The Investment Case (or not)

After a rollercoaster 12 months, Novacyt shares are currently trading at £3.08, having peaked at a price of £12.76 towards the end of January 2021.

As an international specialist in clinical diagnostics solutions, Novacyt was one of the first companies globally to respond with an accurate and certified Covid-19 test in January 2020 . This first mover advantage has transformed the company’s fortunes and revenues and profits have exploded over the last year.

However, a dispute with the Department of Health and Social Care (DHSC) has overshadowed much of the progress the company has made over the past 18 months. The uncertainty around this dispute, which was announced in April 2021, relates to a second supply contract with the DHSC. This has had a notable impact on its Q4 2020 and Q1 2021 revenues and inevitably, the company’s share price.

Nonetheless, Novacyt has built a reputation for itself as one of the best in class in the diagnostics field. The company is now well-established, with a significant global base of over 400 distributors and is building a direct presence in the US and in key European markets. A £90+ million cash hoard has enabled the company to also further its research and development capabilities, and it now houses its own clinical trials team.

It’s been a whirlwind 18 months for Novacyt, but the company has built solid foundations on which it can transform itself into a diagnostics leader in a rapidly growing high-margin industry. However, with Covid revenues starting to subside and investor sentiment weighed against the company, do the risks outweigh the rewards?


What are the company's principal business activities, how does it generate its revenues?

Novacyt Group operates through 4 main subsidiaries: Primerdesign, Microgen Bioproducts, Lab 21 Healthcare and IT-IS International.


Primerdesign, which accounts for the vast majority of the group's revenues, is a world leader in qPCR assay development used for diagnostics. The company was one of the first in the world to produce a highly accurate Covid-19 test in January and quickly received CE certification and FDA approval. It has greatly expanded its portfolio of Covid-19 products over the past year, to streamline the extraction process for PCRs and make them more accessible in decentralised near-patient settings.