Shares of OPKO Health (NASDAQ:OPK) surged 10.8% on Wednesday after the U.S. Centers for Disease Control and Prevention (CDC) said it could file for approval of a test for the COVID-19 coronavirus.
Over 90,000 cases of the virus have been identified in more than 70 locations, including the United States.
COVID-19 can cause life-threatening respiratory illness, including pneumonia, particularly in people with compromised immune systems. Production of testing kits for the virus has lagged demand, creating a bottleneck that the CDC hopes to address by encouraging private healthcare companies, including OPKO Health's BioReference Labs, to develop their own tests.
On March 4, BioReference Labs reported that, following a discussion with the CDC, it's "working expeditiously to identify the best path forward to develop and offer a test that will yield high quality and accurate results."
OPKO Health acquired BioReference Labs for $1.47 billion in 2015, and the specialty lab unit accounts for most of OPKO's revenue. In the third quarter, OPKO reported revenue of $228.8 million. Services, including lab unit revenue, represented $181.1 million of that amount.
Given the growing need for testing kits, there could be an opportunity for lab revenue to increase. That would be welcomed by investors because OPKO Health's revenue has been sliding, and it's losing money. In Q3, sales were down 8% and the company's loss per share worsened to $0.11 from $0.05 in the same quarter in the year prior.