teams, good social distancing and control has allowed a challenging but safe working environment. We have unfortunately seen 10 of our staff contract COVID-19 but I am pleased to say that our contact tracing systems worked well, the infections were contained, and I’m pleased to say that all staff have now recovered fully. This has been a unique situation and everyone has reacted positively with a strong attitude seen throughout the Company from the top down. It has reminded me that, no matter how good our product and services are, it is the quality of the team that counts. Well done and thank you to everyone.
Business performance
Revenues in the first half decreased by 29% to £3.16m (2020: £4.46m), mainly due to the effects of COVID-19 on the Health and Nutrition business. However, as noted above, the second half has shown good recovery with the year-end revenue finishing 11% lower than the previous year at £8.7m (2020: £9.8m). Furthermore, revenue for the Global Health Division (CD4 and AbC-19TM) increased by nearly 300% at £1.9m (2020: £0.65m), £0.9m of which was for the AbC-19TM COVID-19 antibody test. However, although making a significant contribution, this level of AbC-19TM sales was below original expectations, mainly due to focus changing towards antigen testing in the UK where routine antibody testing was not recommended as previously anticipated. Health and Nutrition revenue decreased to £6.8m (2020: £9.2m). The margin for the year finished at 51%, down from 64% in FY2020 reflecting the fixed nature of labour costs on reduced sales. EBITDA loss for the year was £2.2m (2020: profit of £0.9m) and the Company had a strong cash position at the year-end of £5.8m.
Continuing with our strategy to focus on high-value core business units, following last year’s decision to stop developing new allergens for the Immunodiagnostic Systems Holdings plc (“IDS”) instrument, we have recently served notice to IDS to stop producing and supplying the current range of CE marked allergens.
Corporate governance
The long-term success of the business and delivery on strategy depends on good governance. The Company complies with the Quoted Companies Alliance Corporate Governance Code 2018 as explained more fully in the Corporate Governance Report.
Going concern
The directors have considered the principal risks and uncertainties the Group faces taking account of the coronavirus pandemic. While the impact of the pandemic in terms of length, severity and disruption to business is not possible to forecast, it also represents an ongoing opportunity for the business. The Group balance sheet remains strong and the Directors remain comfortable that the Group can survive significant reductions in base case forecasted revenue for at least the period through to 31 July 2022 and have sufficient cash resources in its downside scenario. The Directors therefore continue to adopt the going concern basis in preparing its consolidated financial statements.
Outlook
While conditions in the UK and in many parts of the world have improved significantly over the past few months, there remains considerable uncertainty around the world as countries ease or increase restrictions to manage the global COVID-19 pandemic. Challenges remain for much of our international customer base but the Board believes the Company has the expertise to meet these challenges and capitalise on opportunities as we have done over the past year. CD4 is a unique product and gaining traction in countries where HIV remains a serious challenge. We intend to build on this in the short-term through further country registrations and international distribution. In addition our strategy and focus to deliver high value instrument-free diagnostic products will be enhanced over the next 36 months through the introduction of a further range of lateral flow tests for diseases often associated with Advanced HIV and a damaged immune system. The recovery of the Health and Nutrition business should continue with growth in China and the USA anticipated over the next two years as their economies open up. COVID-19 antigen testing still remains a significant opportunity for us, although very much dependent on the UK Government’s decisions as to test selection and timing.
Simon Douglas
Non-executive Chairman
Chief Executive’s Review
Introduction
You will notice throughout the annual report that we have undertaken an exercise to refresh our branding. It has also been an opportunity to revisit and align our long-term vision for the Group. As a result, earlier this year we re-structured the organisation into two divisions – Global Health (covering CD4 testing for HIV and COVID-19) and Health and Nutrition (formerly known as Food Intolerance). These divisions have separate and quite distinct markets, customers and business models but share common values and strengths. Our vision is to make world-leading diagnostic tests easily accessible to everyone – wherever they are in the world.
Our Global Health division takes a proactive approach to disease management. We have a unique CD4 test for people living with HIV in low and middle-income countries, and high accuracy COVID-19 tests supplied to the UK Government and agencies around the world. Our Health and Nutrition division promotes a personalised approach to health. Using advanced diagnostic technology, we enable healthcare professionals and their patients to identify lifestyle and dietary changes that can significantly improve their long-term health and well-being.
Financial summary
Our revenue in the 12 months to 31 March 2021 was broadly in line with the revised market forecast at £8.7 million, down by 11% on the year prior. The reduction was anticipated and primarily a result of the pandemic impact on our Health and Nutrition business.
Our statutory loss for the year was £2.1 million compared to a loss of £6.8 million in the prior year. Gross profit decreased from £6.3m to £4.5m reflecting the lower sales with gross profit percentage reducing to 51% as a result of the fixed labour costs. EBITDA was in line with expectations and a loss of £2.2m versus a profit of £0.9m in the prior year.
I would like to thank both existing and new shareholders in supporting the Company’s placing and open offer in June 2020, where we raised £10.5 million net of expenses to support our goal to increase significantly our capacity to produce lateral flow tests. The fundraise, along with our careful cash management and the pre-production payments under the Government contract totalling £2.5m, £2.0m of which was received after the year-end, has ensured we remain well capitalised to deliver our ongoing strategic objectives.
Core business
Health and Nutrition
• As noted above sales of our Food sensitivity products declined on prior year, down from £9.2 million to £6.8 million as a result of the Global pandemic. Encouragingly we saw sales recover in the fourth quarter of the financial year to £2.8 million, which provides encouragement that we will return to pre-pandemic sales and growth.
• Sales of FoodPrint® were impacted the most with a decline of 42% to £3.3 million (2020: £5.7 million). Seven FoodPrint® systems were installed in the year, increasing the total number of installations from 216 to 223 in 43 countries. As a result of the reduction in total sales, revenue per instrument decreased by 44% to £14,734 (2020: £26,189).
• Sales of Food Detective® were marginally impacted down by 4.0% in the year to £2.5 million (2020: £2.6 million).
• Despite the pandemic, our partner in China gained regulatory approval in November for their self-test version of the Food Detective® test. This is the only self-test Food sensitivity product available in the Chinese market and our partner has now commenced the market development and commercialisation activities. During the year they procured a further 108,126 tests in addition to the 98,040 tests purchased in the prior year.
Global Health
The Global Health division sales increased to £1.9 million for the year, up from £0.65 million in the prior year. The primary reason for the increase was due to revenues generated from COVID-19 antibody tests (£1.3 million). Due to the spread of COVID-19, antibody testing was not adopted as widely as initially expected, with the realisation that herd immunity could not be achieved via natural infection and the increased pressure this would cause on health care systems. This resulted in the Government focus moving towards antigen testing as the primary focus to identify individuals who had an active infection. We do however anticipate use cases to confirm if vaccines have been successful, to help support immunisation usage and deployment in countries where vaccines need to be prioritised or when to provide individuals with a booster vaccination. Evidence is also building regarding the importance of neutralising antibodies in indicating immunity. With all these use cases we remain confident that demand for the UK-RTC antibody test will be forthcoming.
Our lead partner in the UK-RTC, Abingdon Health, have already confirmed that the AbC-19TM rapid test continues to make good commercial progress. Ongoing commercial discussions are encouraging and the consortium continues to move forward on regulatory approvals. Progress has been made across the seven tier 1 countries being targeted by the UK-RTC and the pipeline of opportunities continues to grow.
Investors will have also seen that a recently published peer-reviewed study showed that the AbC-19TM test had a sensitivity of 97.58% and specificity of 99.59% when using evaluation methods as defined by the MHRA for Target Product Profile of an antibody test.
The focus of the market currently is on antigen testing as a key tool to manage the pandemic and we were pleased to announce the signing of a contract with the Department of Health and Social Care (“DHSC”) in contemplation of manufacturing selected tests on behalf of DHSC to meet the UK Government’s desire for UK-manufactured product. We had hoped that the Mologic test would be chosen by the DHSC as a UK-developed test to be made by us as UK manufacturers, however the contract itself is test agnostic and we are prepared to manufacture whichever test is chosen. The ability to supply tests that are produced within the UK remains a key priority for DHSC and to that end they have facilitated discussions with other potential partner companies with lateral flow antigen tests that have now been approved by the DHSC and also have self-test approval. We have already concluded technical diligence with these parties and we are confident that the transfer time can be expedited given that they have tests already working at scale, rather than transferring straight from development.
In addition, we are also pleased that we have been able to CE mark our own branded VISITECT® lateral flow COVID-19 antigen test for professional use, and we are advancing our plans to achieve approval for home-use as well. To achieve self-test we have been working hard in the background to simplify the sample collection method to ensure consistent results when used by a non-professional. Whilst the cassette itself has not changed, we have looked at the sample handling process and sourced a supplier capable of volume manufacture of pre-filled tubes with our buffer formulation and have performed successful internal studies to confirm this new collection method produces the same performance as the professional test. As a result of this work, we are confident that we can achieve self-test approval and we are now in the process of confirming this externally, which is a requirement of the CE marking process.
Whilst we had hoped to start the utilisation study for home-use earlier, we had to expand the scope of the study to meet additional regulatory requirements, however I am pleased to report that the study has now commenced. We plan to submit the data from the study to our European Notified Body by the end of the month and we are working with them to explore how we can fast track approval. Once we receive approval we have high expectations that our distribution partners will be very successful in the market place with one of the first UK-developed and manufactured self-test products to enter the market.
We are also mindful that once we have self-test approval the VISITECT COVID-19 Antigen test would potentially be available for future DHSC purchase as a UK-developed and UK-made rapid point-of-care test for active COVID-19.
Outside of the UK we continue to support our technology partner, Mologic Ltd, in the submission process to the US Food and Drug Administration for Emergency Use Authorization, for use under both the VISITECT and Global Access Diagnostics brands.
To support the expected increase in demand for lateral flow tests, the Alva site has been totally transformed in the last 12 months. The site has been re-configured not only to ensure staff remain safe but to allow for the installation of equipment either purchased by ourselves or provided on loan by DHSC. The reconfiguration was achieved against very tight and demanding timelines, which is a credit to everyone who was involved and we are now in position where we can produce lateral flow tests in high volume, not only for the current pandemic but also into the future as we focus on CD4 and other products that support the management of Advanced HIV Disease patients.
VISITECT® CD4 – Key achievements during the year included the signing of a supply agreement with Clinton Health Access Initiative (“CHAI”) and Unitaid to support the implementation of the WHO Advanced HIV Disease Initiative in over 130 low and middle-income countries and successful WHO prequalification. These are two critical building blocks to the successful commercialisation of our VISITECT® CD4 Advanced Disease test.
Despite the pandemic, CHAI have made great progress in the implementation of VISITECT® CD4 Advanced Disease, and five out of seven initial target countries have implementation activities ongoing with a view to wider scale-up. Feedback from these countries to date on the performance of the test has been very encouraging and there is a commitment to continue to roll out the test. There are also more than 40 collaborative or distinct clinical studies and evaluations currently in progress with eight of these already reporting positive findings. Of the 37 strategic countries we have targeted, we are free to sell in 17 of these and have already received demand from 15 of these countries.
In addition to the CHAI supply agreement, we have also received initial demand from Médecins Sans Frontières (MSF) for an initial five-country implementation. VISITECT® CD4 Advanced Disease has also been listed in the UNICEF Supply Catalogue which clears the way for UNICEF and other UN agencies to procure via this framework.
In addition, engagement and momentum is increasing with the U.S. President’s Emergency Plan for AIDS Relief (“PEPFAR”), the world’s largest funding contributor to the global HIV response. In PEPFAR’s Country Operating Plan for 2021, they note that our VISITECT® CD4 Advanced Disease test, as a semi-quantitative lateral flow assay which is inexpensive and able to differentiate CD4 values above and below 200 cells/mm3 should be given highest priority. PEPFAR’s next implementation period for budgetary purposes runs from 1 October 2021 to 30 September 2022. Following the increased support from these global health initiatives, we are confident that we can realise the significant potential from the support that our VISITECT® CD4 Advanced Disease test can provide to people living with HIV and we have just received a first order from PEPFAR/USAID.
Outlook
Despite the delay in our ability to commence supplies under the DHSC supply contract, we remain confident that the new financial year will be transformational for the Group.
We expect our food sensitivity product range to return to growth and we are confident in the opportunities that Food Detective® has in China.
For CD4, the CHAI programme to accelerate the deployment of our VISITECT® CD4 Advanced Disease test is starting to gain momentum and we expect to see revenue being generated from our other sales strategies in the second half of the new financial year.
COVID-19 – we expect a successful conclusion to discussions with DHSC that will see us utilising the capacity for both our own equipment and the Government-loaned equipment, which will be further utilised with expected demand for our VISITECT® lateral flow COVID-19 antigen test , especially once we gain approvals for the self-test version and the Emergency Use Authorisation from the US FDA.
We are, therefore, confident as we look forward that we are well positioned to deliver growth to the business.
I would like to thank all the Group’s employees for their continued support and commitment. The COVID-19 outbreak has shown their great desire to ensure we not only continue to manage through these difficult times but their amazing flexibility has allowed us to progress the various COVID-19 opportunities at a faster rate than normal, whilst ensuring the sites have remained secure and safe, thereby protecting themselves and their colleagues.
As part of the divisional restructuring referred to above, I am pleased to advise that Jag Grewal has taken on the broader role of Managing Director for our Health and Nutrition Business.
Finally, I would like to personally thank Kieron for all the support and guidance he has provided me since I joined the Company, he has been a great servant to Omega and I wish him all the best in whatever he decides to do in the future. I would also like to welcome Chris Lea to Omega as Kieron’s replacement next month and look forward to working with him and the broader team on the next phase of Omega’s exciting future.
Colin King
Chief Executive
