On December 7, with the release of the "New Ten Measures" for further optimization and implementation of COVID-19 prevention and control measures, China officially entered a new stage of epidemic prevention and control, and the demand for medical products based on personal epidemic prevention and control accelerated.
Among the “New Ten Measures”, nucleic acid testing was most affected by policy adjustments. Its dominant position was replaced by antigen testing with home self-testing as the usage scenario.
During this new wave of lockdown in China, medicines for personal prevention and treatment of COVID-19-related symptoms have become difficult to purchase. Finding a box of antipyretic drugs, ibuprofen, and acetaminophen is even more challenging.
In addition, COVID-19 oral medicines, household oxygen concentrators, oximeters, and COVID-19 vaccines have also become hot spots in the market.
Under the particular circumstances of the transformation of the epidemic prevention method, superimposed policies, and favorable markets, many subdivided tracks have exploded with solid room for growth in the short term. Although they are widely sought after in terms of capital, how long they can last is still worth observing.
How long will antigen test popularity last?
Since the "New Ten Measures" introduction, it has become a foregone conclusion that PCR tests will gradually "retire". Antigen test products have become the primary method of COVID-19 detection. However, whether antigen tests can become the next "myth of creating wealth" is debatable.
On the one hand, from the beginning of the sale of antigen reagents, the price has been restricted by centralized procurement, and price wars are inevitable. Since mid-March, more than 20 provinces have completed the centralized procurement of antigen detection reagents. Since December, Gansu, Guizhou, Jilin, and other places have issued notices on the price limit of antigen detection kits online, and the online price has been reduced to about 3.9 yuan per person.
Given the current price increase of antigen tests on the market, the production capacity of each approved antigen product is expanding, and the manufacturers will reach the peak of production capacity. The supply of antigen reagents will achieve a balance.
On the other hand, non-mandatory "self-inspection" brings uncertainty to subsequent heavy volume. As far as overseas markets are concerned, with the gradual relaxation of overseas COVID-19 prevention and control, the demand for antigen testing has gradually slowed down. Although domestic antigen tests are still exported, since the second quarter, the export volume has dropped significantly compared to the first quarter of this year.
It is a fact that purchasing a COVID-19 antigen self-test is more or less a "self-discipline behavior". The scale of users who actively pay is much smaller than the scale of mandatory PCR testing, and the performance of related publicly listed companies is also limited.
Some people in the industry have said that antigens may develop in the direction of a combo test of COVID-19 influenza. It is understood that overseas-related products have been approved for marketing.
The difficulty of getting supply vs Overnight CFDA approval
Up to now, China State Food and Drug Administration(CFDA) has approved 49 SARS-CoV-2 antigen test products. Moreover, according to the Zhejiang Daily, the daily production capacity of the three antigen test companies in the province has reached 13.71 million. It is expected to increase to 25 million by the end of the month.
However, at the same time, people were hard to get a supply of COVID-19 antigen tests during the new wave of the pandemic in China in many provinces. The contrast is so apparent that people couldn’t stop but start to ask why this phenomenon would occur out of the sudden lifting of the COVID-19 restrictions.
With the tight supply, the antigen test price was surging; according to a dealer in Beijing, the price was rising from 10 yuan per test to 15 yuan per test. Moreover, some dealers in Beijing even sold the tests in batches; the minimum ordering quantity rose from 150 yuan per box to 750 yuan per 5 boxes.
Though the government has again alleged that they require dealers not to hoard goods and not to raise prices maliciously, on the stock market, the antigen test concept stock has continued to soar.
"Bonus" is only a flash in the pan
Global SARS-CoV-2 detection mainly relies on three methods: nucleic acid detection, antigen detection, and serum antibody detection.
Among them, nucleic acid detection is the most well-known to the public. It is aimed at the genetic material of SARS-CoV-2. Based on real-time fluorescent quantitative PCR technology, it is reverse-transcribed and amplified, and the intensity of the fluorescent signal judges its content.
The current highly respected antigen detection starts from the antibody, tracks the protein shell of the new coronavirus, and draws conclusions through the reaction of the antibody combined with it. The main methods include colloidal gold, latex, fluorescent immunochromatography, etc.
In contrast, nucleic acid detection is more sensitive but needs to be carried out under laboratory conditions, and the process is complicated and time-consuming. Although antigen test is affected by uncertainties such as virus concentration and sampling methods, the process is simple and can be operated by individuals at home. The results are usually available within 15 minutes, and it has been popularized by European and American countries earlier.
On November 6, 2021, iHealth announced that the COVID-19 antigen home self-test OTC kit launched by its US subsidiary "iHealthLabs.Inc" has received emergency authorization from the US FDA and EUA.
In January 2022, iHealth announced that its US subsidiary had received procurement contracts from the US ACC and the US Army Contract Management Command, with a total contract price and tax of US$1.275 billion. Immediately, iHealth's share price skyrocketed, gaining 27 daily limits, becoming a veritable monster stock, and driving more domestic medical device companies to follow.
More public information shows that before 2022, 90% or more of the orders of significant manufacturers will come from overseas. In March of this year, the Comprehensive Group of the Joint Prevention and Control Mechanism of the State Council decided to promote the monitoring mode of "antigen screening and nucleic acid diagnosis", adding antigen tests to supplement nucleic acid detection. Affected by this policy, more antigen companies have been approved, and their products can be circulated in the country, mainly in cities with severe epidemics, such as Shanghai and Shenzhen.
The industry generally believes that the antigen market is welcoming dividends, and many domestic medical device companies also hope to replicate the myth of iHealth.
In the first half of 2022, YHLO achieved an operating income of 2.337 billion yuan, a year-on-year increase of 326.46%; net profit was 666 million yuan, a year-on-year increase of 651.7%. During the reporting period, YHLO's COVID-19 business achieved revenue of 1.819 billion yuan, a year-on-year increase of 3046.55%. Gao Fei, chairman, and general manager of ALLTESTS, once said that in the first quarter of 2022, the company's COVID-19 antigen test products accounted for about 95% of revenue. According to the financial report data of Hotgene, as of the end of the year's first half, the company's COVID-19 antigen business accounted for 91.14% of revenue.
However, some experts have reservations about the market prospect of antigens.
He Bin, a special researcher at the Public Policy Research Center of the Chinese Academy of Social Sciences, believes that the surge in demand for antigen detection kits is a short-term phenomenon, reflecting citizens' anxiety about COVID-19. "There is no difference in the initial treatment plan whether the test is positive or not." Bin also emphasized, "If in the future, the country's classification of COVID-19 is reduced to 'Class B and B' or lower, it becomes a common infectious disease, and antigen test is unlikely to be considered by the medical insurance. And the amount of government purchases will be limited." According to public information, the United States stopped the distribution of free test kits in September.
Export vs Domestic Consumption: Real problems behind the huge profits
According to the latest data from the General Administration of Customs, in October 2022, the export value of COVID-19 antigen reagents was about 1.8 billion yuan, a decrease of 1.6 billion yuan from the same period in 2021.
Currently, Chinese antigen tests are mainly exported to the United States, Germany, Australia, and other regions. According to the General Administration of Customs data, from January to October 2022, the value of Chinese antigen reagent exports to the United States, Germany, and Australia were 10.2 billion yuan, 9.6 billion yuan, and 6.2 billion yuan, respectively.
In the face of the blowout growth brought about by COVID-19, the demand for testing at home and abroad has risen. How far the need for antigen testing can go depends on the government's attitude toward the industry. Still, it is inevitable that after the peak of the COVID-19 epidemic, the market for antigen testing will show signs of weakness.
In the context of the global economic recovery under pressure, people can't help but think about the real problems behind the enormous profits of COVID-19 antigen testing.
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