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Biotech companies are some of the most exciting investments out there, and at the same time most risky, particularly in the early days when expectations are high and delivery is not commensurate.

But if they survive the early boom and bust and make it to the point of having a viable commercial product in their hands, as does Manchester-based diagnostics firm Genedrive (LSE: GDR), then they merit more long term interest from investors.

The Mancunian firm made it onto the investors’ radar earlier this month after it said that it had completed a pilot manufacturing run for a COVID 19 testing kit and was three weeks away from being ready to offer it in the UK. The kit would be manufactured by partner Cyvitia, formerly GE Healthcare Life Sciences. Genedrive shares went from trading in a narrow channel between 9 and 21 for almost a whole year to jumping up to 220 in the space of days after the announcement.

In terms of share prices Genedrive didn’t have a particularly good run coming into 2020. Its shares plunged from a peak of 582 in 2013 to a low of 9 in 2019 as heavy R&D spending resulted in a pre-tax loss of £1.7 million. The early days of grant income were slow to give way to commercial income but the news flow over the last month shows that the company’s work over the last 13 years is beginning to come good.

In peacetime, that is, pre-COVID 19, the diagnostics Genedrive developed a small portable device the size of an iPad that made it possible to do tests for pathogens and certain genetic mutations on site rather than having to send samples to labs.

Genedrive’s contract with the US Department of Defense for testing for pathogens either in the air or in blood samples has been renewed; it also provides testing in Africa where the distance from a lab is frequently an issue and has developed a test for a genetic mutation in newborns who may lose their hearing if given antibiotics.

The diagnostics firm was given a nod of recognition from the World Health Organisation at the beginning of May when the WHO included the Genedrive testing kit for hepatitis C in the list of those prequalified for in vitro diagnostics and allowed it to participate in the procurement processes of UN agencies.

Genedrive about to start supplying COVID tests

The test Genedrive is about to start supplying will still require sending test samples be sent to laboratories but the firm’s technology will allow for the samples to be analysed by platforms produced by different manufactures such as Roche (SWX: RO) and or ABI (Thermo Fisher).

While this is not much different from other test providers working with the NHS it does add to the numbers currently needed to carry out a sufficiently largeamount of testing across the country.

Further down the road, and the company has not given a time frame yet, Genedrive plans to adopt the process so that its portable machines can be used to allow immediate testing on site. Looking at the broader picture, although the UK is only days away from starting to loosen its lockdown, the latest figures of over 6,000 of new COVID cases per day and more than 600 deaths per day show that it is far too early to start relaxing.

For the rest of the year COVID will play a role in how industries and businesses go back to work and end up working more longer term, with scars particularly deeply felt by the travel, hospitality and entertainment sectors.

For Genedrive this means that its technology could be offered not only to the NHS but potentially also to businesses and industries, or alternatively, outside of the UK. This time the rally in Genedrive’s shares is likely to be supported by a much more solid offering in terms of products and ensure that it has legs.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Vanya Dragomanovich

Vanya Dragomanovich

Vanya is an award-winning financial journalist who has worked in both television and newswires. She spent over 10 years at Dow Jones covering commodity markets, including metals, coffee, cocoa and oil. She also reported from the floor of the London Metals Exchange, and appeared on CNBC to discuss international metals markets. Since then she has written for several leading financial publications, including serving as commodities editor for FTSE Global Markets.

Vanya continues to cover international commodities markets globally, specialising in particular on metals and alternative energy. She is also the author of a book on CFD trading.

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