Ellume on skids with $100m in losses after Covid-19 test recall

Prominent Brisbane biotech firm Ellume has called in administrators after racking up more than $100m in losses and being hit by a costly recall of faulty Covid-19 tests.

Covid-19 testing firm Ellume has fallen in administration after accumulating losses of more than $100m and being hit by a costly recall of faulty tests last year.

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.

Dr Parsons is currently in the US negotiating with Department of 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 $1bn in free rapid tests which a source said “knocked their retail market for a six”. The US business, a subsidiary, is not currently affected by the administration.

Ellume has accumulated losses of more than $104m in the last two years, including a $25m hit from recalling defective tests.

According to the company’s annual report last year lodged with the Australian Securities and Investments Commission, batches of its testing kits were found to be faulty resulting in a recall of product from the US market.

“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” with Ellume temporarily ceasing manufacturing of the home tests while the problem was addressed.

Ellume 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 Ellume Covid-19 antigen tests and the expansion of its Australian factory and $305m from the US Department of Defence for the establishment of manufacturing facilities in the US.

Dr Sean Parsons at Ellume’s new facility near Brisbane. Picture: Annette Dew

The company’s independent auditors, PwC, warned in November that the company’s mounting losses and liabilities meant that a “material uncertainty exists about its ability to continue as a going concern”. The company said on Thursday that it had appointed FTI Consulting to “identify the best path to secure the viability of the business”.

“We set out to spark a revolution in the way infectious diseases are diagnosed. I am incredibly proud of Ellume’s achievements in what has been an unprecedented, challenging, and dynamic time,” said Dr Parsons, Ellume’s chief executive.

“We are entering into a voluntary administration process for the Australian business to help determine the best course of action to secure and strengthen a future for Ellume.”

Further comment was being sought from Dr Parsons.

A health worker performs duties at a Covid-19 testing clinic in Brisbane.

As late as March, the company was considering an ASX listing which would have valued it at between $500m and $1bn.

It raised some $85m in 2021 in a process that was managed by Morgans and Ord Minnett.

Work continues in the company’s $50m Richlands manufacturing plant, where it had planned to employ 450 staff. Its head office is in East Brisbane. There are no redundancies at this stage.

FTI Consulting’s John Park said: “The administrators will seek to maximise the chances of Ellume exiting the Administration process in an orderly fashion.

“The administrators intend to trade the company on a business-as-usual basis, while we conduct an independent assessment of the financial position and ongoing viability of the business,” he added.

In the wake of the Covid -19 pandemic in Ellume was awarded multimillion-dollar contract by the US government to produce rapid antigen tests. However, they have unable to find interest from the Australian government and the rapid test has not been approved by local authorities.

Former treasurer Joe Hockey, who had been advising Ellume, told The Australian in January that it had been “immensely frustrating that (Ellume) have produced these kits for an extended period of time now, and they’re all going to the US when they could have gone to Australia”.