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Anglo-French biotech firm Novacyt (LON:NCYT) has seen its shares leap overnight as the company confirmed that it has launched a test for novel coronavirus (COVID-19). Novacyt has a clinical diagnostics unit called Primerdesign which it is now believed has released the first CE-Mark test for the coronavirus.

CE-Mark tests can be used by to test for the coronavirus at the molecular level and don’t require the involvement of clinical staff. That will make it easier for tests to be carried out on thousands of patients without the need for referral to doctors and lab technicians.

Demand for Novacyt shares

Novcyt shares were trading at around 15 pence a month ago and have since rallied to £1.62 at time of writing. While much of the investor enthusiasm has been built into the price in the last few weeks, there is likely to be further demand for its product this week from health services in Asia.

Novacyt said yesterday that Primerdesign has received 288,000 pre-orders for its CE-Mark tests, including from China, the UK and US. We would expect these orders to ramp up as more health services become aware of the opportunity. The test is currently being formally evaluated by public health authorities in five countries.

Novacyt says it is seeing high conversion rates from quotations to orders. It has been presciently investing in manufacturing capacity to meet current and future demand for the tests.

As the coronavirus has spread, testing has been one of the main problems in effective screening. We have seen this already in China where local health authorities initially found it very difficult to track the spread of the virus. Once it had become established there was a problem, rudimentary temperature tests were employed, but these cannot distinguish between the coronavirus or an unrelated cause like flu.

The current technology available from Novacyt can produce a result in less than two hours. It can also be transported at room temperature and does not need to be refrigerated, which is a considerable bonus when it comes to logistics. It is designed to run on multiple different instrument platforms.

The Company has submitted an application and remains in discussion with the US Food and Drug Administration (FDA) for Emergency Use Approval of its test for COVID-19, which would allow laboratories in the US to use the test for clinical diagnosis on a temporary basis. 

A coronavirus related hedge

We may have seen most of the price action on this biotech stock but it seems well positioned to benefit from further orders for its products. It is a potential hedge against further spread of the coronavirus, which is undermining the value of major stocks like Apple.

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

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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