Covid test supplier in £150m contract dispute with Government

A major supplier of polymerase chain reaction (PCR) Covid-19 testing kits is in dispute with the Government over a £150 million contract.

Novacyt developed one of the UK’s first coronavirus testing kits in January 2020, subsequently working alongside AstraZeneca, GlaxoSmithKline and the University of Cambridge in April 2020.

It led to the signing of a multimillion-pound contract with the Department of Health and Social Care (DHSC) later that month to supply 288,000 tests per week for NHS staff.

A second contract signed in September last year is now in dispute, the company has revealed, relating to 300 PCR testing machines, test kits and support services.

Novacyt said in a statement to the stock market: “The company has taken legal advice in relation to the dispute and believes it has strong grounds to assert its contractual rights.”

Bosses at the firm, which has offices in the UK and France, had hoped to win further contracts with the DHSC.

The September deal ran until the end of last year and was worth a minimum £150 million, with the option to extend it for a further 10 weeks for at least £100 million. The option was not taken up by ministers.

A second phase of the contract was being negotiated to provide 700 additional PCR instruments, kits and support services, with Novacyt saying at the time “the contract could generate considerably more sales than the first phase”.

But last month the firm said active discussions with the DHSC over an extension had not been agreed and the contract covering the 14 weeks to the end of 2020 was now in dispute.

The matter is in the hands of company lawyers although no action has been brought before the courts.

As a result of the dispute and failure to negotiate a new contract, Novacyt said overall sales at the firm would take a significant hit. In the first quarter of the year 50% of revenues came from the DHSC.

PCR tests have primarily been used for testing people showing signs of Covid-19 and are considered to be the most reliable.

But they tend to be more expensive and lateral flow tests are used more widely for those having regular tests – such as school teachers and pupils – or those not showing symptoms.

Prime Minister Boris Johnson said earlier this year that mass rollouts of lateral flow tests would play a key role in the UK coming out of lockdown.

A Department of Health and Social Care spokesperson said: “As part of our response to this global pandemic we have drawn on the expertise and resources of a number of public and private sector partners.

“We have been clear from the outset that all private sector partners must achieve value for taxpayers’ money and use good commercial judgment.”