What happened

After competitor Abbott Labs (NYSE:ABT) unveiled a $5, 15-minute COVID-19 test, shares of Fulgent Genetics (NASDAQ:FLGT) are tumbling 28.7% at 11:15 a.m. EDT on Thursday.

So what

Fulgent Genetics' bread-and-butter business is providing genetic testing for cancer patients and would-be parents. However, management pivoted earlier this year to provide COVID-19 testing, too, and that's caused revenue and the company's share price to soar.

A COVID-19 test tube in a person's hand.

IMAGE SOURCE: GETTY IMAGES.

In Q2, sales surged 105% year over year to $17.3 million because of significant COVID-19 test demand, resulting in adjusted earnings per share of $0.17, which was $0.19 better than industry watchers' forecast. The healthcare company delivered 180,513 billable tests in the period, up more than 1,003% from the same quarter last year.

The company's test volume continued increasing in the third quarter, too. During Fulgent Genetics second-quarter conference call in July, management said it expects quarterly testing volume to increase from about 180,000 in Q2 to over 700,000. Earlier this month, it increased its full-year sales outlook to $135 million from $120 million, previously.

The growth forecast could be temporary, though. On Thursday, healthcare-giant Abbott Labs announced that it's releasing a 15-minute COVID-19 test using a nasal swab and a reactive card that will cost just $5 per test. Fulgent Genetics' turnaround time from receiving the sample to results is 24 hours, and its cost is higher, with management charging $39 out of pocket for its at-home test.

Now what

A faster, cheaper testing alternative could reduce the spread of COVID-19 and help businesses return to normal operations. However, a previous Abbott Labs test drew criticism over potential false positives, so investors will want to wait and see how the test performs following its launch.

If Abbott's launch is successful, government and corporate clients could shift away from Fulgent Genetics' testing option, causing revenue to drop in future quarters. However, Fulgent Genetics' main business of genetic testing for cancer patients and parents-to-be has been negatively impacted by COVID-19 lockdowns, so demand for those services should benefit if widespread testing results in more people visiting doctors.

Overall, the genetic-testing market is expected to eclipse $10 billion by 2022 worldwide, so Fulgent Genetics' current sales suggest it has plenty of potential to produce meaningful revenue growth regardless of how the COVID-19 marketplace evolves.