ODX.L Regulatory News (ODX)

OMEGA DIAGNOSTICS GROUP PLC

("Omega" or the "Company" or the "Group")

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2020

Omega (AIM: ODX), the medical diagnostics company focused on CD4, infectious diseases and food intolerance, announces its unaudited interim results for the six months ended 30 September 2020 in line with the trading update announced at the end of October. The Company also provides an update on the core business and the Board's expectation for a significantly improved performance in the second half.

Omega has substantial growth opportunities in the areas of Food Intolerance, CD4 testing for the management of people living with HIV, and COVID-19 antibody and antigen testing and provides high quality in-vitro diagnostics products for use in hospitals, clinics, laboratories and healthcare practices in over 75 countries.

1Adjusted for exceptional items, amortisation of intangible assets and share based payment charges 

Operational Highlights:

H2 Outlook:

Regarding outlook, William Rhodes, Interim Chairman, said:

"We are encouraged that our financial performance in the first half, although impacted by the pandemic, was within the boundaries of sensitivity that we have been monitoring and the Company expects to have a significantly improved second half performance.

"Our food Intolerance division is showing early signs of recovery in its second half performance, when comparing sales to equivalent months in the prior-year second half. Whilst we cannot be certain what decisions, and the related impact, might be taken by governments around the world to deal with the pandemic in the short-term, we remain confident that our food intolerance business is resilient and positioned for growth as some degree of normality returns. Achieving self-test regulatory approval in China for Food Detective® is a significant milestone that underpins confidence, and we expect our renewed focus on the US market to bear fruit in the next financial year.

"We are particularly pleased that our VISITECT® CD4 Advanced Disease received WHO prequalification in August this year, a significant mark of regulatory approval which positions the product for short-term deployment through the supply agreement with CHAI, and for longer-term deployment with financial support from a number of other NGOs which are active in supporting initiatives to manage the care of people living with HIV.

"As outlined above we have a number of exciting opportunities in both antigen testing and antibody testing for COVID-19. We are very encouraged by recent news with a number of vaccine candidates demonstrating efficacy in producing an immune response as we believe testing will play a crucial role in any vaccine deployment. We continue to make progress to significantly increase lateral flow test capacity in our manufacturing site in Alva and are on target to reach a production capacity of 500,000 tests a week by the end of December."

An investor presentation will be available later this morning on the Company website: Corporate Information ¦¦ Investor Relations ¦¦ Omega Diagnostics

The information communicated in this announcement is inside information for the purposes of Article 7 of EU Regulation 596/2014.

Contacts: 

Chairman's Statement

The first half performance was as detailed in our trading update at the end of October. This historic performance was in line with management expectations and reflects the predicted impact on the short-term performance of our food intolerance business due to the coronavirus pandemic as set out in our full year results earlier this year.

Whilst this performance was expected we appreciate that shareholders will have a keen interest in the future performance of the business in the second half and beyond. Below we have provided a review of the first half performance along with a summary of the key growth opportunities that we have across all business areas and how these are progressing.

Financial performance

Revenue from operations decreased by 29% to £3.16m (2019: £4.46m) predominantly due to the performance in our Food Intolerance division as described below.

Food Intolerance revenue decreased by 38% to £2.53m over the prior period (2019: £4.08m). As previously highlighted in our October trading update, our food intolerance segment has been impacted by the coronavirus pandemic. The largest impact has led to reduced sales of our FoodPrint® laboratory reagents, which reduced by 64% to £0.95m (2019: £2.67m). Reductions were seen in most geographic regions but particularly in North America and Europe. We have however seen recent signs of recovery with double digit growth in October and November, as compared to the same months last year. In contrast, sales of Food Detective® increased by 30% to £1.26m (2019: £0.96m). This performance was helped with significant stocking orders from our Chinese partner, in advance of receiving NMPA approval for self-test use, which was confirmed at the beginning of November.

Global Health revenue increased to £0.58m (2019: £0.38m), the majority of which related to income generated from Covid-19 activities, either through early seeding sales of the Mologic ELISA antibody test, or development income generated from third parties.

Gross profit from operations decreased to £1.36m (2019: £3.01m) with the gross margin percentage decreasing by 24.6 percentage points to 42.9% (2019: 67.5%). The reduction in margin principally reflects the fixed nature of labour costs on the reduced level of pandemic-impacted sales.

Administrative overheads decreased by £0.08m to £2.55m (2019: £2.63m) due mainly to the offsetting effects of receiving furlough reimbursements from HMRC. Selling and marketing costs decreased by £0.23m to £0.51m (2019: £0.74m) due to reduced travel and exhibition costs related to lockdown restrictions.

The adjusted loss before tax from continuing operations was in line with management's expectation at £1.70m (statutory loss before tax of £1.80m and adding back amortisation of intangibles and share-based payment charges totalling £0.1m) (2019: adjusted loss before tax of £0.35m).

The tax credit in the year of £1.52m relates to a deferred tax asset comprising losses carried forward and recognition of future tax deductions related to the increased likelihood of employees exercising share options due to the significant increase in the share price in the period. The tax credit of £0.04m in the prior period relates to SME R&D tax credits.

IFRS 16 - Leases

Following the adoption of IFRS 16, the Group has also recognised right of use assets of £1.99 million, with a liability of £1.74m at 30 September 2020 (2019: £1.88m). In the six month period to 30 September 2020, the Group has charged depreciation of £0.12m and interest expense of £0.07m through the profit and loss account and made lease payments totalling £0.13m (this figure being equivalent to the previous rent that would have been charged to profit and loss before the adoption of IFRS16).

As at 30 September 2020, the outstanding liabilities in connection with leases recognised under IFRS 16 included short-term liabilities of £0.08 million and long-term liabilities of £1.66 million.

Business summary update

Omega has growth opportunities across all its business areas of Food Intolerance, CD4 testing for the management of people living with HIV, and COVID-19 antibody and antigen testing.

Food intolerance

As noted above, the first-half performance of the business was impacted by the pandemic. As we move forward in the second half, we continue to see signs of recovery. Sales in the months of October and November 2020 are expected to be approximately 12% higher than in October and November 2019 which remains encouraging.

Omega believes there are significant near-term opportunities for this business unit in China. We recently confirmed we received regulatory approval of a self-test version of Food Detective® and we anticipate continued growth in this product line. Our Chinese partner has estimated that potential sales could reach 1 million Food Detective tests by calendar 2023. The US remains a key market opportunity and we are focusing on bringing additional resource to support our existing US partner's expansion plans whilst increasing market penetration through new partners.

VISITECT® CD4 Advanced Disease test

In April this year, the Company signed a supply agreement with Clinton Health Access Initiative, Inc. ("CHAI") to accelerate access to the VISITECT® CD4 Advanced Disease test in low-income countries, lower-middle income countries and upper-middle income countries (together "Eligible Countries"). The VISITECT® CD4 Advanced Disease test is currently the only available instrument-free lateral flow point-of-care test, anywhere in the world, for identifying patients with advanced HIV who are at risk of potentially life-threatening opportunistic infections. CHAI continues to make good progress in its objectives and is actively working with six Eligible Countries in Africa, with additional countries coming onboard in the coming months ahead. The Company has already received a number of purchase orders from certain countries under the CHAI programme which will be supplied in the second half of the current financial year.

On 21 August 2020, Omega announced it had received World Health Organization ('WHO') Prequalification for its VISITECT® CD4 Advanced Disease test which expands market reach, with the product now eligible to participate in the procurement processes of UN agencies. The Company remains confident that the CHAI initiative is seeding future growing demand which can now be supported by longer-term donor programmes following WHO prequalification.

Omega believes that there is a very substantial unmet need for an instrument-free Point-of-Care test and believes it has the potential to generate significant revenues with its VISITECT® CD4 products in the medium term.

VISITECT® CD4 350 test

Implementation of the test by the Nigerian Ministry of Health has been delayed due to COVID-19. Our distribution partner has only recently been able to recommence dialogue with the authorities regarding the implementation plan and we will provide further updates once orders are placed with the distributor. We remain confident that this demand will materialise, and that Nigeria remains a large market opportunity.

COVID-19

The Company's strategy is to pursue opportunities to meet the needs of global healthcare systems that require both antibody tests (denoting previous infection) and antigen tests (denoting current infection) and to develop multiple tests, typically in conjunction with UK industry partners and consortia, using both ELISA platforms and lateral flow technology (as currently used for the VISITECT® CD4 tests). To attain targeted capacity, particularly for lateral flow tests, the Company has undertaken significant refurbishment works in its Alva, Scotland facility. The building layout has been substantially re-engineered to allow for volume manufacturing as well as to enable socially distanced working for employees due to the pandemic. The Company remains on target to reach a production capacity of 500,000 lateral flow tests per week by the end of December.

Mologic ELISA antibody test

In June, the Company announced it signed a supply agreement with Mologic Ltd ("Mologic") under which Mologic supplies raw materials to enable Omega to manufacture its CE marked ELISA antibody test which is manufactured at the Company's facilities in Littleport, Cambridgeshire. Following initial orders for this test, traction has not materialised as the Company was originally anticipating. The Company believes this is due, in part, to competition from ELISA antibody tests that are now available on larger automated instruments and an evolving market need that seems more geared towards lateral flow antibody tests in the short term. We continue to review the potential for using the test in our in-house laboratory testing service.

UK-RTC AbC-19™ Rapid test

Since becoming involved with the UK Rapid Test Consortium ("UK-RTC") in April this year, in order to jointly develop and manufacture a COVID-19 Rapid Test as part of the Government's five pillar national testing strategy for COVID-19, the Company has supported Abingdon Health Ltd ("Abingdon"), lead partner of the UK-RTC, in developing and CE marking its AbC-19™ Rapid test.

The UK-RTC has achieved a significant amount of work in a short timescale, in terms of developing and then CE marking the test in a matter of months. The manufacturing processes have since been successfully transferred from Abingdon to Omega. The AbC-19™ Rapid test was specifically developed as a companion diagnostic test, alongside the Oxford University and AstraZeneca COVID-19 vaccine programme. The Oxford vaccine triggers the body to produce trimeric spike protein neutralising antibodies and the AbC-19™ Rapid test is specifically designed to detect those antibodies. The Company therefore welcomes the recent news confirming efficacy of the Oxford vaccine and believes this will support increased demand.

The UK-RTC believes that the AbC-19™ Rapid test can be deployed at scale across populations to aid policymakers, healthcare systems, the scientific community and the public at large by:

The Company has now commenced shipments of AbC-19™ Rapid tests to Abingdon so that it may meet the requirement to supply the Department of Health and Social Care ("DHSC") with its first purchase order of 1 million tests. Currently, the Company now expects to be able to supply Abingdon with closer to 25% of this initial DHSC requirement and not less than 25% over the longer term.

In addition, Abingdon continues to progress self-test approval and remains in dialogue with the MHRA to ensure it has sufficient data to show suitability for self-test use and the MHRA has recently confirmed that Abingdon can proceed to undertake one more usability study shortly, under agreed protocols. The Company is confident that it will see further product sales from the UK Government and other domestic and overseas customers in the second half of the current financial year. To the extent that sales are made to third parties, the UK-RTC expects to achieve a higher selling price.

Mologic lateral flow antibody test

As announced in September, Omega CE marked Mologic's lateral flow antibody test for COVID-19 for sale under Omega's VISITECT ® brand. The Mologic lateral flow antibody test is a Point-of-Care test that differentiates itself by testing for three antibodies - IgA, IgG and IgM - picking up positive patients at an earlier stage than most other antibody tests. The Company has just commenced sales of this professional-use rapid test through its distribution network and which is targeted at healthcare professionals.

Antigen testing

In June this year, the Company signed a material transfer agreement ("MTA") with Mologic providing access to raw materials and know-how to manufacture their lateral flow antigen test. This test determines the concentration of COVID-19 (SARS-CoV-2) antigens in a saliva or swab extract sample to identify an individual with an infection. Mologic is currently evaluating a prototype in a number of healthcare settings and the results to date look promising. Omega has now established its technology transfer team and looks forward to working with Mologic to make a commercial success of this opportunity. 

Outlook

We are encouraged that our financial performance in the first half, although impacted by the pandemic, was within the boundaries of sensitivity that we have been monitoring and the Company expects to have a significantly improved second half performance.

Our food Intolerance division is showing early signs of recovery in its second half performance, when comparing sales to equivalent months in the prior-year second half. Whilst we cannot be certain what decisions, and the related impact, might be taken by governments around the world to deal with the pandemic in the short-term, we remain confident that our food intolerance business is resilient and positioned for growth as some degree of normality returns. Achieving self-test regulatory approval in China for Food Detective® is a significant milestone that underpins confidence, and we expect our renewed focus on the US market to bear fruit in the next financial year.

We are particularly pleased that our VISITECT® CD4 Advanced Disease received WHO prequalification in August this year, a significant mark of regulatory approval which positions the product for short-term deployment through the supply agreement with CHAI, and for longer-term deployment with financial support from a number of other NGOs which are active in supporting initiatives to manage the care of people living with HIV.

As outlined above we have a number of exciting opportunities in both antigen testing and antibody testing for COVID-19. We are very encouraged by recent news with a number of vaccine candidates demonstrating efficacy in producing an immune response as we believe testing will play a crucial role in any vaccine deployment. We continue to make progress to significantly increase lateral flow test capacity in our manufacturing site in Alva and are on target to reach a production capacity of 500,000 tests a week by the end of December.

William Rhodes

Interim Non-Executive Chairman

Notes to the Interim Report

for the six months ended 30 September 2020

1. BASIS OF PREPARATION

For the purpose of preparing the March 2020 annual financial statements the Directors used IFRS as adopted by the EU and in accordance with the AIM Rules issued by the London Stock Exchange. In preparing these interim financial statements, the accounting policies used in the Group's Annual Report for the year ended 31 March 2020 have been applied consistently. The Group has not applied IAS 34 Interim Financial Reporting, which is not mandatory for AIM companies, in the preparation of these interim financial statements.

The interim financial statements are unaudited. The information shown in the consolidated balance sheet as at 31 March 2020 does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has been extracted from the Group's 2020 Annual Report which has been filed with the Registrar of Companies. The report of the auditors on the financial statements contained within the Group's 2020 Annual Report was unqualified and did not contain a statement under sections 498 (2) and 498 (3) of Chapter 3, Part 16 of the Companies Act 2006. These interim financial statements were approved by the Board of Directors on 27 November 2020.

2. SEGMENT INFORMATION

For management purposes, from 1 April 2020 the Group became organised into two operating divisions: Health and Nutrition, and Global Health and Other. Prior to 1 April 2020 the Group operated with three operating divisions: Allergy and Autoimmune, Food Intolerance and Infectious Disease and Other. Prior period segmental information has been restated in line with the current divisional structure.

The Health and Nutrition division specialises in the research, development and production of kits to aid the detection of immune reactions to food. It also provides clinical analysis to the general public, clinics and health professionals as well as supplying the consumer Food Detective test.

The Global Health and Other division specialises in the research, development, production and marketing of kits to aid the diagnosis of infectious diseases, including COVID-19.

Corporate consists of centralised corporate costs which are not allocated across the three business divisions.

Inter segment transfers or transactions are entered into under the normal commercial conditions that would be available to unrelated third parties.

4. FINANCE COSTS

5. TAX CREDIT/(CHARGE)

6. EARNINGS PER SHARE

The number of shares in issue at the period end was 178,678,110. Basic earnings per share are calculated by dividing profit for the year attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing the profit attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Diluting events are excluded from the calculation when the average market price of ordinary shares is lower than the exercise price.

Adjusted Earnings per share on loss for the period

The Group presents adjusted earnings per share which is calculated by taking adjusted (loss)/profit before taxation and adding the tax credit in order to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.

7. INTANGIBLES