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Why Abbott Laboratories Stock Surged Today

By Joe Tenebruso – Updated Aug 27, 2020 at 7:23PM

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The healthcare giant announced a major breakthrough in the coronavirus testing market -- and a blockbuster deal with the U.S. government.

What happened

Shares of Abbott Laboratories (ABT -1.01%) jumped 7.9% after the medical device leader announced that the U.S. Food and Drug Administration (FDA) had granted its COVID-19 test an emergency use authorization.  

So what 

Abbott's test is a game-changer. The healthcare titan calls it a "rapid, reliable, highly portable, and affordable tool for detecting active coronavirus infections at massive scale." With results ready in 15 minutes, a positive sensitivity rate of 97.1%, zero need for specialized equipment, and a cost of only $5, it's hard to argue against Abbott's claims.

A person points to an upwardly sloping stock chart.

Investors are excited about Abbott Laboratories' new coronavirus test. Image source: Getty Images.

Better still, test-takers can download a free app that will display their results. Abbott says the app could, in turn, be used to provide evidence of a negative result and serve as a "temporary digital health pass," while also helping those with positive results get the care they need. 

Now what

Abbott expects to see robust demand for its new test. The company is gearing up to produce as many as 50 million tests per month starting in October. "The massive scale of this test and app will allow tens of millions of people to have access to rapid and reliable testing," Baylor College of Medicine professor Joseph Petrosino said in a press release.

The U.S. government wasted little time in securing a supply of Abbott's new rapid COVID-19 tests. After the market close, the White House announced a $750 million deal to purchase 150 million tests. "This is a major development that will help save more lives by further protecting America's most vulnerable and allow our country to remain open, get Americans back to work, and get kids back to school," the White House said in a statement. 

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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