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Diagnostics sector set to continue to see growth in 2021 and 2022, says broker finnCap


The medical diagnostics sector is set to continue to see growth in 2021 as demand for coronavirus testing is not going away any time soon, a report from broker finnCap states.

Analysts say that while COVID-19 testing is likely to peak in 2021 it will continue to see strong demand into 2022 and beyond as a result of the logistical hurdles in vaccinating the global population as well as the uncertainty around how long vaccine jabs provide immunity and their effectiveness against new COVID strains.

“The encouraging progress on vaccines has prompted fears over the sustainability of this market; however, we believe these fears are unwarranted,” said finnCap analyst Arshad Ahad.

“We believe the market has yet to peak and will do so in 2021, but will remain strong into 2022 and beyond. Overall, it is likely that COVID-19 will be a part of our lives for years to come and may even be a perpetual presence – and as long as this remains the case, COVID-19 testing will be an important tool for keeping the disease in check and avoiding outbreaks.”

Companies offering or developing PCR tests include Novacyt SA (LON:NCYT), Yourgene Health PLC (LON:YGEN) and Genedrive PLC (LON:GDR).

To effective help control the pandemic in the UK alone, it has been suggested the government will need around 120mln tests per month.

“Global demand exceeds supply, providing opportunities for existing diagnostics providers and newcomers alike,” finnCap said in its quarterly life sciences sector report, ‘Rude Health: COVID-19 Diagnostics’.

“The diagnostics sector remains a high-growth area, at a time when most other sectors are experiencing disruptions due to the pandemic.”

PCR testing is the most common type of testing as it provided the highest levels of accuracy, but is expensive and requires experienced professionals and some results can take days to process.

Lateral flow diagnostics, although not always as accurate as other technologies, can provide cheap and rapid results and be administered without training.

Companies offering/developing COVID-19 lateral flow diagnostics include Avacta Group PLC (LON:AVCT), Omega Diagnostics Group PLC (LON:ODX) and Immunodiagnostic Systems Holdings PLC (LON:IDH).

The finnCap report also highlights two less well-known processes – the enzyme linked immunosorbent assays (ELISA) being utilised by companies such as EKF Diagnostics Holdings PLC (LON:EKF) and loop mediated isothermal amplification (LAMP) being ultilised by companies such as OptiGene.

FinnCap also noted that the AIM life sciences sector outperformed larger-cap and health indices and other sectors in 2020, boosted by COVID-19 testing stocks.

There was also more than GBP1bn raised for the life sciences sector on the AIM Index over 2020, a leap on the GBP242mn raised over the same period in 2019.

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