Member Info for Merchantbanker

Things that might improve on this....

1) Can we sell UK RTC tests to our own distribution network?
2) If we hit max capacity do we add more capacity. With 5 tests this is a possibility.
3) Achieve optimum product mix selling maximum of the most profitable products.

Mr Investment - It's not difficult to work out if you want to validate others calculations. Or just refer to Finncap research note. Margin expected at 50% minimum. They achieve 60% currently on CD4 and food.

2m tests at £1.5 x 4.3 weeks per month = £13m per month revenue (This assumes our least profitable product mix with all tests at £1.50)
2m tests split 50% Antibody Elisa tests 25% RTC Lateral flow and 25% Mologic = 2m x £1.8 (average sale price) x 4.3 weeks per month = £15.5m per month revenue
2m tests split 25% Antibody Elisa, 25% Antigen Elisa, 17% Mologic Antibody Lateral flow, 17% Mologic antibody, 17% RTC lateral flow = 2m x £3.24(average sell price) x 4.3 weeks per month = £28m per month revenue

The sell prices worked on are prudent and based on FInncapp estimates and by no means final. It is a high volume business. High volume low price, you would be surprised how the revenue adds up quickly. High quality tests sold at these prices easy to see why they will be in high demand.

Denn - £22m is 5 months into sales. ODX 5 months into sales can get up to maximum capacity and could deliver £20m+ per month in revenue.
I do think Novacyt is undervalued and is a good opportunity to buy at these levels.
The problem with Novacyt at the moment is the test is first generation and better tests will overtake it whether thats cheaper tests, quicker tests or home self tests. They have benefited from early mover advantage which has generated good results early on. They have to prove they can maintain sales when the home self tests start becoming available. The difference with ODX is we will be delivering the next generation of tests unlikely to be trumped with better offerings.

I do think you are right that covid stocks are not at their peak in terms of sentiment, that is clear, so there is some suppression there. But i certainly don't think they are on their way out and i expect the popularity of covid stocks to have a resurgence before too long. In the UK at the moment everything appears on the surface to be largely under control, but unfortunately not the case globally. As much as it is under control here, we are a long way from normality and we cant hide behind perspex screens and face masks for the rest of our lives.

To expect the CEO to talk about orders is an unrealistic expectation. We are quite simply not quite there yet.

We know the following:

UK RTC test - design freeze achieved, tech transfer to ODX with self validation and scale up happening this month. Simultaneous research and assessment which will lead to CE mark, which may well come by the end of July. PHE England approval and adoption by UK health is the natural next step. Supply agreement with the government is already a given at a minimum of 200k units per week. Look out for an improvement on this. I suspect that the government plan and strategy is still holding back when this will all come out in the news. Expect a national mass testing program funded by the government. Other things to look out for, is whether ODX can market and sell the UK RTC test to their own distribution networks.

Mologic - We are already told local approvals are currently being sought in at least 15 out of the 75 countries to be targeted. There may have been progress here over the last 3 weeks and it is possible we might get some material updates here soon but don't expect too much too soon.

Be realistic. We have been in the development phase, moving through validation and into production. This normally takes 12-36 months, we are speeding through in only 3/4. We are not yet at the point where you can judge based on orders. It is simply not possible to make sales without an approved quality product. Let them get the product and approval right. The indications are that they are really getting to the business end of this phase ready to move forward. The best indication of expected sales is the level of production capacity.

I think you are worrying too much about finding reasons to use antibody tests. Even if we directed all our lateral flow capacity to anitbody tests for 2 years we can only make 104m. With a global population of 7.8bn it is only scratching the surface with repeat testing making the market significantly larger. It will not be a problem to find buyers for 104m tests whether its to test for the need for a vaccine, research, curiosity, immunity passports or any other reason.

Swooped. Agree. Many will not take a vaccine even if offered.

Vaccine wont be accessible to the global population from day dot.

Antibody test before vaccination. Like the polio jab.

Some of the comments are laughable.

This is a company that in the last 3 months have been in the development phase of getting tests ready to market. You cant assess a companies sales of a product during the development phase before they are ready for sale. These tests usually take 12-36 months to get to market, they have been involved for 3 months and are on the cusp of having 3 of the 5 tests ready.

One of these tests will be the leading test of its type globally and part of one of the largest scale mass testing programs medicine has ever seen.

”The AbC-19TM lateral flow test has been designed to be used at point of care, initially by healthcare professionals. In time it will also be made available for home use. The AbC-19TM test at design freeze shows a 98.6% accuracy.”

"Independent trials will continue throughout the scale-up phase. This will lead to CE marking, indicating health and safety conformity for goods sold in the EU, of the product for use at the point of care by healthcare professionals. Following this, additional field trials with the general public will allow MHRA to provide regulatory approval and CE marking for use by the public as a home test."

"The AbC-19TM lateral flow test uses detector molecules modelled on the “full spike proteins” of the COVID-19 virus making the assay detect antibodies which would bind to the native protein as seen on the virus. This makes the test more robust than ones that only detect antibodies which bind to part of the molecule or to other viral proteins."

The other tests have global reach through our existing distribution network and will be highly competitive on performance, price and throughput. It is easy to work out profitability based on the capacity they have. It's not difficult and the valuation projections are not made up pipe dream numbers they can be easily calculated and substantiated. With the products we have and the markets they are targeting and the distribution channels they have, sales towards the high end of our manufacturing capacity should be very easily achieved.

People throwing the towel in before it's even started, ****ging off the lack of performance. They have achieved so much and they have positioned themselves to make serious money over the next 2-3 years. and beyond. Selling out now is like turning off a film at the opening credits.

People believing covid testing has missed the boat will be proved very wrong. FOr starters, the UK national antibody testing program will go ahead regardless of the prevalence of Covid for the rest of the year. Overseas we see Covid getting much worse in several countries. We will be living with social distancing for some time, and this is not normal life. We know that it only took 1 case to start the spread in the UK and it only takes one case to bring it back. Testing will continue for years after covid is under control to make sure it stays that way.

As i said yesterday we are no more than 10% of the way through the Covid play. All the value is still to come.

Just remember directors just bought at 40p. They have stock options at 7-15p, so why would they pay 40p if they didn't think they would make a good return?

Agree PR is the weak point. But they aren't really being given much of a chance at the moment to turn it around. Let's see how the presentation goes.

The £7.7m impairment is good management not bad management. Why do you want them diverting resources to a small business that is costing us money and a long way off making returns when we now have covid? Don't you think resources are better used on Covid tests? It's a non cash item of sunk costs, shutting down a business that is losing money.

Mr Investment...

Firstly i think any of us will be happy with £500m.

The top end valuation needs everything to click into place including the antigen tests. The antigen tests are of higher worth, so the £1 per test would be more like £3 average with the antigen tests running at a product sensible mix.

These test will be needed for longer than you think. If it takes 12-18 months to control the virus testing will go on for much longer. Even if it is considered that the virus is disappearing they will still continue to test to prove this, because just one case could cause a new spread.

More importantly, regarding the valuation, longevity of these revenues is not necessarily the be all and end all. It is the manufacturing capacity that has the value, so in building the manufacturing capacity it is down to ODX to replace that capacity with other tests when covid does start to decline. As mentioned in the presentation they expect the manufacturing capacity to be continued post covid with other tests. Tests that may even be more profitable. Cd4 will increase and they are working on new tests. We will be at the centre of the UK diagnostics industry. They can offer manufacturing capacity up to any company that have any test. So i dont see covid as a limiting factor in relation to utilisation of manufacturing capacity.

But aside from that, the short term cash flow generation will be so significant, its also about what they do with that cash. That cash wont disappear. They could pay a dividend, do a share buy back, or invest it in something else. This is why the valuation will be maintained and it isnt just a one time pay day.

Also the £970m valuation is on a modest income multiplier to take into account the uncertainty.

£30-£40m profit will be easy at really poor capacity utilisation, and £100m would only be 2 and a bit times income multiplier which is a very low income multiplier.

Prospects now are many times better than they were in April. Fact.

Capacity 4x greater than expectation
Instead of 1 UK RTC test in development and 1 Mologic Elisa test we have 5 tests including antigen, and RTC out of development into design freeze.

Duble D - Define the market. What does the market know? The market knows how to rip people off. The market knows how to change peoples beliefs. And the market is doing a very good job of it.
Meanwhile ODX are building a business with high growth potential and i will wait with my shares and add more when i can.

Sam - I havn't been wrong. I am not calling this as a trader trying to benefit from every up and down. I am calling this as a business prospect and potential for growth. That has always been clear from my posts. I can't account for the market reactions, but i know that long term i am right.
The share price being down is not just, it's a reflection of AIM and how people react and not a reflection of the business.

I don't care if people buy or sell they can do what they want and i will never encourage anyone to do either. I only say it how i see it from a business point of view.

The point i am making is the gap between value and the actual share price is increased dramatically, which stands good for a reversal.

Correct Pilgrim. It's the early adopters with inferior products rushed to market that will suffer.

Once RTC test is on the market there will be no superior product to trump it for demand. They have taken the time to get the product right so that it will be of the highest quality.

Mologic tests are of high enough quality at competitive prices to attract enough demand to capacity. Most people have no idea what these tests offer compared to others on the market. Those that have done their research will know why they will be in high demand. You have to look at cost, accessibility, high volume throughput and well as specificity and sensitivity. The Mologic offerings are highly competitive on all accounts. Then you have to look at Omega's distribution network. PR may not be their forte, but distribution of product to market is and that's where the money is.

We have a unique position where we have lab and lateral flow antigen and antibody tests. They will be able to adapt their product mix to meet demand and maximise capacity.

AVCT valued at £300m just on Antigen tests alone that have a lower chance of success than ours.

No SP - I know exactly how the market works and i know this is not about what the company are delivering. Increasing your test capacity from 400k tests per week to 2m, being part of a Gold standard testing program "on a scale never seen before", and adding 4 other tests including unexpectedly antigen tests. (The tests that people are hyped about in another company valued at £300m MCAP despite the fact they may never achieve a test and have no manufacturing capabilities whereas ours is with a partner with proven progress to sales and we are already set up to deliver).

It's not hype. It is significant development to lead to future growth. Future prospects are multiples of what they were "hyped" at, if you had any business sense to model the profitability from reaching various milestones and specifically the production capacity targets you would be able to work this out. There is serious profit and free cash generation on the table there for the taking, and this is valued at considerably higher than today. Pricing some of that in is ok in a market and expected, but currently what i am showing is nothing is prices in, the share price is just a mechanic of a market it isnt a reflection of future potential. It will change at some point.

Share price on 9th April when we first got news on being involved in Covid through RTC = 19p. 11p close the day before.
Share price end of Jan before the world went mad with Covid = 15p. We have seen minimal impact of Covid per results.
Low share price during covid = 7p. Therefore you can say 8p drop on wider market is unjust and wider market has recovered to some degree.

Other news pre Covid RTC since Jan: Chinese Food approval, Visitect evaluation. So say worth 4p to get to 11p from 7p.

So without Covid decline sp would be 19p, min, perhaps a little more with a bigger impact of news.

9th April ODX enter UK RTC SP = 19p
20th April ODX enter Mologic MOU SP = 35p

So this was the last time you saw 35p, which included an 8p decline for Covid impact of the core business which is shown to be negligible in the results. News since then:

CE Mark Elisa Mologic test
CD4 supply agreement 500k units
Mologic Elisa first orders and approvals and notification of plan to use distribution network of 75 countries
Mologic MTA for 4 tests including Antibody and Antigen lab and POC tests

£11m raised at 40p, cashed up to enable significant expansion

Notification of plan to increase capacity to 2m tests per week
Development of 2 new tests
Discontinued loss making allergy business saving capex and bottom line
UK RTC design freeze achieved and tech transfer to commence
Mologic Elisa test approval in India

So currently all the above is valued at less than the £11m raised which is outrageous considering the size of the opportunities the above has opened up. The actual added value of the delivery of these items is significantly higher.

News to come:

UK RTC approval
Completion of tech transfer
UK RTC supply agreement
UK RTC government announcements and testing policy
Scientific advise regarding antibodies
CD4 WHO approval
CD4 local approvals and further orders
CD4 USA and global program updates
CD4 further sales
Food tolerance China home self test
Food tolerance sales updates
Food tolerance US market penetration
Mologic Elisa test further sales and local approvals
Mologic Elisa test PHE approval
Mologic Antibody lateral flow test tech transfer
Mologic Antibody lateral flow test local approvals and sales
Mologic Antigen Elisa test
Mologic Antigen POC test

Sell at sub 40p because some idiots convince you it's a bad RNS. Joking right?

The only have to sell 200k RTC tsts a week and 46k Elisa tests to get to £200m MCAP. Achieve maximum capacity and deliver growth in existing business high end valuation of £970m

Share price is not tracking value. It's pivoting around the placing price.

ODX as show above are moving forward making solid progress. Share price is driving sentiment, rather than sentiment driving share price.

The market cannot keep ignoring the value added. Placing will be history and supply will dry and probably new institutions will come on.

Not worried at all with the way this will play out t

There's a typo in one of their tweets. Is anyone going to lose their **** and start ****ging off the company and saying it's worthless? No because nobody can make money from it.

There is what i thought was a real gem in there that nobody has even mentioned rather than focusing on what you perceive as a typo or bad wording.

Some really great insight into CD4 and how well placed Omega are. US Government support. We are the leading player here. Good detail on next steps and the market opportunity in CEO statement. It's clear the Food Intolerance opportunity with China self test growth and Visitect we have high growth potential which can be worth more than todays valuation without even taking into account Covid testing.

"While a strong market exists for the VISITECT® 350 test, with the largest demand in Nigeria, we expect that the VISITECT® Advanced Disease test, with a 200 cells/µl cut-off, will be the larger opportunity. For example, the US government, through PEPFAR, has indicated support for a lateral flow CD4 assay, and Unitaid, via the Clinton Health Access Initiative (CHAI), is investing at least $20 million through the end of 2021 to accelerate the deployment of Advance HIV disease care which will specifically include our CD4 lateral flow assay with a 200 cells/µl cut-off."

"Unlike any other diagnostics companies producing CD4 tests of various formats, we believe that Omega has the only fully validated, commercially available lateral flow CD4 test kit that can meet the specifications called for by these multiple funding agencies."

"We believe that VISITECT® CD4 Advanced Disease is the larger opportunity out of the two test formats. The US government, through the US President's Emergency Plan for AIDS Relief (PEPFAR), has included support for a "lateral flow CD4 assay" in its current operational guidance and the Global Fund has indicated it will financially support the initiative."

Thanks for your input Jollyspeculator.

Yes i did believe they could do this without a placing and i still believe they could have done looking at the results today, based on the expectation at the time that capacity would be 200k poc tests and 300k Elisa tests. I never expected the plan was so ambitious as to increase capacity to 4 times the level expected. If i had know at the time how ambitious they were with production, then clearly expansion of that level needed funds.

I also am still a little perplexed given the good standing of the finances and the high level of cash generation expected how they didn't manage to secure some short term loan facility. Or better still some kind of government loan or grant. At a time the government were handing out loans left right and centre it's fair to assume this would have been an easy route for ODX given that their reason for it was to support government strategy. I suspect their is an element of risk aversion from the BOD and broker advise with self interest. I am still not entirely comfortable with this, but it is what it is we have to reassess things as they develop. Does the fact that we had a placing change any of the potential that i saw in the company....? Well yes it does, it makes the opportunity 4 times bigger for the sake of 20% dilution, which means net we would still be over 3x better off with the dilution.

So i and i think most others are over it. It's clearly damaged the share price short term and sentiment with the manipulation but i stand by everything i say about the future of this company and i have put my money where my mouth is.