An Australian Covid-19 rapid testing company has collapsed into liquidation just three years after making international headlines for securing a multimillion-dollar deal with US health authorities.
On Tuesday, the Australian division of Brisbane-based biotech Ellume went into liquidation.
The floundering business had been in the hands of administrators since August last year. They were ultimately not able to come to a solution and made the decision to wind up the company for good on June 13.
An estimated 40 employees are understood to have lost their jobs.
Ellume was founded in 2009 by Dr Sean Parsons. The biotech company’s operations in the US are separate and are not affected by the liquidation proceedings.
At the time of the administration, news.com.au reported that $140 million was owed to creditors.
Ellume appointed John Park and Joanne Dunn of restructuring firm FTI Consulting as administrators. They now act as the company’s liquidators.
The company reportedly collapsed after a $58 million deal with an interested buyer fell through.
Hough Consolidated Pty Ltd, a diagnostics business that supplies self-test kits for Covid-19, was looking to buy Ellume outright, including retaining all its employees.
Hough agreed to pay $5 million to prop up the company while they underwent the process of buying it which involved putting together a deed of company arrangement (DOCA).
They also paid an additional $3.2 million in interim funding.
Hough was also supposed to pay US$300,000 in two instalments in May but by early June, this had not eventuated.
“Unfortunately, as of 4.00pm on 13 June 2023, Hough failed to satisfy the condition for the variation of the DOCA and the DOCA was automatically terminated,” the liquidators said.
“At this time, the Company has been placed into liquidation and a wind-down of the operations has begun.”
In September last year, at a creditors meeting, documents showed that Ellume owes $1.7 million to employees. Of that, $182,000 is owed in outstanding superannuation while $1.5 million is due to unpaid entitlements.
On top of that, Ellume owed $49 million to creditors.
Ellume has also racked up a massive debt with investors, who have convertible notes worth $89 million — meaning they invested that at an early stage of the company and expected to convert it into equity in the future.
According to results reported to the Australian Securities and Investments Commission, Ellume was in the red for some time, despite the massive deal it struck with the US.
In the 2020-2021 financial year, it lost $17 million.
In the most recent reporting period, Ellume lost a whopping $87.9 million.
Of those losses, Ellume shed an estimated $25 million after having to recall two million products.
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Some of their tests showed false positives, prompting customers to take launch a class action against the company which forced them to pause manufacturing operations while they addressed the problem.
Ellume’s report said that the product recall had “significant impact on the operations and liquidity of the group”.
The firm’s survival was also not helped by the fact that in 2022, the US government made rapid testing largely accessible and free, spending $1 billion on the venture, and putting Ellume largely out of business.
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