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The rapidly evolving COVID-19 testing market will produce huge winners and losers. Is the new Abbott $5 fifteen-minute COVID-19 test a game-changer?

In WILTWs March 5, 2020, March 26, 2020, April 2, 2020, April 9, 2020, and May 7, 2020, we argued that rapid-health screening and infectious-disease testing is a new multi-billion-dollar industry in the making, and the only way to safely reopen economies. 

SARS-CoV-2 continues to rage in the U.S. and other parts of the world. Although new cases have fallen in America’s Sun Belt, they are accelerating in other parts of the nation, particularly across the Midwest, West, and in rural areas, notes former FDA Commissioner Scott Gottlieb. 

This is of particular concern for the many rural areas that don’t have the hospital capacity or resources to deal with an epidemic at scale. America has now seen six consecutive weeks with every weekday recording more than 1,000 lives lost, totaling over 30,000 deaths in August, and exceeding projections in recent days, recently noted Dr. Eric Topol, Director of the Scripps Research Translational Institute. 

This new phase of the pandemic makes fast, accessible, affordable diagnostic testing critical to gaining control of the virus, underscores Dr. Francis Collins, Director of the National Institute of Health (NIH). Last week, Abbott Laboratories (see WILTW April 2, 2020) gained U.S. emergency authorization for a new antigen-based diagnostic test called BinaxNow that is the lowest cost point-of-care COVID-19 test authorized in the U.S. The test has a demonstrated sensitivity of 97.1% and specificity of 98.5%. 

The Abbott test is also a fraction of the cost of competing tests, such as Becton Dickinson’s BD Veritor system ($20 per test) and Yale’s FDA-approved saliva-based test ($10 per sample). BinaxNow joins 3 other authorized antigen assays, but is simpler to use. 

The U.S. government secured the first three months of production, totaling 150 million tests, effectively doubling the nation’s testing capacity virtually overnight. The test can be performed by doctors, nurses, school nurses, medical assistants and technicians, pharmacists, and employer occupational health specialists, among others. Likely initial uses include nursing homes, schools, airports, and other public venues. 

The Abbott test is the first of many low-cost, rapid diagnostic tests that will become available over the next few months. This week, Roche (ROG SW) also announced a rapid antigen test for countries accepting the European CE mark approval that has similar performance characteristics to the Abbott antigen test. 

Innovative screening tests hold potential to change the direction of the pandemic, as they are cheap, quick, easily mass-produced, and don’t require laboratory processing. Huge numbers of people could be tested regularly, and contagious people could be identified and quarantined before widely spreading the virus. 

Many of the new tests in the pipeline are being developed under the NIH’s Rapid Acceleration of Diagnostics (RADx) initiative. Seven projects are on-track to become available this fall. Four aim to bolster the nation’s lab-based COVID-19 diagnostic capacity by tens of thousands of tests per day. The other three will expand point-of-care testing making results more rapidly and readily available. 

For instance, Mammoth Biosciences is developing a fast test for COVID-19 that aims to “unite” the accuracy of molecular [PCR] tests with the speed of serology [antigen/antibody] tests. Mammoth has partnered with GlaxoSmithKline to scale and commercialize the CRISPR-based tests. The CRISPR tests could provide a multi-fold increase in testing capacity in commercial laboratories, a version of which could eventually be sold over the counter for at-home use. 

Simple at-home tests for SARS-CoV-2, some of which use saliva, could be critical for an expanded, sustainable testing infrastructure. The challenge with nasal swab-based tests is their cost, which ranges from $50 to $150, and their required laboratory assessment that can take days—a key reason why nine out of 10 infected Americans never get tested. 

By the end of the year, the U.S. has the potential to run 6 million COVID-19 tests per day, given the new technologies in the RADx pipeline. This is a stark difference to the current 750,000 daily, and 2.6 million projection for year-end testing capacity. 

Many universities and schools have opened around the nation in faith that they won’t suffer a major outbreak. However, the University of Illinois has implemented a robust test and trace program, based on an approach developed by the Broad Institute. The Midwest school is now testing 30,000 students and faculty twice per week, with results returned in less than six hours. 

Together with her colleagues, Melanie Ott, MD, PhD., Director of the Gladstone Institute of Virology has calculated that if PCR tests are conducted daily, new infections would effectively be zero as infected patients could immediately be isolated. If results are delayed by two days, community spread occurs. If tests are conducted twice a week, infections rise up to 50%, while weekly testing causes the number of infections to jump 80%. 

To find a solution, Ott’s group is leveraging advances in smartphone technologies and production economies of scale to develop a cellphone-based COVID-19 test, an initial version of which is expected to be available by yearend. Camera lenses used in today’s smartphones rival laboratory microscopes for their power and can be more sensitive than expensive diagnostic plate readers. 

Dr. Peter Diamandis underscores that Ott is digitizing, de-materializing, and de-monetizing the old-school diagnostics lab, making it available to anyone anywhere. Initially, the device will detect SARS-CoV-2, but ultimately could identify a range of infections. 

Other companies also working on at-home tests include E25Bio, Sherlock Biosciences, and an increasing number of academic research laboratories. Some of the tests use a paper strip that could be mass-produced within weeks at a cost of $1 to $5 per day. 

Low-cost, rapid diagnostic tests, however, will not be a panacea. COVID-19 screening tests may not be as accurate as molecular PCR diagnostic tests. These concerns can’t be overlooked. Dr. Michael Osterholm, a leading epidemiologist, is a strong believer in testing. However, he warns that unless the rapid screening tests are super sensitive with high specificity to reduce the risk of false negatives, the nation could see “a big drop in the number of positives,” creating a false impression that the rate of virus infection is declining. 

Nevertheless, moderate levels of accuracy can still slow the spread of the virus. This is because frequent testing would catch the majority of cases, and those with false-negative results are less likely to be contagious. For instance, a test that misses 20% of positive cases the chance of an infected person getting two false negatives in a row would be only 4%. 

We believe the emerging health tech surveillance industry, which in our view broadly includes testing and tracing infrastructure, is still in its early innings. Abbott could gain share in the rapid COVID-19 testing market. However, molecular PCR tests will still have a strong role due to their reliability and accuracy. 

Comparison of Largest Covid-19 Test Makers

Source: Bloomberg Intelligence

We recommend investors accumulate positions in the following testing-related stocks: 

  • Thermo Fisher Scientific (TMO, $475) – a leader in solutions for infectious disease detection, which has gained 33.5% since WILTW March 5, 2020, versus 15.8% for the S&P 500 index. 

  • Abbott Laboratories (ABT, $82) – a global leader in diagnostic equipment, which has gained 31.9% since WILTW April 2, 2020, on par with a 36.7% rise in the S&P 500 index. 

  • Quidel (QDEL, $95) – a leading developer of diagnostic-testing solutions that has risen 63.8% since WILTW April 2, 2020, versus 36.7% for the S&P 500 index. 

  • Hologic (HOLX, $08) – a leader in real-time molecular PCR diagnostic testing equipment, which has risen 73.5% since WILTW April 2, 2020, versus a 36.7% rise in the S&P 500 index. 

  • PerkinElmer (PKI, $41) – a leader in diagnostics and laboratory equipment, up 59.5% since WILTW April 2, 2020, versus 36.7% for the S&P 500 index. 

We are also adding two new recommendations to our COVID-19 testing portfolio: 

  • Fluidigm (FLDM, $77) – a leader in integrated fluidic systems for gene expression analysis, genotyping, digital PCR and protein crystallization. As part of the NIH RADx program, FLDM has built a microfluidic platform capable of processing thousands of PCR tests for COVID-19 genetic material per day. The company is deploying advanced integrated fluidic chips to process up to hundreds of thousands of new, mostly saliva tests per day this fall. 

Last month, FLDM received FDA EUA approval for a saliva-based PCR test, called Advanta Dx SARS-CoV-2 RT-PCR Assay. The assay demonstrated 100% agreement with the results from paired nasopharyngeal samples tested with authorized assays. Fluidigm’s test runs on the Biomark HD platform, which can generate 6,000 tests per day on a single system. 

  • Roche Holding AG (ROG SW, 320.05 CHF; ADR-RHHBY, $43.67 see prior WILTW reports) - is a global leader in biologic medicines and diagnostics, including oncology, immunology and infectious diseases. Roche is also the world leader in in-vitro diagnostics. As noted above, Roche this week announced plans to launch a rapid antigen test in European countries accepting the CE mark, and also intends to apply for EUA from the U.S. FDA. The test has demonstrated a sensitivity of 96.52% and a specificity of 99.68% in two separate independent studies and delivers the result in 15 minutes. Roche plans to start production at 40 million test kits per month, doubling the capacity by end of the year. 

Roche’s competitive advantage is its strong portfolio of molecular, serology and digital solutions to help combat COVID-19. Roche already has EUA approval for a high-volume molecular test to detect SARS-CoV-2 and a rapid antibody test. Roche also received EUA for a test to identify severe inflammatory response in patients with confirmed COVID-19 and has launched a v-TAC system to simplify the screening, diagnosis and monitoring of patients.

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