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Omega challenges government on repayment after Covid test contract failure
10th Dec 2021 15:17
(Sharecast News) - Omega Diagnostics updated the market on its contract with the UK Department of Health and Social Care (DHSC) to provide manufacturing capacity for Covid-19 lateral flow antigen tests on Friday, indicating it was in disagreement with the government on an alleged repayment requirement.
The AIM-traded firm had previously said it was unable to move into the second phase of the contract, which would have seen Omega progress to manufacturing tests using government-furnished equipment.
It said on Friday that it had received confirmation from the DHSC, acknowledging that the contract expired on 1 October, with a request that Omega submit a proposal for repaying the pre-production payment of £2.5m, net of VAT.
The company's board, having taken initial legal advice, said it did not believe that Omega was required to repay the pre-production payment, adding that it would respond in writing as requested.
It said it would continue to take further legal advice on the matter, hoping to reach a resolution swiftly.
"It is clearly disappointing to receive this request for repayment given the efforts we have gone to ensure manufacturing capacity for Covid-19 lateral flow test was available for the DHSC and that we did not progress to the second phase of the contract due to the lack of confirmation from the DHSC regarding which test they require us to manufacture," said chief executive officer Colin King.
"Acting in good faith we used these pre-production payments, along with our own funds, to upgrade our manufacturing facilities to be able to integrate the government-furnished equipment and bring on the additional staff required to be able to supply the DHSC using our UK-based volume manufacturing services.
"We therefore are confident that, having sought legal advice, we will not be required to make this repayment."
At 1456 GMT, shares in Omega Diagnostics were down 26.15% at 24p.
The AIM-traded firm had previously said it was unable to move into the second phase of the contract, which would have seen Omega progress to manufacturing tests using government-furnished equipment.
It said on Friday that it had received confirmation from the DHSC, acknowledging that the contract expired on 1 October, with a request that Omega submit a proposal for repaying the pre-production payment of £2.5m, net of VAT.
The company's board, having taken initial legal advice, said it did not believe that Omega was required to repay the pre-production payment, adding that it would respond in writing as requested.
It said it would continue to take further legal advice on the matter, hoping to reach a resolution swiftly.
"It is clearly disappointing to receive this request for repayment given the efforts we have gone to ensure manufacturing capacity for Covid-19 lateral flow test was available for the DHSC and that we did not progress to the second phase of the contract due to the lack of confirmation from the DHSC regarding which test they require us to manufacture," said chief executive officer Colin King.
"Acting in good faith we used these pre-production payments, along with our own funds, to upgrade our manufacturing facilities to be able to integrate the government-furnished equipment and bring on the additional staff required to be able to supply the DHSC using our UK-based volume manufacturing services.
"We therefore are confident that, having sought legal advice, we will not be required to make this repayment."
At 1456 GMT, shares in Omega Diagnostics were down 26.15% at 24p.