Throughout the turmoil of the pandemic, Quidel Corporation (QDEL) and Guardant Health (GH -5.19%) are continuing to innovate with their medical testing and diagnostic products. Both companies are experiencing rapid revenue growth, and neither is being held back by cumbersome levels of debt or regulatory obstacles to getting their products approved for sale. What's more, the two stocks have grown furiously this year, and each company has a concrete vision for where and how to compete in the near future.
Still, the companies are at significantly different phases in their life cycles. Guardant has yet to reach profitability, whereas Quidel has been profitable for quite some time. Similarly, Quidel has a large collection of different diagnostic tests, whereas Guardant has one primary product and a couple of others in the works.
These companies have taken different approaches to developing products for the coronavirus market. Let's examine each stock to see which is the better buy based on their competitive positioning in and outside of the coronavirus space.
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Can Guardant's coronavirus tests find a home in its core business?
Guardant's primary line of business is making specialty diagnostic tests for cancer. Unlike many other cancer diagnostics, Guardant's cancer diagnostics only require a blood sample rather than a tissue sample, so they provide an easier collection process for patients and physicians. Its flagship Guardant360 CDx product helps oncologists create highly accurate genetic profiles of their patients' tumors across a plethora of different cancers. Then, the clinicians analyze these profiles to select the appropriate course of treatment given the genetic attributes of their patients' tumors and the relevant scientific literature.
At the start of the pandemic, Guardant initiated the development of a diagnostic test for COVID-19. This test received the an Emergency Use Authorization (EUA) in late August. At the time of its authorization, Guardant's test was not especially advanced relative to other tests on the market. Guardant's product isn't a rapid test, and it requires some hands-on time in the laboratory to process, using the appropriate hardware. In terms of its place in the company's strategy, coronavirus testing doesn't appear to be emphasized, so it may not push for further development or widespread distribution.
While Guardant isn't profitable, its core cancer-diagnostics business will likely continue to grow rapidly. Right now, the company's quarterly revenues are growing 22.9% year over year, fueled by its excellent cancer-diagnostic products. So, it might still be a worthwhile healthcare stock even if its participation in the coronavirus market is a bit lackluster.
Quidel gracefully expands its testing empire
Quidel produces a plethora of different medical-diagnostic products for infectious diseases and other conditions. It also produces several diagnostic test-analyzer machines and a large collection of products for researchers and pharmaceutical companies. Simply put, Quidel competes in many more markets than Guardant, and it has a significantly broader set of core competencies. In particular, coronavirus testing has quickly become of significant importance to the company's future development.
Quidel produces several different coronavirus diagnostic products which have already earned regulatory approval. Quidel offers more than one rapid test, including one that delivers results in around 15 minutes. One of Quidel's coronavirus rapid diagnostics, the Sofia 2 Flu + SARS Antigen Fluorescent Immunoassay, tests for both influenza and coronavirus infections from the same nasal swab. This is a critical feature, because it will allow care providers to discriminate between the flu and SARS-CoV-2 with one test, reducing the amount of labor and time required and cutting down the risk of misdiagnosis.
Some of Quidel's diagnostics require one of the company's branded analyzer machines to develop, whereas others are compatible with analyzers from a variety of different manufacturers. Quidel also has at least one additional coronavirus diagnostic in development.
Right now, Quidel hopes to produce at least 1.8 million of its rapid coronavirus diagnostics per week. Thanks to extremely high demand for its coronavirus products, Quidel's quarterly revenue grew year over year by an eye-popping 276% in the third quarter of this year, replicating a similarly sharp rise in the prior quarter. What's more, Quidel expects demand to keep growing, and the company was consistently profitable long before the pandemic.
When it comes to picking between these two stocks, Quidel is the obvious winner. While Guardant's oncology diagnostics will continue to inform treatment and save lives, the company isn't as effectively positioned to compete in the coronavirus testing market as Quidel, nor does it seem intent on pivoting in response to its growth.
