Novacyt said today it is selling its NOVAprep® next-generation, liquid based cytology solution for diagnosing cervical cancer and non-gynecological cancers, as well as its clinical laboratory—in moves the company said will enable it to focus on its core profitable diagnostic products business.
The company said it has appointed advisors and begun a formal open-market sales process for NOVAprep, which during the first half of this year saw its revenue fall 44% from January-June 2017, from €1.1 million ($1.25 million) to €0.6 million (about $680,000)—a decline the company blamed on “unexpected supply-chain issues.”
That loss came on top of the NOVAprep division finishing 2017 with an earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of €1.2 million (about $1.4 million) “impacting the profitability of the wider Group.” NOVAprep generated 2017 revenue of €2.2 million (nearly $2.5 million).
“This may result in the sale of the entire business unit either as a single entity or as separate assets to multiple parties,” Novacyt cautioned in a statement.
In announcing first-half 2018 results on August 2, Novacyt said its board had begun a strategic review “of how to maximize future value” of NOVAprep.
“The strategic review has reinforced the Board’s belief of the value of the NOVAprep technology in growing markets, such as Asia and other developing markets, but it has concluded that Novacyt cannot continue to support the investment still required to realize the division’s full potential,” Novacyt added.
The rollout of NOVAprep in Asia and other developing markets helped the cytology solution generate revenue growth over the past three years, Novacyt acknowledged. However, NOVAprep revenues account for less than 9% of the company’s total revenue.
The company finished the first half of this year with total revenue of €7.044 million (about $8 million), up 0.2% from January-June 2017.
“The Board believes a focus on its profitable core diagnostic reagent development and manufacture business units, will drive significantly greater value for its shareholders.”
Novacyt cited profitable first-half results for two divisions: One is Primerdesign, a qPCR assay development business focused on the design, manufacture, validation and supply of real-time PCR kits and reagents that was acquired by Novacyt in 2016. Primerdesign finished January-June 2018 with a 15% year-over-year revenue jump to €7 million ($7.9 million).
The other division, the Lab21 clinical diagnostics business, saw its first-half revenue rise 3%, to €3 million ($3.4 million). That division includes Novacyt’s clinical lab business based in Cambridge, UK, which specializes in clinical pathology testing services in oncology and virology.
The clinical lab business, Novacyt concluded, “is also non-core and not integral to its in vitro diagnostic products focus.” The lab lost €0.1 million ($0.113 million) in 2017 on revenue of €0.8 million ($0.906 million). Novacyt did not break down the lab’s revenues or profitability when it reported first-half results.
The company said it has appointed advisors, and has been running a formal sale process for the clinical lab that has already “received multiple expressions of interest.”
Novacyt said it expects to update shareholders on the sale processes for NOVAprep and the clinical lab in the first quarter of 2019.