- Preferred bidder selected for sale of CD4 manufacturing business
- Substantial up-front payment and royalties expected
- Focus now on higher margin Health & Nutrition
Specialist medical diagnostics firm Omega Diagnostics (ODX:AIM) said it had selected a preferred bidder after receiving several indicative offers for its CD4 Advanced Disease testing business.
The bidder has been granted four weeks to finalise due diligence which comprises commercial discussions with key customers and suppliers.
The transaction is expected to complete shortly thereafter and will include a ‘significant up-front cash payment’ and a future royalty stream linked to VISITECT CD4 sales.
Investors welcomed the news, marking the shares up 6% to 3.3p. The deal finalizes the transformation of the business following the sale of its Covid lateral flow manufacturing site in Alva, Scotland for £1 million in March 2022.
The sale was deemed necessary after the Department of Health and Social Care decided not to extend a contact to supply lateral flow tests.
Chief executive Jag Grewal commented: ‘We were delighted by the level of interest we have received for the CD4 business and look forward to announcing the completion of the transaction in due course.
‘Having withdrawn from the COVID-19 market and disposed of the Alva site earlier this year, the divestment of our loss-making CD4 business will leave the Group solely focused on our higher margin Health & Nutrition division.’
SHORING UP FINANCES
The company said its funding requirements would change significantly following the divestment as recognised by the extension of an existing £2 million overdraft facility by three months to 30 September 2022.
Omega successfully raised £2.2 million of fresh equity on 31 May 2022 through an open offer and placing at 4p per share.
The additional funding will allow the company to expand its products and geographical footprint.
In the year to 31 March 2022 the firm’s Health and Nutrition division reported underlying sales growth of 54% driven by strong food print product sales. This involves providing food intolerance testing.
The company said it had identified ‘substantial’ growth opportunities in the US and China.