Omega to sell HIV test business and raise up to £7.25m
Omega Diagnostics is selling its HIV testing business and has announced plans to raise up to £7.25 million in a share issue.
The company has raised £2 million via a placing of 50 million shares of 4p each and 90m warrants to subscribe for shares to institutional investors at the same price. It hopes to raise an additional £2m by the issue of up to 49,860,515 shares through an open offer to shareholders and a subscription by directors for an additional 2,125,000 shares.
The net proceeds of the fundraising, amounting to between £1.75m and £7.25m, depending on the take up of the open offer and the number of warrants exercised, will be used to initially fund the CD4 HIV testing business before it is sold, and provide additional working capital.
Following the divestment of the Alva site in March, the cash costs of operating the CD4 business under the Transitional Services Agreement with Accubio are significantly reduced, said the company.
However, the cash funding requirement remains approximately £300,000 per month. Whilst the board is prepared to continue to fund the CD4 business in the short term, the TSA requires the whole Alva site to be returned to Accubio by 31 December 2022 at the latest.
When sufficient time is allowed for an acquirer to complete the technical transfer of the product into a new facility, this implies that a sale should be closed in early summer, it said.
COVID-19 related revenues contributed £2.6m last year (2020: £1.7m). However, the company no longer intends to support COVID-related products. It remains in dispute with the Department of Health and Social Care over cancellation of an order for test kits and has still to receive a response to the company’s latest correspondence sent on 8 February 2022.
At the company’s request, the DHSC is making arrangements to remove the government-funded equipment from its former Alva site.
The board will now focus its efforts solely and strategically on its core Health & Nutrition business, maintaining its leadership position and targeting significant organic growth through embracing digital technologies and related marketing activities.
Jag Grewal, CEO of Omega, commented: “Following the outcome of the General Meeting in March, the Board reflected on the ongoing strategy and explored alternative options to fund future growth.
“In this process we concluded that the best opportunity to deliver shareholder value lies with a clear focus on our Health & Nutrition division, where we believe we have substantial opportunities in both China and the US.
“We have already confirmed that ongoing COVID income is expected to be minimal and, having considered strategic options for CD4 and the funding available to realise that opportunity, we have made the decision to divest the CD4 business and have begun the process of seeking an acquirer for it.
“As set out in last month’s trading update, our Health & Nutrition division contributed to the strong growth seen in the previous financial year.
“We are very excited about the future prospects that we have in this area and delighted to have secured fresh investment from new shareholders to allow us to deliver on our new focussed growth strategy, enabling the company to deliver personalised nutrition to the global market.”
On 7 April the company reported a 41% increase in revenues to £12.3m for the year ended 31 March 2022 (2021: £8.7m), with the Health and Nutrition division contributing £8.6m of revenue (2021: £6.8m).