Omega Diagnostics

Diagnostic kits manufacturer Omega has pleased the market with improved results in what is traditionally its slower half.

Sales in the six months to September 2010 jumped 15% to £3.3m as adjusted profits soared 53% to £403,000. Omega is benefiting from strong demand for its range of food intolerance kits that seek out infectious diseases such as Syphillis, TB, Malaria and Dengue Fever. This area accounts for half its historic sales, however Omega also sells autoimmune kits for anaemia and connective tissue disease.

Omega has secured a distribution deal to sell its food testing kits in India in a move that should chip in sales of £300,000 over the next few years. Discussions are also underway to push into the US market, although FDA approval is required first.

However the big news is the reverse takeover of Germany based IVD business Allergopharma. A former non-core division of Merck, the deal brings exposure to the growing allergy testing market. A placing to raise £7.75m at 12p has been secured bringing in new investors such as JM Finn and Unicorn. By leveraging its distribution network in over 100 countries, Omega should be able to drive its previous sales efforts much harder. The worldwide market for in vitro allergy testing was $408m in 2007, however prior to the acquisition, over 90% of its sales were in Germany.

Broker Cenkos has put its forecasts on hold pending the outcome of the EGM on 17 December to ratify the acquisition of Allergopharma. Chairman David Evans has a great track record at building diagnostics businesses so the drifting share price over recent months provides a good opportunity. Buy.