Investments aimed at helping testing companies fight the global pandemic are flowing but the money can be difficult to access.
  • Investments aimed at scaling-up COVID-19 testing are growing but can be difficult to access.
  • Testing and isolating people who may be infected with COVID-19 is key to reopening the global economy.
  • The U.S. may need to ramp up testing capacity to anywhere between 5 million to 30 million tests a day.

Investments aimed at curbing the global pandemic and ramping up COVID-19 testing are growing, but analysts say the capital flows are slow and can be difficult to access. 

Myriad commercial companies are seeking capital to ramp up COVID-19 testing and lab diagnostics capabilities to meet rising demand for their services. But some investors are taking a wait-and-see approach amid a global economic slowdown, brought on by the outbreak, says Ash Shehata, the national sector leader for healthcare and life sciences at KPMG.

“There is a lag in getting access to that initial startup funding,“ Shehata told Karma. “There is a nascent component where it is unclear on how to get funding for these solutions.”

Since the beginning of 2020, a handful of companies have gotten funding in ever-larger deal sizes from venture capital firms or through grants and initial public offerings, according to the database PitchBook. Most recently on April 16, Australia–based Atomo Diagnostics Ltd., a medical device company that manufactures tests for infectious diseases including COVID-19, raised $18.3 million from an IPO on the ASX stock exchange in Sydney. The company raised $1 million in debt in 2017.

Market entrants are looking to tap into $2 trillion of publicly available funding the U.S. government deployed through the Coronavirus Aid, Relief, and Economic Security Act, or CARES.

Several federal agencies with different guidelines administer such funds, which can make it difficult for companies to access the money, says Allen Thornton, the chief executive officer of Grant Source, a software platform that helps entrepreneurs find grants.

“The grant money is not easy to find and secure. You have to go through a few rabbit holes in order to secure it,“ Thornton told Karma. “Right now if we are talking of COVID outreach, the public money far surpasses the private funds at this time.”

“there is a lot of nonsense right now going on in the market because people are desperate.”

Testing people for the presence of the COVID-19 virus is key to reopening the U.S. economy, say experts and states from New York to California have announced plans to get their residents back to work by testing large swaths of them.

Estimates vary but the U.S. will need to scale up testing capacity to anywhere between 5  million to 30 million tests a day, as every American may need to be tested several times and all the tests need to be processed.

In the U.S. market, large companies such as LabCorp and Quest Diagnostics Inc. have rapidly scaled up their diagnostic capabilities. Quest accounted for almost half of all COVID-19 testing in the country, at the apex of the outbreak and processed as many as 40,000 tests per day by April 6, says the company.

Still, more testing is needed, says Arda Ural, an operational transaction services life sciences leader at Ernst & Young.

“There is an acute need for availability of test kits for broad population testing to facilitate returning to work,” Ural told Karma. “As of today, there are currently sufficient rapid diagnostics test technologies, including self-tests, that have been approved. However, the challenge is to make them available at a national scale to all individuals.”

There are primarily two types of tests, one that screens for an ongoing infection and another that checks for antibodies which can indicate if a person might have been previously sick and is potentially immune to being reinfected with COVID-19. The scientific community is still unsure what level of antibodies are needed to provide immunity or how long the immunity lasts.

Scientists and policymakers have raised concerns about the reliability of some of the tests. The UK government bought millions of COVID-19 antibody home test devices this year that turned out to be faulty, The Guardian reported. The uncertainty is scaring off some investors, says Eghosa Omoigui, founder of EchoVC Partners, a venture capital firm.

“So there is a lot of nonsense right now going on in the market because people are desperate,” Omoigui told Karma. “You are on your own if [the product] turns out to be bogus.” 

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