Covid-19 testing companies still a hit with investors

These two stocks stand to gain as vaccine roll-out expected to take months.

Covid-19 testing companies including Novacyt (LSE:NCYT) and recently-listed Abingdon Health (LSE:ABDX) are continuing to attract strong interest from investors amid the roll-out of vaccines.

AIM-traded Novacyt was one of the best-performing stocks of 2020 — as well as among the most-bought stocks on our platform — following the deployment of its kits for use in the rapid testing of NHS patients in the UK and by health authorities around the world.

Its shares jumped from 14p to 1,200p at one point in October, before settling at 850p in December after vaccine breakthroughs appeared to pour cold water on the buying frenzy. However, the shares have resumed their rise in 2021 as more contagious strains of the coronavirus keep global case numbers at high levels.

Shares are also supported by the realisation that Covid-19 vaccines will need many more months to roll out, meaning there’s no chance that testing demand will collapse any time soon. In the meantime, Novacyt is using the cash flows generated from its Covid-19 testing kits to strengthen its position across the diagnostics market.

The stock closed yesterday at near to 1,200p for a valuation of more than £800 million, although it dropped back to 1,150p today. A year-end update on trading is usually posted before the end of January, with Novacyt set to show that revenues have topped €300 million (£269 million) in 2020 compared with €13.1 million the year before.

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Its prospects in the UK have been underpinned by the government’s commitment to fund testing until March 2022, with 2021 seeing peak demand as prime minister Boris Johnson aims for millions of tests every day.

That’s also a boost for Abingdon Health, which raised £22 million from institutional investors in December to support increased manufacturing of its rapid lateral-flow test.

The AIM-traded shares were priced at 96p for a market capitalisation of £92 million, but have already risen to 127.4p. This includes a 7% gain today after the York-based company said half-year revenues jumped in line with expectations to £7.7 million, from £1.5 million a year earlier, after second quarter trading was boosted by a range of products, some unrelated to Covid-19.

Alongside its consortium partners, including Omega Diagnostics (LSE:ODX), the company said it delivered one million AbC-19 rapid antibody tests to the Department of Health on 8 January.

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The antibody test, which uses a small drop of blood from a finger-prick, is administered by healthcare staff and shows results in 20 minutes without the need to send a sample to a lab.

The tests can help to build a picture of how the virus has spread throughout populations, which will be crucial in the understanding of immunity to Covid-19. They can also assist in establishing the effectiveness of vaccines.

Given that information from mass testing will be critical to managing current and future outbreaks of Covid-19, the company is working with commercial and academic partners to build the datasets around the use case of the test alongside vaccines.

Production rose August, with the proceeds of December’s flotation expected to lead to a boost in manufacturing capacity while the company seeks regulatory approvals in 27 territories. Abingdon has been in contact with the US Food and Drug Administration, including data on the performance of its rapid test versus polymerase chain reaction testing.