With shrinking revenues, unprofitable operations, and only $45.4 million in cash against trailing-12-month operating expenses of $115.4 million, cell analysis hardware company Fluidigm (FLDM 1.02%) might not seem like an obvious candidate for investment now. It took a beating in the recent market correction, even as it released new high-throughput coronavirus diagnostic tests in late August, and the stock is nowhere near its peak this year.

With its innovative portfolio of cutting-edge cell analysis products, Fluidigm's poor stock performance is only a blip that investors shouldn't read too much into, especially because the stock has nearly doubled this year. Despite being weakly received by the market, Fluidigm's new coronavirus diagnostics might be the opportunity the company needs to push through the pandemic's economic doldrums and get some breathing room to work on profitability and shareholder returns in the long term. To understand how this might be the case, we'll need to dive into a few details about Fluidigm's entry into the coronavirus market.

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It's not going exactly as shareholders planned

When Fluidigm announced in late August that its Advanta coronavirus diagnostic test had received emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA), its stock briefly soared to reach its highest point of the year so far. In keeping with the company's core competency in designing microfluidic devices, the Advanta test uses integrated fluidic circuits that allow a single test cassette to process 192 different samples at once. When paired with Fluidigm's Juno and Biomark high-throughput machines, clinics using the Advanta test can process as many as 6,000 different saliva samples per day.

Unfortunately for Fluidigm, each Advanta test cassette takes about three hours to process. So when Abbott Laboratories (ABT 0.04%) reported that its brand new 15-minute coronavirus test had also received emergency authorization, the Advanta diagnostic didn't look as appealing, and the company's stock dropped. Then, as Fluidigm's stock was still limping downward, the market entered several days of sharp correction earlier this month, dragging the stock down even more.

But the market may have overreacted, and investors may be missing the larger context of Fluidigm's coronavirus business. On July 31, Fluidigm announced that the National Institutes of Health (NIH) had agreed to provide it with up to $37 million to develop high-capacity COVID-19 diagnostic tests. While the details of the contract are being finalized, the NIH provisioned $12 million for the company to use immediately, contingent on its Advanta assay receiving third-party validation. On Sept. 8, Fluidigm received this payment after meeting the validation milestone, suggesting that its collaboration with the NIH will proceed in full. Given that its entire research and development budget was $31.6 million in 2019, this amounts to a massive subsidy.

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Could Fluidigm's price be a blessing in disguise for potential investors?

The market may have judged Advanta as a flop right out of the gate, but Fluidigm has already secured a package of cash to spend on product development and commercialization. Importantly, Advanta isn't the first time that Fluidigm has deftly leveraged government support. Last year, the Defense Advanced Research Projects Agency agreed to pay the company up to $3.9 million through 2024 to refine its microfluidics technologies and produce a single-cell analysis device for diagnostic use in the context of biological weapons of mass destruction.

Right now, it's difficult to assess how much money Fluidigm is making from Advanta. Management noted in its second-quarter earnings report that more than 100,000 assays had been run using the Advanta test, but that figure is quite small because it dates from before the diagnostic received its EUA. Keep an eye on the company's next earnings report in early November to get a sense for how rapidly the company is deploying its tests.

In the meantime, consider that the stock's recently bumpy ride may be a byproduct of speculation and overreaction rather than genuinely changing fundamentals. After all, since its price collapsed in late August, the company's position has only improved -- and many of Fluidigm's competitors don't have government help with product development.