Omega Diagnostics Group PLC (LON:ODX) is heading into a transformational period operationally and commercially after raising £11mln that will be used to scale up production.

It is aiming to hit one million units per week respectively for its ELISA and lateral flow tests.

That’s a major step up from current levels of 275,000 for the former and fewer than 100,000 for the latter.

Manufacturing capacity will be added incrementally between now and early next year to achieve its ambitious goals, says Colin King, Omega’s chief executive

Challenge and opportunity 

While the coronavirus pandemic has been one of the biggest global health emergencies since the Spanish Flu more than a century ago, for Omega it represents the opportunity to deploy its diagnostic technology en masse.

Using its enhanced output, the plan is to produce as many as five separate types of COVID-19 tests from lab-based to point of care (PoC) assessments.

Developing kit that will be able to test whether you have coronavirus, or have had it, Omega is working with commercial partner, Mologic, while it is also part of the UK Rapid Test Consortium.

“We are creating a position where we can cover lab and primary care demand and have self-test antibody and antigen tests as well,” says CEO King.

The recent share price reaction – it has moved from a post-lockdown low of 6.67p to just over 60p – would suggest a lot of the foregoing has been digested by the market (and taken extremely positively).

However, there is more to Omega than the COVID opportunity.

For example, the VISITECT CD4 technology for advanced diseases should be enhanced by pre-qualification approval by the World Health Organisation, opening a significant new revenue stream.

The CD4 opportunity is further enhanced by its adoption by the Clinton Health Access Initiative and a push into disease areas such as cryptococcal meningitis and tuberculosis.

Probably the sleeper in the portfolio is the food intolerance opportunity in China – though this is around two years over the horizon.

It has teamed up with a local partner that has invested US$2mln on gaining approvals for the PoC and lab food intolerance tests and on a China-specific app for the company’s Food Detective self-assessment.

In April it received the green light for the lab test, and it expects the outstanding rubber stamp for the PoC device in “August, September”.

China holds potential 

Omega’s Chinese distributor believes it could be selling one million food intolerance tests by 2023.

The company’s broker, finnCap, meanwhile, has drilled down to look also at the potential of all three revenues streams – food intolerance, COVID and HIV – and tried to value each.

For food intolerance, finnCap believes revenues could be in the region of £6-£12mln, generating a gross profit of £4-£8mln. Based on a 10-times enterprise multiple, it reckons the opportunity could ultimately be worth £40-£80mln, or £30-£60mln today.

The two new COVID revenue streams (Mologic and UK Rapid Test Consortium) might add as much as £37mln to the top line, which finnCap values at £75-£110mln. Finally, it said the VISITECT CD4 test opportunity is “worth £45-£75mln today”.

The above provides a sum of the parts valuation well in excess of the current Omega Diagnostics market capitalisation of £107mln, finnCap pointed out.

“Whilst it is not clear how long the global demand for COVID-19 antibody and antigen tests will last, we believe that it will continue for the next 12-24 months at least, and the capacity that Omega intends to build into its Alva facility [in Scotland] will be replaced in part by new lateral flow devices that it will develop and that can be marketed alongside VISITECT CD4,” the broker concludes.