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FDA Reversal on Chembio Antibody Test Sends Stock Down 63%

(Bloomberg) — Chembio Diagnostics stock lost more than half its value on Wednesday after U.S. regulators revoked its right to sell a test for Covid-19 antibodies over accuracy concerns.

That could serve as a warning to other smaller players racing for solutions to the pandemic, Canaccord analyst Max Masucci warned. The regulator’s about face “serves as a humble reminder that execution and transparency risks are magnified for micro-cap companies,” he wrote in a research note.

The revocation follows another high-profile turnabout for the Food and Drug administration when earlier this week the agency took away its backing for the emergency use of controversial anti-malarial drugs often touted by President Trump.

The FDA has allowed more than 100 Covid-19 viral and antibody tests since the March decision to bolster testing with emergency use authorizations.

Even larger established players haven’t been immune from scrutiny. The FDA issued a warning on Abbott Laboratories’ rapid diagnostic for the disease, ID Now, in May after a handful of scientific studies raised concerns about its accuracy.

The speed with which the FDA has pushed through new drug and device approvals faced scrutiny even before the crisis. With drug- and test-makers racing to find ways to tamp down the spread of Covid-19 so global economies can remain open, the agency will now have to balance economic needs with scientific results.

Masucci slashed his price target on Chembio to $7 from $22 and joined four other analysts who all downgraded their buy equivalent ratings to neutral. The stock plunged as much as 63% Wednesday — the most in 18 years — on almost four times average daily, three-month volume.

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