It's almost impossible to turn on the news without seeing the latest updates on the spread of the novel coronavirus throughout the world. The number of individuals infected continues to rise, as does the death toll. Also worrisome is the emergence of the infection across the globe.

The stock markets have dropped precipitously in recent days. We are already seeing how the spread of the coronavirus, which causes the respiratory disease COVID-19, is having broad implications for the global economy and stock prices. Supply chains, particularly those originating in or passing through China, will be disrupted. Companies will miss revenue forecasts as people in China and other large markets forgo shopping and spending. Travel and tourism will likely be impacted as people play it safe by staying away from crowds and avoiding confined spaces like airplane cabins.

A person wearing rubber gloves holds a vial with "coronavirus" written on it.

Image source: Getty Images.

Key initiatives by public health officials focus on avoiding transmission and detecting those infected. Luckily, to help the latter effort, Qiagen (QGEN 0.61%) launched a new diagnostic test kit. The company claims the kit can distinguish coronavirus from 21 other pathogens involved in respiratory disease. Not only can it detect the virus, but it does so rapidly in about one hour, without much effort by lab technicians.

A simple, quick diagnostic test

Using Qiagen's QIAstat-Dx system, a technician loads a sample, such as a swab, into a the QIAstat-Dx cartridge, which is then placed into an analyzer. The U.S. Food and Drug Administration (FDA) cleared the system for use last year, following its entrance into the European market in 2018.

On Feb. 26, Qiagen announced the shipment of test kits to four hospitals in China. This follows a testing period at a Paris hospital. Additional kits are in the process of being shipped to health authorities in Europe, Southeast Asia, and the Middle East. The company plans to seek emergency approval with regulatory bodies around the world, including the FDA. 

Beyond the QIAstat-Dx diagnostic test, Qiagen continues to develop additional tools for researchers working to neutralize the virus. Additionally, the company is working on different systems to enable medium- and high-throughput testing. This will allow for significantly more samples to be analyzed.

Will China turn into a bright spot for Qiagen's business going forward? Not likely. Qiagen expects slower-than-anticipated revenue growth in China. The initial news of slow sales in China caused the stock to drop following its third-quarter earnings report. The ability to rapidly institute its coronavirus test kits in China may positively impact Qiagen's stock. However, a general slowdown due to the outbreak will hinder the company's other businesses there.

Should investors get excited?

Investors may want to temper their enthusiasm since it remains unclear how many tests will likely be distributed. Also, it's unknown what price these kits will command, if any. The company will not want to be viewed as gouging health authorities under these emergency approvals and protocols. This may end up as positive PR in the near term and lead to stockpiling of the tests in the future.

Investing in biotech comes with many specific challenges. It is highly speculative to try to predict how global health authorities respond in a pandemic situation and then extrapolating how that will impact a specific company. Assumptions can change rapidly. New competition can emerge quickly and a competing stock may be a better buy.

Investors need to be comfortable with the core business before owning the shares. For 2019, that meant adjusted earnings per share (EPS) of $1.43 per share on revenues of $1.53 billion. Qiagen expects net sales to grow 3% to 4% in 2020, resulting in adjusted EPS of $1.52 to $1.54. It remains unclear how significant the coronovirus test will be on the company's overall prospects. Therefore, I remain on the sidelines until more news becomes available.