Can Co-Diagnostics Dominate Coronavirus News Against New Competition
Co-Diagnostics Inc. (NASDAQ: CODX) is a small-cap stock that is far from a household name, but it has received much added exposure after becoming the first of the molecular diagnostics companies given a CE-Marking for its coronavirus test. That allows the company to sell and export its Logix Smart Coronavirus COVID-19 Test to any market that accepts the CE mark from Europe. Due to the scare and rapid spreading of the coronavirus around the world, the stock price of Co-Diagnostics went through the roof, from under $1 at the start of 2020 to above $20 briefly just last week.
With shares having pulled back to $17.81 on Monday and down another 20% on Tuesday, some investors are going to wonder what’s left in the tank here. One reality is that the company may have a first-mover advantage for selling its COVID-19 test kits that could last for some time. Another is that the exponential stock move barely took the shares to a $500 million market value, even at the peak last week. There also appears to be some new competition for its coronavirus tests.
Time will tell how this company fares, but history around outbreaks and other medical-need themes has shown that many companies get huge spikes in interest around events only to see their shares tick back to lower levels and to see thin trading volume come back into play after the shakeouts.
In the case of Co-Diagnostics, 24/7 Wall St. wanted to see what might be working against the shares, now that they have already lost one-third of their value from last week’s peak after rising about 2,000% from trough to the recent zenith. The potential upside for the company seems obvious enough, particularly if the coronavirus situation gets worse and becomes a formal pandemic, but we are leaving all the hype and touting to investor chats and the like.
Several fresh bits of news have come out in the past few days that investors should pay attention to.
Shares of Co-Diagnostics traded lower on Tuesday morning after the firm Maxim Group downgraded its Buy rating to Hold. The downgrade was valuation-based after its exponential run-up and after its $450 million (or so) market cap now reflects much of its potential.
Just last week, Co-Diagnostics conducted a registered direct offering of 470,000 shares of its common stock at a purchase price of $9.00 per share, This was an at-the-market offering under Nasdaq rules and the move raised about $4.2 million for the company. Maxim Group was co-placement agent and H.C. Wainwright was the lead placement agent for that offering.
No formal research report has been seen out of H.C. Wainwright to show if the firm is maintaining its Buy rating after the shares ran up so much. It was just a week earlier that the firm reiterated that rating and doubled its target price to $4 from $2.
Co-Diagnostics announced this week that it has been requested to speak at the 27th Annual Molecular Medicine Tri-Conference in San Francisco, California, and the firm also announced on Monday that it will provide its COVID-19 tests to U.S. CLIA (Clinical Laboratory Improvement Amendments) labs.
CEO Dwight Egan gave a video interview on Yahoo! Finance in which he confirmed that the Co-Diagnostics enables testing within about 90 minutes and that the company can now sell its tests to labs and uses co-primers as the first company to get a CE Mark (EU). The company also wants to be supportive to CDC efforts, and its Salt Lake City, Utah, facility can make about 50,000 tests a day after this last weekend’s FDA policy changes.
Another issue affecting Co-Diagnostics is that a small company called GenMark Diagnostics Inc. (NASDAQ: GNMK), which was trading up almost 30% at $4.55 on Tuesday, announced along with earnings that it has started sending initial shipments of its ePlex Research Use Only (RUO) test kits designed to detect the SARS-CoV-2 virus. GenMark’s press release indicated that it took a month to design and manufacture the tests to send out:
Initial RUO test kits were recently shipped to the company’s Hong Kong distributor, as well as several U.S. customers that have access to clinical samples. GenMark plans to use this information to support submission of an Emergency Use Authorization (EUA) to the U.S. Food and Drug Administration (FDA) for the ePlex SARS-CoV-2 test to address this developing global public health emergency.
While GenMark is smaller at this time with a $271 million market cap, its shares have not gone through the same exponential run that Co-Disgnostics saw, and the company generated $88 million in full-year 2019 revenues.
Shares of Co-Diagnostics were last seen trading down about 16% at $14.98 on Tuesday morning, after a $17.81 close the prior day. Its 52-week range is $0.69 to $21.75.
Again, the potential and existing upside story should be well known at this point. That does not mean that the stock will not have runs up and down from this point, but the explosive trading volume seen in February means that this story is no longer that much of an unknown to the trading and investing community than earlier in the year, before the coronavirus news dominated the headlines.