Cash, it’s the lifeblood of any business and while their specialty in early stage disease diagnosis, Lumos Diagnostics (ASX: LDX) has finally applied the same thinking to their business having identified unsalvageable cash burn, prompting the closure of their Florida manufacturing facility.
Although the US healthcare market is the world’s most lucrative, Lumos will cease operations at its Sarasota, Florida facility by October in a fresh bid to save the business whose cash burn would otherwise be out of control.
For the full year ended 30 June 2022, Lumos generated $11.6 million in unaudited revenue from their diagnostic test kits, but that came with $19.6 million in cash outflows. While rapid antigen tests (RAT) were a shining light in the Company’s plans, the normalisation of COVID in the post-pandemic world has been a bullet to the business that simply isn’t recouping its costs.
When the full year results are released, it’s not going to be a pretty picture for Lumos which last month had their FebriDX test kits knocked back by the US FDA on the grounds of too many false positives.
These contributing factors have all culminated in LDX shares plunging from their 52-week high of $1.32 down to a low of $0.05 – a 96% decline.
“In the current market, Lumos clearly has to be very mindful of its planned cash expenditure and capital investment commitments,” said Lumos Diagnostics CEO, Doug Ward.
“In conjunction with the Board, we are looking at all aspects of Lumos’ operations to ensure that our investment and expenditure is closely aligned with achieving commercial outcomes. Even as we build out our pipeline with new Commercial Services customers, I am confident that our Carlsbad facility has sufficient capabilities and capacity to meet our near term needs for our growing business.”
The imminent closure of Sarasota is expected to be cash flow neutral for Lumos but ongoing cash burn will be slowed by eliminating the leasing and operational expenses.
As of June, Lumos had $7.9m in cash which they estimate will enable 4-5 more months of operating before they need to raise capital again. Such an exercise would come quickly after raising $11.2m from shareholders in June 2022 at $0.19 per share.
Having capitalised on the need for rapid diagnostic test kits at the height of the pandemic when listing publicly on the ASX in July 2021 when raising $63 million at a $1.25 IPO Offer Price, the haemorrhage may be stemmed, but for how long…
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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