Healthcare Stocks & ETFs to Gain on Coronavirus Test Progress

Sweta Jaiswal, FRM

The coronavirus crisis shows no signs of dissipating any time soon as the number of confirmed cases in the United States have soared to more than 347,000, with the death toll crossing 10,000. Globally, the number of infected cases has risen to more than 1.27 million.

It is being believed that testing for COVID-19 is the major key in controlling the outbreak and making important decisions like treatment protocols, appropriate resource allocation and drafting the right healthcare policies. China realised the importance of testing and conducted well more than 320,000 tests by the end of March. South Korea also took an aggressive approach toward testing and established capacity to run about 15,000 diagnostic tests a day. It has conducted more than 300,000 tests by Apr 2. Going on, Germany has also developed capacity to run 12,000 tests a day.

Considering the growing demand for testing kits, the FDA has allowed certain certified laboratories to begin developing validated coronavirus diagnostics on a priority basis. However, the test will have to be submitted for review within 15 days to the federal agency. Over 20 commercial COVID-19 diagnostic tests, panels and assays have received FDA’s Emergency Use Authorization (EUA) so far such that diagnostic professionals can immediately begin conducting the same in any state health laboratory (read: Biotech Stocks & ETFs to Gain on Progress in COVID-19 Vaccine).

Progress in the Quest for COVID-19 Test Kits

The FDA has granted emergency authorization to Mesa Biotech’s Accula device. The device is developed to allow near-patient testing, available anywhere outside of the laboratory. It can provide results in about 30 minutes.  A new COVID-19 diagnostic from BioFire, a subsidiary of bioMerieux, has also been granted EUA by the FDA.  The test was designed in partnership with the U.S. Department of Defense. It can deliver results in about an hour.

Notably, a major player in the medical devices space, Abbott ABT recently rolled out a highly-portable and fastest-available molecular point-of-care test for the detection of coronavirus. This test delivers positive results in just five minutes and negative results in 13 minutes. The company has also launched its Abbott m2000RealTime SARS-CoV-2 EUA test, which runs on the m2000 RealTime System located in hospitals and reference labs, globally.

A renowned molecular diagnostics solutions provider, QIAGEN N.V. QGEN has already started shipping its new QIAstat-Dx Respiratory SARS-CoV-2 Panel test (which is to be sold as an in-vitro diagnostic or IVD) in the United States. Per QIAGEN, QIAstat-Dx SARS-CoV-2 test kits currently available in the United States are the first syndromic tests, which can detect SARS-CoV-2, as well as more than 20 other respiratory targets. The company has also attained CE marking for its QIAstat-Dx Respiratory SARS-CoV-2 Panel test.

Becton, Dickinson and Company BDX, also known as BD, along with CerTestBiotec, have received CE mark for the VIASURE SARS-CoV-2 real time test adapted for the BD MAX System. Thus, the polymerase chain reaction (PCR) test, used for detecting COVID-19, is now available to clinical laboratories.

Another player, Hologic HOLX has also received the FDA’s EUA for its latest molecular diagnostic test, Panther Fusion SARS-CoV-2 assay, which will be used for the qualitative detection of RNA from the SARS-CoV-2. Global manufacturer of scientific instruments,Thermo Fisher TMO, recently attained the FDA’s EUA for its diagnostic test to be used immediately by Clinical Laboratory Improvement Amendments’ high-complexity laboratories in the United States. The test has been developed for the detection of nucleic acid exclusively from SARS-CoV-2.

Rising Demand for Serological Tests

Huge demand for the serological tests, also known as immunity tests for the antibodies to the virus, is being observed. The identification of immunity level to the virus will aid in combating the serious concern of staffing shortages. Accordingly, around 3.5 million serological tests have been ordered by the U.K., with surging demand in the United States as well. Germany is also contemplating the use of the test to issue immunity certificates to the COVID-19 survivors. In such a scenario, Henry Schein HSIC has informed about availability of an antibody rapid blood test, known as Standard Q COVID-19 IgM/IgG Rapid Test. This test can deliver results within 15 minutes from a pinprick, with no need for instrumentation.

Going on, FDA has awarded its first emergency authorization for a rapid antibody blood test for coronavirus, developed by Cellex. The serological test utilizes a fingerprick of blood and a small strip, and will deliver a reading in 15-20 minutes.

Healthcare ETFs That Might Gain

The continuous race to introduce appropriate treatments for COVID-19 is resulting in near-term opportunities, making the healthcare sector a good space for investments. Therefore, we discuss a few ETFs that seek to provide exposure to the healthcare sector (see all Health Care ETFs here):

The Health Care Select Sector SPDR Fund XLV

The most popular healthcare ETF, XLV follows the Health Care Select Sector Index. In total, the fund holds 60 securities in its basket, with the pharma sector taking the largest share at 34.3%. Healthcare equipment and supplies, healthcare providers and services, and biotech also have double-digit exposure each. It includes stocks like Abbott and Thermo Fisher in its top 10 holdings. The expense ratio is 0.13% (read: ETF Strategies & Best Practices Amid Coronavirus Volatility).

Vanguard Health Care ETF VHT

The Vanguard Health Care ETF seeks to track the performance of the MSCI US Investable Market Health Care 25/50 Index. This fund comprises stocks of companies involved in providing medical or health care products, services, technology, or equipment. The fund holds 389 stocks in its basket and has a 0.10% expense ratio. It includes stocks like Abbott and Thermo Fisher in its top 10 holdings.

iShares U.S. Healthcare ETF IYH

The fund provides exposure to the Dow Jones U.S. Health Care Index. It holds 119 stocks in its basket and has a 0.43% expense ratio. Abbott, Thermo Fisher and BD are some of the companies included in its portfolio.

iShares U.S. Medical Devices ETF IHI

The fund provides exposure to U.S. companies that manufacture and distribute medical devices by tracking the Dow Jones U.S. Select Medical Equipment Index. In total, the fund holds 56 securities in its basket with Abbott, Thermo Fisher and BD making the top 10 holdings. It charges 43 bps in fees per year.

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Becton, Dickinson and Company (BDX) : Free Stock Analysis Report
 
Hologic, Inc. (HOLX) : Free Stock Analysis Report
 
QIAGEN N.V. (QGEN) : Free Stock Analysis Report
 
Abbott Laboratories (ABT) : Free Stock Analysis Report
 
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
 
Henry Schein, Inc. (HSIC) : Free Stock Analysis Report
 
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
 
Vanguard Health Care ETF (VHT): ETF Research Reports
 
iShares U.S. Healthcare ETF (IYH): ETF Research Reports
 
iShares U.S. Medical Devices ETF (IHI): ETF Research Reports
 
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