The trading week is over and even the after-hours traders are packing it up. But to the amazement of the social-media pundits, Co-Diagnostics (NASDAQ:CODX) stock is up 40% post-market.
What’s going on? There’s a development afoot and it’s a potential game changer in the global battle against the spread of the novel coronavirus. So, let’s unpack the details and flesh out the news story that has CODX stockholders celebrating — and rightfully so.
One Letter to Change Everything
Besides a vaccine and ventilators (and bathroom tissue), if there’s one thing that the world wants now, it’s coronavirus-testing kits. There was even a report that President Donald Trump had requested testing kits from South Korea at one point in time.
Earlier, there had also been a report that Vice President Mike Pence conceded that the Trump administration was unable to meet its objective in delivering the target number of testing kits. Therefore, it’s understandable if the government is now willing to fast-track its approval processes in order to get coronavirus-testing kits to people quickly.
Back in February, Co-Diagnostics received a key regulatory clearance to supply the Logix Smart COVID-19 Test kit, “an in vitro diagnostic (‘IVD’) for the diagnosis of COVID-19 in European Union states and other markets that accept a CE-IVD mark as valid regulatory approval.” Naturally, this development was welcomed by long-side traders, and the share price advanced quickly that month.
Now there’s another another significant regulatory clearance, and this time it’s from none other than the U.S. Food and Drug Administration. Specifically, FDA Chief Scientist Denise M. Hinton released a letter to Co-Diagnostics informing the company that the emergency use of its COVID-19 diagnostic kits has been approved.
Opening the Floodgates
That, of course, is the best news that a medical-supply company could possibly hope for. Even for bigger companies in this field, regulatory approval is a significant event. For a small company like Co-Diagnostics, it’s make or break.
In this case, the make-or-break event is what’s known as an Emergency Use Authorization, or EUA. This is how the FDA describes the circumstances under which an EUA might be deployed:
“Under section 564 of the Federal Food, Drug, and Cosmetic Act (FD&C Act), the FDA Commissioner may allow unapproved medical products or unapproved uses of approved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions caused by CBRN [Chemical, Biological, Radiological and Nuclear] threat agents when there are no adequate, approved, and available alternatives.”
There’s no doubt that the coronavirus crisis qualifies as “life-threatening” and that there are no “available alternatives” on a widespread basis. This is a situation in which the government had to act quickly, and the FDA evidently identified Co-Diagnostics as a company sufficiently qualified and trustworthy to provide these crucial diagnostic devices.
As the letter spells out, the coronavirus crisis was declared a public-health emergency in February and Co-Diagnostics’ testing kit “may be effective in diagnosing COVID-19, and … the known and potential benefits of [the] product when used for diagnosing COVID-19, outweigh the known and potential risks of [the] product.”
Just as importantly, the FDA declared that “There is no adequate, approved, and available alternative to the emergency use of [Co-Diagnostics’] product.” That’s a powerful statement. Prospective investors should seriously consider the implications of the FDA declaring that Co-Diagnostics’ product basically has no alternative.
That’s a green light to own the stock, as clear as it gets. With news of this magnitude, after-hours traders had every reason to bid up the share price.
The Final Word on CODX Stock
Not every government action is a game changer. In this instance, however, it’s a powerful buy signal for CODX stock. Best of all, it’s an opportunity to get essential medical devices to the people who need them – a win-win for all stakeholders, including shareholders.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.