Member Info for Okehurst1

School finishes soon .we should hear from him.

Good find Chris

We can assume this is a long term contract, you get a lot of storage for £6M

RegUK, agree a high chance.

Personal opinion

How does the Consortium operate?

Its not a limited company , it’s a Consortium. Having a single entity vehicle for tax purposes is too complicated, on 25% equity the holding in the same would have fell into group accounting , it’s a position no one would want to go,it’s extremely complexed.

How could it work ?

Abingdon on behalf of the consortium are managing the procurement of the kit that make up the LFT, the Government have provided an upfront payment of just over £10M to support cash flow.
Each member of the Consortium enjoys £2.5M of the materials, it’s then up to each member to manage their own production capacity to maximise their lowest cost base, whoever has the most efficient business model enjoys the lowest cost ,numerous factors come into play here,one especially being each companies own cost of capital.

Each member then deliver the LFT’s to Abingdon who again on behalf of the Consortium deal with the administration/ distribution to the U.K. Government.

Sale price per unit ?

We know the commercial sale price is £16 plus vat and there has been an indication from Abingdon of £13 per test to Government, which would be a reasonable reduction to the commercial price, it seems plausible?

Gross profit?

My research identifies a unit cost of around £1 to £1.20 for materials plus packing, if the £13 per unit selling price is correct less a handling / administration fee for Abingdon , then the gross profit per unit is somewhere around £8 to £9 per unit, the packing cost is my variable and I can’t see Abingdon being able to charge more than 15% which is the normal commercial handling percentage.

The £2.5M of raw materials to Omega should provide 2.5M LFT’s and from a cash flow point of view - am assuming prompt payment by the Government - Omega generate around £20M having already having benefitted from the £2.5M upfront payment.

Abingdon then order £40M of raw material, each member contributIng £10M of their £20M and we hit the 10M tests a month as Colin has indicated.

The Omega Board will in the meantime will be considering do they forward order more machinery to increase production in excess of 10m per month ? This would then ensure Omega has spare capacity for overseas sales, again this makes sense when read alongside the Consortium have trademarked their product name in the USA for example.

To round off, either way Omega generate as much as £90M a month cash on this scenario of 10m tests per month, circa £1B a year, you then make the call for how many years?

What are the red flags on this thesis?
The £13 per sale price but it does look reasonable to the £16 commercial price?
The cost of the LFT itself ? This is my personal market research from speaking to people in the industry.
The legal structure of the Consortium, based on personal experience being involved with Group Accounting I can’t see any benefit of an equity based entity.

Of course we will all soon find out s

Thanks for sharing Fredd1eboy ,appreciated

Assuming no trade deal

WOW!

Old news 27/08/20 but highlights Deeks does have an agenda, it appears unless he gets paid to review the test results he will do all he can dump down on it and I guess his inflated ego on being left has irked him.

None of his comments/ views are based on science, it’s all because he has not been part of the process.
It’s my way or the highway for Jonny boy, he wants to be the man.

http://www.theguardian.com/commentisfree/2020/aug/27/covid-19-antibody-test-coronavirus-corners-being-cut

Jon Deeks has done ‘ a job ‘ on the RTC test , he’s apologised via twitter but his prior actions last week may have influenced this final test / review.
I think he knew exactly what he was doing with the Guardian article and of course he would have read the PHE Ulster results.
He apologies but damage done then a fellow Professor regurgitates for the Sunday Press to keep the story running, suggest agendas at play, Deeks was possibly upset he never got the gig to work with PHE as he considers himself to be a world expert in this field.

https://www.birmingham.ac.uk/staff/profiles/applied-health/deeks-jon.aspx

Of course it won’t stop Government orders but it may well delay MHRC approval a bit longer.

https://www.gov.uk/government/publications/assessment-and-procurement-of-coronavirus-covid-19-tests/technical-validation-protocol-for-sars-cov-2-nucleic-acid-detection

It appears we may be in for one more final review, paragraph 7 is of interest , up to 250no samples.

‘I agree the reason Odx hasn't yet seen the Ncyt rise is that it's technology is 2nd generation’

According to PHE results on the RTC test it’s the gold standard test in the world ,put aside its POC / self administered and a fraction of the overall price of PCR .

Suggest we are going to be surprised to the upside on the unit sale price to the Government.
We are a partner in a consortium with no price pressure and have possibly the best POC self administered triple antibody test in the world.
Our distributors are selling the test for £16 plus vat .
Think you are well out with the £3 unit sale price to the Government, we have to remember there is a cost of capital to ODX and the other members of the RTC the same to invest Originally in this test then the tooling up of the machinery , put aside the commercial risk of that capital.

We will of course soon find out.

Less a handling fee of sorts to cover the cost of the partner who is distributing the Tests

‘We need to be clear - for the UK-RTC AbC19 test, whether CE marked professional POC or MHRA-approved self-test, all sales will be undertaken by CIGA on behalf of the consortium. ODX is purely manufacturing capacity and will get paid a proportion of the sales for the tests it produces. ODX will not be selling UK-RTC tests directly’

The key factor is whoever is distributing the tests will just receive an administration / distribution fee per test , they won’t be collecting £10 or £13 and dropping £1.50 to ODX
We have at least 25% of the sales pot , we are not a junior partner.

Contract values on OJEU are indicative and we know because the disclosure document tells us there is no competitive tendering which is a key point, as such the consortium have pricing power.

It’s now down to £10 or £13 per test for the Government contract less admin / distribution costs of say 15% as a figure

This is much higher than Finncap are aware of, unit sale price post MHRC to the public direct will we can guess be much higher.

Contract values on OJEU are set the start of tendering and are indicative.
It will be even higher at £13 test which is line with other RTC members messaging.

The comment ;

‘little or no incentive for suppliers to participate in competitive procurement ‘

Says it all

There was no way we enjoyed £3 from £13 or £16 via distributors.

We have at least equal share / status as a member of the RTC, Abingdon are just going to take an administration/ distribution fee per test

The rest is ours

And no competitive tendering as part of a recognised consortium

The rest is ours

Contract values on ojeu are usually set the start of tendering and are indicative

The £8 a profit per test is looking firmer

‘ little or no incentive for suppliers to participate in competitive procurement.’

Thatcher, fair comment on the 25% as a percentage but let’s say in terms of what we think we know, 10M tests a month is the unit sales forecast as alluded to by Colin himself .

We are then down to gross profit per test, I just can’t see ODX receiving just £3 from £13 or same from £16.
It has to be much higher and ODX don’t wish to disclose at the moment, it’s not in their medium term interest and as such they are not engaging with the Company broker .

If it is £9 gross a test based on 10M tests a month ODX generate £1B Plus a year gross profit just from Covid testing, putting aside additional capacity / output.

Genuinely not attempting to super ramp the shares but I think we are all understating the g/p per test, open for other points of view on where the income goes from the £13 / £16 ?

£3 , even £5 g/p looks too low ?
£9 g/p looks to be about right to me.

Mizman, good bit of research

MB and I had been debating below, I posted this below ironically same time as your post.

‘Thinking if it was an equity spilt then the company would have been formed ? Put aside it would have required capital and would have been RNS newsworthy?

Abingdon collecting the kit from the other 3 members and then distributing to the Government on the consortiums behalf is looking feasible and Abingdon enjoy a handling fee/ percentage up to 15%.

Each member of the RTC has up to 25% capacity, use or lose it effectively.

The gross profit per test has to be near £9 possibly £10 if the sale price is maintained at £13.

Either way we know it’s £16 via a distributor

With MHRC approval we could place on Amazon at £16 ourselves , Amazon take 30% and still make between £9 and £10 a test gross profit .

Based on the fact be it our own distributors today for professional use or ourselves using say Amazon / similar post MHRC think we can say there won’t be much or any chip on the £13 to the Government, we would be the best value / accurate test on the market today.

If I am correct the cash profits for ODX are far far higher than the market or any of us had previously imagined, this then stacks why no broker update, the Company are keeping their powder dry for commercial reasons’

What’s your view Mizman on the gross profit margin per test ? £4 doesn’t stack to me , it’s £8 to £9.
Not trying to ramp here , just looking at the known facts
I think the potential profit is 100% plus higher and ODX for commercial reasons don’t wish to discuss with their broker, not yet anyway.