Shares of Quidel (NASDAQ:QDEL) were down a whopping 27% at 2:27 p.m. EDT on Thursday after rival Abbott Laboratories (NYSE:ABT) gained emergency use authorization from the Food and Drug Administration for its 15-minute, $5 test for the novel coronavirus. Fellow test makers Hologic (NASDAQ:HOLX) and Quest Diagnostics (NYSE:DGX) were down 6% and 7%, respectively.
Quidel fell the most because its COVID-19 test, the Sofia SARS Antigen FIA, is in the same class as Abbott's BinaxNOW COVID-19 Ag Card test. Both are so-called antigen tests that detect the coronavirus by looking for the viral proteins rather than genetic material from the coronavirus, which molecular tests detect.
The advantage of testing for proteins versus genetic material is that the latter generally has to be amplified, which takes time and requires a machine to run the molecular amplification steps.
Quidel's test can also generate results in 15 minutes, rivaling Abbott's test, but it requires the testing location to own one of Quidel's Sofia instruments, which can run tests for a wide range of diseases from strep throat to the flu. Abbott's test, on the other hand, is a stand-alone product capable of giving a readout without a separate device..
The FDA has authorized 181 molecular tests, but Abbott's test was only the fourth antigen test to be given an emergency use authorization. In addition to Abbott and Quidel, privately held LumiraDx has a test, as does Becton, Dickinson (NYSE:BDX). The latter's stock was down a modest 3% today, which seems reasonable given that it's a substantially diversified healthcare company with a $71 billion market cap.
Neither Hologic nor Quest has an antigen test, but their FDA authorized molecular tests (Hologic has two and Quest has four) will compete directly with Abbott's BinaxNOW COVID-19 Ag Card test.
While competition is rarely good for any company, Abbott's test may end up substantially expanding the COVID-19 testing market rather than directly taking market share from Quidel, Hologic, and Quest. Testing in the U.S. has certainly been supply-constrained over the last few weeks with reports of patients receiving results weeks after being given the test.
Abbott is also promoting its test as helping to "facilitate return to daily activities." The test will be linked to a new mobile app that patients can use to prove they're not infected with the coronavirus. If the U.S. is at the point where it's testing a lot of asymptomatic people just to make sure they're not positive, the testing market will naturally have to be substantially larger than it is currently.
Even if Abbott cuts into the market share of Quidel, Hologic, and Quest, the three companies are well diversified and should come out of the pandemic ready to get back to promoting the rest of their offerings.
Quidel, for example, should benefit greatly from the increased placements of Sofia instruments, which doctors' offices have been buying primarily so they can offer in-house COVID-19 tests. There were about 50,000 Sofia analyzers installed as of the company's earnings report at the end of July, with the company able to manufacture 2,500 machines per month, which could increase to 7,500 to 10,000 instruments by September. Once the pandemic is over, the company can promote all the other tests that can be run on the Sofia machines, generating recurring revenue that wasn't available previously.
Hologic is in a similar situation. Its COVID-19 molecular tests run on its Panther systems, which can test for other infectious diseases as well. In the most recently completed quarter, the company placed 208 Panther systems, quite a feat considering it was averaging 228 system placements per year over the last several years.
Finally Quest is arguably more diversified than either of the other companies, offering a wide range of diagnostic tests that are routinely ordered by doctors. The company may not experience a post-pandemic boost from new customers, but it should eventually see increased revenue from all the tests that patients have put off as they've avoided doctors' offices during the pandemic.