Novacyt was paid to deliver 288,000 kits per week to the NHS at the height of the pandemic.
However, concerns about the kit were raised by the Government’s validation group, which assessed how sensitive tests were and whether they produced false negatives.
Adam Heppinstall KC, representing the government department, said in April that the rate of failure was “far in excess” of anything that could be tolerated.
He added: “Time is of the essence and the quality and robustness of the test is very important. A false negative is frankly very dangerous for public health.”
The tests were never rolled out by the NHS.
Novacyt and Primer Design had claimed evidence suggesting their tests failed to spot Covid-19 was “seriously and obviously flawed”.
They argued that errors had been made in assessing the laboratory results.
Novacyt and Primer Design had launched a counter claim for £70m over three unpaid invoices.
Following the settlement, the cases will now no longer proceed to trial.
Neither party made any admission of liability or wrongdoing in respect of the claim or counterclaim or otherwise.