Genedrive PLC (LON: GDR) shares have had a good run recently – and also not a good run recently. The question is, which direction of travel of that Genedrive share price is the correct one? From some 15 pence or so to 70 p, or the return from 70p to 15? That’s the thing that we need to work out in order to consider the jump from 15 to 20 on this latest announcement. Are we seeing a blip based upon hopes or is this the start of a proper revaluation?
The background here is that Genedrive – entirely sensibly – jumped on the covid testing bandwagon. When governments are handing out free money it would be absurd not to. As Boris Johnson has been saying, the testing regime in the UK has been costing £2 billion a month. Any management that could grasp a piece of that and didn’t would be failing shareholders.
Genedrive developed a fast covid test which is an excellent thing to have. The last share price jump started when they applied for a CE Mark. This is a precondition for being able to sell across the EU. But the Genedrive share price has fallen back to the starting point on the basis that little in the way of sales has so far followed. There are many covid test-making companies out there and gaining the contracts to sell, not just having the test itself, seems essential.
Genedrive announces today, news on those tests. Genedrive shares have jumped 30% as a result. The question for us as traders is whether that jump – and any subsequent move in the price – is justified. This can be argued either way which is what makes it a trading proposition.
It’s possible to think that the news about discussions with direct users of such tests across Europe is good news. Pharmacies, sports facilities, and so on, well, such direct distribution might well be an interesting market. Sure, it’s not the same as getting an order for 50 million off a government but then that’s rather over really. Or at least we could think that it is rather over. The UK has announced the end of free tests so that is the end of the mass, mass, market orders.
It’s also true that Genedrive hasn’t been able to sell to the UK govt. For a CE Mark doesn’t work here, there’s an extra test required, as Genedrive points out: “The product cannot be commercially sold yet in the UK, as CTDA approval is still pending. With UK government statutory requirements for COVID testing changing rapidly, future opportunities would be discretionary testing vs government mandates.” They’ve not been able to sell direct and certainly haven’t gained any of the mass contracts.
All of which gives us those two opposing views. One is that Genedrive now has an interesting product which can be sold in the normal way across Europe. OK, missed the bulk sales to government's part but still, a nice market to address. The other is that they’ve missed the bulk sales to government part and that’s really the end of the excitement. The Genedrive share price will likely depend on how the market as a whole decides between those two options.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.