Healthcare Business

With FDA Approval in Place, Is Co-Diagnostics Stock Already Fully Priced?

Co-Diagnostics Inc. (NASDAQ: CODX) has been the toast of Wall Street after it went from penny stock status to a revered coronavirus testing stock. This was a relatively quick move, and it’s most recent U.S. Food and Drug Administration (FDA) approval is only speeding things up for this Salt Lake City-based molecular diagnostics company.

Testing for the coronavirus has become a lucrative field. A couple of the other companies specifically dealing with the testing aspect are Quest Diagnostics Inc. (NYSE: DGX) and Becton, Dickinson and Co. (NYSE: BDX). Their stocks have seen solid gains since they entered the coronavirus test business as well.

Separately, GenMark Diagnostics announced preliminary numbers and the impact of its coronavirus test kit on its first quarter. However, Co-Diagnostics was the first to the party.

After what has been a roller-coaster ride for the markets over the past month, a return to normalcy seems to be on the horizon. This return will be led by increased coronavirus testing, and Co-Diagnostics is a gatekeeper.

Opening the Gate to Flattening the Curve

Last week, Co-Diagnostics announced a key update from the FDA. Essentially, the Co-Diagnostics coronavirus test obtained an Emergency Use Authorization (EUA) from the FDA for its Logix Smart Coronavirus COVID-19 Test for SARS-CoV-2.

Co-Diagnostics had initiated sales of its CE-IVD test to the European community and to other global markets that accept a CE marking as valid regulatory approval following routine local product registration.

It also began offering its Logix Smart COVID-19 test to some U.S. Clinical Laboratory Improvement Amendments (CLIA) labs in March 2020, as a result of the FDA’s policy for diagnostic tests for COVID-19 during the current public health emergency.

The test kit can be used by clinical laboratories certified under CLIA to detect the presence of the virus that causes COVID-19. Ultimately, this FDA EUA is opening the gate for Co-Diagnostics to help flatten the curve and start making some money with its test kits.

The Price Is Right

Co-Diagnostics was relatively unknown prior to January. A look at its chart shows that the real action for the stock picked up in February, when shares shot to a high of $21.75 but quickly backed off. This came at a time when the market was unsure of how to price anything, and the Dow Jones industrial average and S&P 500 were swinging at least 4% on a daily basis.

In the past couple of weeks, the shares have found a range between $8 and $10, where investors seem to have a consensus. Obviously, the current stock price reflects and takes into account the potential future earnings from this company. With the FDA approval, Co-Diagnostics can now sell its test and capitalize.

However, there are a couple questions that need answers to really understand if the price is right. First, how many tests will Co-Diagnostics be able to ship? Also, what will the price be for these tests, and what type of margin is the company looking at for producing them?

For now, the current trading range seems to fit and liquidity seems exceptional. Co-Diagnostics moves an average of about 12 million shares daily.