Vaccines and drugs get much of the attention in the scientific race to fight COVID-19. But companies have been working just as hard on ways to meet the enormous demand for testing. Those investments are beginning to pay off.
Abbott Laboratories Inc. and ThermoFisher Scientific Inc., two major players in coronavirus testing, reported third-quarter results Wednesday that beat Wall Street estimates thanks largely to this focus. They followed Roche Holding AG, another leader in testing whose earnings last week showed a similar windfall. All three companies reported impressive growth as they ramped up machine production and rolled out new types of tests.
Abbott’s $881 million in COVID-19 testing revenue accounted for nearly 10% of its total sales in the third quarter. ThermoFisher, which makes money by building testing machines and providing other services and supplies to labs, generated $2 billion in COVID-19 related revenue, up from $1.3 billion last quarter. Revenue at Roche’s molecular diagnostics business, which includes much of its coronavirus testing operations, more than doubled in the third quarter compared with the same period last year.
Abbott expects even greater COVID-related sales in the fourth quarter, in the range of $1.3 billion to $1.4 billion, and expects demand to remain strong at least through 2021. Those are big projections, but they aren’t unreasonable.
Coronavirus cases in Europe and the U.S. are surging, and stemming the tide will take time. But even when the infection rate slows, demand will remain for testing.
The renewed outbreaks highlight the need for a better approach to sustainably containing the virus, and broad surveillance testing offers a way forward that’s comparatively easy on the economy. Catching cases early should reduce spread, and people will be more confident engaging in increased activities if testing is speedy and routine.
Abbott and Roche have recently launched new rapid tests that deliver results in 15 minutes or less without lab analysis or specialized instruments. Those new tests should be well-suited to both acute outbreaks and reopening efforts as they allow for easy and inexpensive repeat testing. There’s a lot of room for improvement: Many European countries did not take advantage of a relatively virus-free summer to build enough testing and tracing capacity. The U.S., too, is well short of the testing volumes needed to contain the virus.
While testing could peak in the next few quarters, the pandemic is likely to have a long tail. Only a widely available vaccine is likely to damp demand meaningfully, and even then it won’t erase the need for testing. It’s possible that one of the front-runners in vaccine development will gain emergency authorization by late November, but that’s a best-case scenario. Relatively few doses will be available at first as drugmakers ramp up manufacturing, and distribution will take time. Vaccines likely won’t be broadly available to the general public until a fair bit of 2021 has passed, and it will be even longer before most receive it.
The hard truth is that it will be a while before the virus is well-controlled, vaccine or not. In the meantime, testing is a good business to be in.
The writer is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.