Whenever a business announces anything linked to a treatment, vaccine or test for Covid-19 their shares go ballistic, and there appears to be substance behind global diagnostics play Novacyt’s (NCYT:AIM) progress in this area.

The company enjoyed strong gains on 29 September with the shares reaching a record high of 585p after it announced a second major contract to supply the UK Department of Health and Social Care (DHSC) with its Covid-19 testing equipment.

In the first phase of the deal Novacyt’s wholly-owned subsidiary Primerdesign will supply 300 of its polymerase chain reaction (PCR) instruments for up to six months with an initial minimum contract value of £150 million for the first 14 weeks. Depending on the outcome and demand for the products, a further £100 million could be expected for the subsequent 10 weeks.

The second phase, which is at the discretion of the DHSC, allows for the supply of a further 700 PCR instruments, related kit and support services as well as additional Covid-19 products from the company’s portfolio.

The second phase could generate ‘considerably more’ sales than phase one, says Novacyt. The value of the contracts, which can be delivered from existing capacity, compares with revenue of a little over £60 million in the first half of 2020.

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