“Election-proof… Pandemic-proof… Crash-proof… This tiny tech stock is the rare…TRIPLE THREAT”
That’s the teaser headline from the ads I got over the weekend about Dave Lashmet’s favorite COVID-19 testing stock, a pick that he’s apparently making for his Stansberry Venture Technology newsletter… and Stansberry has a massive reach, and it’s a very expensive service (currently “on sale” for $2,500, no refunds).
So what’s the story? This headline from the order form sums it up:
“This is your ONE chance to get in ahead of a potential 565% whirlwind gain from the small American company that could announce its game-changing COVID-19 test any day now.”
We’ve seen quite a few teaser pitches from Dave Lashmet about biotech and pharma stocks over the past few months — he was teasing Biogen (BIIB) earlier this year for its controversial on again, off again Alzheimer’s Drug, and that one just took a massive punch to the face, and more recently he’s been talking up the potential of Rhythm’s (RYTM) obesity drug, which is coming very close to its first FDA decision date. Both interesting stories, no life-changing wealth just yet — his big winners this year, he says, were some of the vaccine hype stories, like Inovio (INO), that soared in the wake of COVID, and it sounds like he was at least wise enough to take some profits on those.
So what’s next? From the ad:
“While most the world is focused on COVID vaccines, the impact of this company’s critical biotechnology is flying completely under the radar… for now.
“But for those paying attention… AND acting quickly… you could see a potential windfall profit of 565% or more in just a matter of months.”
What other clues do we get about this company?
“This is a small, American, biotechnology company with a proven track record of success, that’s working to help our country overcome the threat of COVID-19 and keep ALL of us safer from the virus.
“And management has publicly stated that they’re going to start doing it before the end of the year – right now in Q4, to be more specific.
“That means they could announce government approval and start the sales of their critical technology ANY day now. In fact, depending on when someone’s watching this interview, they may already have.”
We’re told that it’s “apolitical” — that both President-Elect Biden and President Trump are big supporters of the technology, and agree that it needs to ramp up. That’s just a reference to the fact that both men — and indeed, pretty much everybody else in the country — agree that there has to be a dramatic increase in testing before we can stop the spread of the coronavirus. Makes sense — after all, if you don’t know you’ve got it it’s easy to spread it, and even a small decrease in the number of infected people who realize they’re infected and quarantine themselves could have a massive impact on both the pace and breadth of the spread.
Or, as Lashmet puts it, “What’s driving this equity position is what happens at the FDA, not what happens in the Oval office.”
“If this company which is trading at… ‘a lot less’ than $40… today is able to deliver the technology they’re promising – technology, I should add, they’ve already produced to combat other viral epidemics like HIV, Ebola, and the flu – well, that’s a massive hidden asset to uncover.”
I already let the cat out of the bag, so you already know this is a testing stock… but here’s some of what Lashmet says on that:
“… we’re talking about COVID-19 rapid testing….
“… it’s an easy swab that you can do yourself from the comfort and privacy of your own home. No long drive waiting in line for a nurse to swab you with an extra-long q-tip stuffed deep into your head.
“And from the moment you take a sample, you’ll have a definitive COVID test result in about 20 minutes.”
OK, so a 20-minute at-home test, using a swab… that actually narrows it quite a bit, there are hundreds of tests either already approved or in the approval process, of pretty much every stripe you could imagine, but there aren’t many at-home tests that are quick, use swabs, and don’t require an expert to read them.
This is more of what Lashmet says about the test:
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“In 20 minutes, we could let someone with a simple cold board a jet or enter a classroom…
“You could have it at the front door to every nursing home and hospitals allowing healthy people visit their loved ones while keeping COVID far away from our most vulnerable populations…
“And if you purchase one of the tests, which I’m estimating they’ll sell for around $30, and took it home, you’d know the difference between a bad case of the flu – which you can ride out – or a case of COVID19 which can send you to the emergency room….
“… this company’s new rapid test enables the user to do it completely on their own with just a simple swab and a self-contained chemistry.”
Other clues about the company? Here you go:
“… this company’s been in business for 20 years.
“They have a proven track record of winning full FDA approval both for an at-home test for HIV and an in-the-field test for Ebola.”
So… who are we talking about here? There are, as I said, tons of companies either approved or attempting to get approval for COVID-19 testing, including home tests, antigen tests, PCR tests, and all kinds of variations… but the Thinkolator says our best match here is Orasure (OSUR)
How do we match thee? Let me count the ways:
They are US-based.
They are 20 years old (the name has been around for 32 years, but the current iteration of the company came into existence as a testing firm, for HIV, in 2000).
They do have a HIV self-test, called OraQuick, that can be used for home testing and has been their most important growth product in recent years… and they did get approval for a rapid diagnostic test for Ebola last year, though I don’t know how much it has been used at this point.
On that ‘imminent’ point, though, it looks like that has become a little bit less so. And I don’t mean because of the good news about Pfizer’s vaccine progress this morning, though that has brought all of the testing stocks down a bit (including sometime “hot story” Quidel (QDEL), which dropped almost 30% this morning).
Lashmet says the company’s goal is to be on the market with their rapid test in Q4… and that was true until a few days ago, when their third quarter earnings call included the update that they hope to be ready for that in the first quarter of next year. Here’s what they said in the Q2 press release in early August:
“OraQuick Coronavirus Rapid Antigen Self-Test on track for EUA submission and subsequent launch in the fourth quarter. OraSure is developing a rapid antigen self-test, designed to produce a result for active COVID-19 infection within minutes, with no instrumentation needed to interpret the results and no need to transport samples to a lab for processing, enabling the detection of COVID-19 infection anytime, anywhere. The development of the test is supported by $710,310 of funding from the Biomedical Advanced Research and Development Authority (BARDA), part of the U.S. Department of Health and Human Services (HHS). The test is currently in human clinical testing. Although originally intended for use with oral fluid, this test has been modified to employ an easily and comfortably self-collected lower nostril sample in order to achieve the best possible accuracy. The Company fully expects to meet or exceed applicable FDA performance requirements, with EUA filing and subsequent commercial launch in the fourth quarter, pending regulatory approvals. To date, there are no COVID-19 tests for active infection which provide a result at the point of collection with no need for a diagnostic instrument to interpret the result.”
Does sound promising, to be sure, but this is how they updated that in the third quarter press release last week (it’s OK that you missed it, we were all a little distracted last week)… you can see that it sounds quite different and a bit more specific:
“The Company continues to make progress on its OraQuick® Coronavirus Rapid Antigen Self-Test and expects to apply for its first EUA in the first quarter of 2021. To date, there are no self-tests authorized in the U.S. to detect active COVID-19 infection that enable individuals to test themselves and read the results at the point of collection with no instrumentation needed.
- Between now and the filing of the EUA application OraSure will finalize the device design and complete the EUA studies necessary to demonstrate achievement of the high performance standards the FDA demands of a self-test.
- Subject to receipt of an EUA, this product would test for active COVID-19 infection using nasal samples self-collected from the lower nostril. Results would be available at the point of collection, with no instrumentation or laboratory analysis needed to interpret results.
- Subject to regulatory approvals, the Company intends to sequentially introduce its antigen test to the market for three different uses:
- Professional Test for use at drive-through sites, physician offices, public health testing sites, and employer/university health centers. In this instance, a physician would prescribe the test and the patient would conduct a self-swab in the presence of a healthcare provider who would then interpret the results.
- Prescription Self-Test for use by individual consumers (with prescription) at home or in any location, by employers/universities on or off-site, or by physicians or public health via remote testing. In this instance, a physician would prescribe the test and the patient would conduct a self-swab at home, or in any location, where they would then interpret their own results.
- OTC Self-Test for use by consumers who would purchase online or at retail without prescription, and conduct the test and receive the results themselves anytime, anywhere.
OraSure expects to file for the Professional Test EUA in Q1 2021, with the Prescription Self-Test and OTC Self-Test EUAs to follow as soon as possible thereafter. Although the timing of the EUA receipt is subject to FDA review, the Company will be prepared to launch the test, subject to authorization, without delay.
So it still sounds good, and who knows what the testing marketplace will look like in 3-6 months, but it’s pretty clear that this is taking longer than they were hoping it would… and that any home-based OTC test is going to be still quite a ways off if they’re just trying to get the “Professional” rapid test EUA in the first quarter next year and base further approvals off of that.
Orasure is in fine shape otherwise, I should note — yes, the rapid testing is not quite as imminent as teased, but they’ve been pretty steady with revenue in the $150-200 million range in recent years, they were profitable last quarter, even with their big COVID-19 ramp-up in administrative and R&D expenses, and they’re still fairly small at a $900 million market cap. They’ve been profitable for years, actually, the problem, at least in the eyes of investors, is that they haven’t grown much — their revenue for the past year, even with some increased demand for materials due to COVID, was lower than it was a couple years ago.
They are growing right now, more because of their molecular collection systems than because of the actual testing revenue, since their core HIV and HCV testing is not growing much, and thanks to the growth in COVID-19 “collection systems revenue” they will probably have their highest revenue quarter ever in Q4. And they do have other products, including a non-rapid COVID-19 test that has been submitted for EUA recently.
And, well, that’s all I’ve got for you on Orasure. They’re in decent financial shape, they’re an existing company that has developed a variety of products, and they’re likely to grow… how fast they grow probably does depend on whether they can get that COVID-19 rapid test through to an EUA early next year, and how long it takes to go from that to some sort of mass-market usage, assuming they get to that point. I might be able to get talked into this kind of idea, but I’m not there yet, so feel free to try to convince me with a comment below… or, of course, to share other ideas if you believe you’ve a better match than the Thinkolator was able to provide.