Rescue plan for Ellume as $140m owed to creditors revealed
Covid-19 testing firm Ellume could be sold or recapitalised despite owing creditors and convertible note holders close to $140m following a disastrous recall of faulty kits last year.
Collapsed Covid-19 testing firm Ellume could be sold or recapitalised under a rescue plan unveiled by administrators, who say the company owes close to $140m.
Brisbane-based Ellume called in administrators FTI Consulting last month after a bid to take on the lucrative US market resulted in losses of more than $100m.
Founded in 2009 by Sean Parsons, the company rose to prominence with its rapid Covid-19 testing technology and large contracts with the US government.
FTI Consulting administrators John Park and Joanne Dunn told a meeting of creditors on Monday that they were continuing to operate the business with a view to either a recapitalisation or selling it as a going concern.
Ellume had accumulated losses of more than $104m in the past two years, including a $25m hit from recalling defective tests.
It owes creditors an estimated $49m and employees about $1.69m. Convertible note holders, which included Dutch biotech Qiagen, are owed about $89m.
“We have undertaken an urgent assessment of the company’s cashflow position and forecast liquidity requirements to support its continued operations through the voluntary administration period,” Mr Park and Ms Dunn told creditors on Monday.
The administrators said that following their appointment they had signed a funding agreement with a third party in order to keep the business operational.
They also had liaised with the company’s US subsidiary about production and the contract with the US Defence Department. Dr Parsons was believed to be in the US last month negotiating with Defence officials in a bid to extend their existing contracts.
A major blow for the company came early this year, when the Biden administration gave away $US1bn in free tests, which a source said “knocked their retail market for a six”. The US business, a subsidiary, is not affected by the administration.
The company made a loss of $87.9m last financial year and a deficit of $17m the previous year despite a huge injection of funds provided by the US government.
This included $41m from the National Institutes of Health for the development of Covid-19 antigen tests and the expansion of its Australian factory and $305m from the Defence Department for the establishment of manufacturing facilities in the US.
According to the company’s last annual report lodged with the Australian Securities & Investments Commission, batches of its testing kits were found to be faulty, resulting in a recall of product from the US. “An internal investigation was undertaken following an increased frequency of positive results from the Covid-19 home tests sold by the group,” the report said.
“The group has been working with the US Food and Drug Administration to voluntarily recall the affected tests from the US market.”
The report said the recall had “significant impact on the operations and liquidity of the group”.
During the height of the Covid-19 pandemic, Ellume had been championed by high-profile investors and political figures.
Joe Hockey – a former federal treasurer and Australia’s previous ambassador to the US – helped Ellume extract funding from the US government.
Additional reporting: Jared Lynch
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