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Abingdon Health, Genedrive, Suffer From The Avacta Omicron Testing Problem

Tim Worstall
Tim Worstall trader
Updated 11 Jan 2022

Key Points:

  • Avacta noted that its covid test doesn’t deal well with the omicron variant – the shares dropped
  • Abingdon Health noted that it was affected by that very same problem – the shares dropped
  • Genedrive’s share price dropped – we might be seeing a pattern here.

The three companies, Genedrive (LON: GDR), Abingdon Health (LON: ABDX) and Avacta Group PLC(LON: AVCT) are all entirely different companies. Yet given that they’re all in much the same field – testing kits for covid – they’re subject to the same batterings from the wider market. It’s not true to say that the three, Genedrive, Abingdon and Avacta all move in lockstep but there are still similarities in price movements in their share prices.

This mattered yesterday and today. For Avacta suspended the sales of its covid tests. Abingdon announced that it faced much the same problem and would be working to correct it. Both share prices suffered substantially as a result. Which is where that third company, Genedrive, comes in for that share price also declined. The market probably assuming that if it were two out of three then why wouldn’t it be three out of three?

Also Read: How To Trade The Omicron Variant

There are differences, of course, there are. Abingdon, for example, has had significant trouble in getting paid by the government for their earlier work on covid tests, to the extent that they recently recapitalised with a share issue. Avacta made that announcement yesterday and Abingdon followed. Genedrive was first to announce that it was applying for a CE Mark to sell tests across Europe. They are different companies with different prospects.

On the other hand, the three, Genedrive, Abingdon and Avacta, are closely linked in their prospects in the market more generally. Obviously, this is so as they each make much the same thing, covid tests. So much so that when Genedrive saw a significant price rise on the announcement of a CE Mark application – to be able to sell in Europe – the other two companies made similar announcements with varied results.

So, we’re seeing much the same on the downside here. Avacta announces that its covid tests are not all that sensitive to omicron. Abingdon announces that it suffers from much the same problem. The Genedrive share price then suffers in sympathy. It doesn’t in fact matter – well, it does, but prices are prices – whether Genedrive actually suffers from the same problem or not. The three prices are, to some extent, linked in the collective mind of the market.

As to what will happen in the medium term that’s an interesting question. The British companies haven’t had much luck selling tests to UK govt simply because UK govt is insisting upon higher tests of effectiveness done by Porton Down than other countries. So, the scaling down of the UK testing regime may or may not damage sales prospects for those British testing companies.

The size of the future testing market is unknown, whether the tests can be ginned up to meet required accuracy levels for omicron is also unknown. But it would be reasonable for us to expect the three share prices, Genedrive, Abingdon and Avacta to be linked in their responses to those changes.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.