Shares in Omega Diagnostics fell by nearly a third yesterday as investors took a grim view on the possibility of the Scottish company raising additional funding.
Responding to “recent online speculation” Omega confirmed that it is in discussions with “certain investors and shareholders” regarding a potential equity fundraising. If it goes ahead, it would be executed at a discount to the company’s already battered AIM-listed share price.
“Market conditions remain challenging and accordingly any issue of equity would be at a discount to the current share price,” Omega said. “Any fundraise would include an open offer to accommodate retail investors.”
The statement from the testing kit manufacturer came less than two weeks after it played down speculation of such a move following the departure of Colin King as chief executive. He has been replaced by Jag Grewal, who previously headed up the Alva-headquartered company’s health and nutrition division.
Omega reiterated that as per its last announcement on January 19, it currently has “significant” cash resources and thus there is no “immediate need” to raise additional capital. It might therefore choose not to proceed with a fundraising “until such time as conditions are more favourable”.
“A further announcement will be made in due course as necessary,” the company added.
Mr King’s departure came after a bruising 10 months in which the Alva-headquartered company has suffered from the unwinding of what could have been a lucrative contract to produce rapid Covid tests for the UK’s Department of Health and Social Care (DHSC). From highs of almost 100p in February and March of last year, the stock has now lost more than 90 per cent of its value.
Announcing the appointment of Mr Grewal as chief executive on January 19, Omega noted that it had cash balances of more than £2.5 million and an undrawn overdraft facility of £2m.
“Thus, there is no short-term need to raise additional capital,” it said at that time. “Like all growth companies, Omega will look to raise funds to drive growth as and when appropriate.”
Mr King joined Omega as chief operating officer in August 2015 from his previous post as site director with Axis-Shield. He was appointed chief executive in December 2017.
As such he spearheaded discussions with the government on the DHSC contract and presided over a strategic review in which the company axed its lower-growth allergy division to focus more resources on Covid-19 testing.
UK officials confirmed in March that Omega had been selected as one of three companies to produce hundreds of millions of tests in a two-part agreement that could have been worth up to £374m to the Scottish firm. However, no decision was ever made on which test the government wanted, and in November it was confirmed that the contract had expired and would not move into the production phase.
Shares in the company, which has a large retail investor base, then lost more than a quarter of their remaining value in December when the government demanded the return of a £2.5m pre-production payment given to Omega to ramp up manufacturing capacity during the initial phase of the contract. The company has said that based on the legal advice it has received, it does not believe it is liable to repay the money.
Mr Grewal has been a member of the board of directors since he joined Omega in June 2011 from his previous post as head of business development at GSTS Pathology. A graduate in biochemistry from Cardiff University and analytical chemistry from Birkbeck at the University of London, he has more than 25 years’ experience in the fields of in vitro diagnostics, life science research and drug discovery.
Shares in Omega closed yesterday’s trading 32% lower, down 3.4p at 7.25p.