Shares of medical diagnostics company Novacyt (NCYT:AIM) surged 13% to 178.25p on Friday after it announced French diagnostics firm Biosynex had acquired a 5.5% stake.
Biosynex’s shares traded almost 10% higher to €16.7 and although its intentions are unknown, the move suggests both sets of shareholders see a potential tie-up as beneficial for both firms.
The companies are of similar size, with market capitalisations of £115 million and both have similar revenues and profits. Novacyt has significant amounts of net cash, equivalent to 85% of its market value.
This could make it vulnerable to a takeover, but an unresolved dispute with the DHSC (Department of Health and Social Care) over £40.8 million of revenues, could be a stumbling block for potential suitors.
FALLEN STAR
Novacyt’s shares are around 83% below their peak of £11.30 achieved in October 2020 when demand for coronavirus testing services was strong.
The company was the first to launch a commercially viable Covid-19 test at the end of January 2020 and capitalized on its first mover advantage.
There has since been a shift in the demand for Covid-19 testing towards the private sector, but the company has adapted well, with 58% of revenues now generated from this source in 2021.
The company has guided for total 2022 revenues to halve to around £50 million, partially offset by sales of new non-covid products planned for release towards the end of the year.
NEW MANAGEMENT
David Allmond took over as the new chief executive in October 2021 when Graham Mullins retired after 13 years at the company.
Following a strategic review, the company is seeking to maintain its position as a global first responder to infectious diseases and develop new non-covid products.
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