More than 100 companies are working on treatments or vaccines for the novel coronavirus. Co-Diagnostics (NASDAQ:CODX) isn’t one of them, but CODX stock still recently rose a staggering 1,910% year-to-date.
“Staggering” may not adequately address the ascent of company that, until the virus really hit the U.S., was basically a penny stock. As of June 2, Co-Diagnostics has a market capitalization of about $480 million, which is puny considering the aforementioned appreciation by the stock. Stature aside, the company is a credible coronavirus idea, albeit a potentially risky, speculative one after an almost 20-fold rise in a matter of months.
For those not familiar with Utah-based Co-Diagnostics, it is, in its own words, “a molecular diagnostics company that develops, manufactures and markets a new, state-of-the-art diagnostics technology. The Company’s technology is utilized for tests that are designed using the detection and/or analysis of nucleic acid molecules (DNA or RNA).”
If you’ve been following coronavirus stocks this year, you’ve probably seen the “RNA” acronym. It stands for ribonucleic acid and it’s the foundation of some companies’ efforts to develop vaccines for the virus, including familiar name Moderna (NASDAQ:MRNA).
Advantage of C0-Diagnostics
The obvious benefit with Co-Diagnostics, one that’s largely reflected in the stock run-up, is that the company makes Covid-19 tests. It’s not working on a treatment or vaccine.
This is a critical differentiation for several reasons. First, even some large companies, such as Gilead (NASDAQ:GILD) and Moderna are encountering difficulties in Covid-19 treatment/vaccine testing. Yes, those two companies are having success here and there, but the road to a successful treatment or a cure is going to be long. As in 12 to 18 months type of long, barring surprises.
The time it’s going to take for a Covid-19 vaccine to clear three stages of clinical trials and be prepped to come to market gets us to the second point. That being that in the interim period, the best option until a vaccine is ready is more testing. Testing is critical and that’s understatement.
Dr. Anthony Fauci recently said the U.S. needs to be performing 1.5 million to 2 million coronavirus tests a week at a minimum. Harvard University has a more ambitious opinion, saying 5 million people per day need to be tested in order for the country to safely reopen.
Co-Diagnostics’ test product is the Logix Smart COVID-19 Test Kit, which uses “a single step real-time reverse transcriptase polymerase chain reaction (RT-PCR) process in lower respiratory tract fluids (e.g. bronchoalveolar lavage, sputum, tracheal aspirate), and upper respiratory tract fluids (e.g. nasopharyngeal and oropharyngeal swabs)” in patients displaying signs or symptoms of Covid-19.
In April, the Food and Drug Administration approved Logix Smart for emergency use, but the company hasn’t provided sales data since then. In late May, however, the company did say Logix Smart was proven effective in identifying coronavirus in cancer tissue even in patients that weren’t displaying symptoms of the respiratory illness.
Bottom Line on CODX Stock
Even when accounting for the obvious need for more coronavirus test kits, Co-Diagnostics isn’t a free lunch for investors.
In fact, there are multiple risks for investors to consider. First, the company’s test kit isn’t 100% accurate. Few if any medical tests are, but when testing for an illness causing a pandemic, the test can’t miss the 100% level by much, particularly after the maker promised that level of accuracy.
Second, there’s a school of thought that coronavirus testing and vaccines are competing interests. That opens the door to think along the lines of “why test when there’s a cure.” Right or wrong, if that logic becomes consensus, investors could treat any good news from the likes of Gilead or Moderna as bad news for Co-Diagnostics.
Those risks must be appreciated, but so does testing demand, which says Co-Diagnostics could have some life left in it for risk-tolerant investors.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.
