Shares of medical technology company Lucira Health (NASDAQ:LHDX) rose sharply on Monday and ended the day up by 27% after climbing by as much as 41.3% earlier in the trading session. The reason for these gains was the fact that the U.S. Food and Drug Administration (FDA) issued an emergency use authorization (EUA) for the company's Lucira Check It COVID-19 Test Kit for over-the-counter (OTC) sale.
The Lucira Check It Test Kit, the first self-administered COVID-19 test approved by the FDA, can be used from the comfort of one's own home and delivers "PCR quality molecular accuracy in 30 minutes or less."
While results from lab tests can take anywhere from several days to two weeks, Lucira Health's test kit delivers quality results in less than an hour. Plenty of other diagnostic tests for COVID-19 have been granted EUA by the FDA. And in fact, it seems at first glance that the healthcare company may not benefit a whole lot from this milestone.
After all, with coronavirus vaccines becoming more and more widespread, there will likely be less of a need for test kits for the disease. But the OTC availability of this test will drastically improve its accessibility, which could lead to a significant increase in sales for Lucira Health. That explains why investors are bidding up the company's shares today despite unimpressive, preliminary, first-quarter top-line projections. Lucira Health expects to record between $4 million and $4.5 million in net revenue during Q1 2021, which comes short of the $11.71 million analysts are expecting on average.
According to the research firm Grand View Research, the COVID-19 testing market will expand at a compound annual growth rate (CAGR) of 5.05% between 2021 and 2027. Thanks to the FDA's decision to approve its test kit for OTC sale, Lucira Health looks well positioned to profit from this market in the coming months and years.