Marc Davis
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It’s the technological breakthrough that the world has been waiting for.

A small Canadian life sciences company, XPhyto Therapeutics Corp. (CSE: XPHY) (FSE: 4XT), has just announced its ability to significantly speed up testing for COVID-19 in analytical laboratories, hospitals, and a diversity of point-of-care other settings. 

The breakthrough news revolves around the announcement of successful validation results for XPhyto’s proprietary PCR test kit, which is being developed in Germany. This disruptive innovation is an exclusive collaboration with 3a-Diagnostics GmbH, which already has plenty of expertise in developing diagnostics for infectious diseases. 

The partners’ test kit exhibited a high diagnostic level of accuracy in sensitivity and specificity in what may be world’s fastest COVID-19 PCR test. 

This high degree of accuracy in delivering a definitive COVID-19 diagnosis combined with extreme speed and convenience is exceptional in the testing world. These results were generated from what the company refers to as “final validation”. And they easily surpass the threshold for accuracy in testing technology that is required by the World Health Organization, as well as by government regulators in North American and Europe.

This reality promises to become a powerful catalyst for the company’s share price in the coming weeks. During this time, XPhyto CEO Hugh Rogers says his company intends to apply for regulatory approval in Germany immediately, while also gearing up for an anticipated near-term commercial launch.

It is worth noting at this point that there have been some very inflated claims made by a few publicly-traded companies involved with “in-development” technologies to combat COVID-19. However, investors will be particularly reassured to hear that XPhyto’s testing results and methodology has been reviewed by an independent third-party laboratory.

How XPhyto’s Two Major Disruptors are a Major Game Changer  

The key dynamic that makes this PCR test kit innovation especially disruptive is its speed.

XPhyto’s kit only requires a single PCR cycle that is complete in 20 minutes plus five minutes for data collection while most PCR test systems require at least an hour and sometimes several hours to complete a multi-cycle viral RNA amplification process. 

By way of explanation, PCR is an acronym for “polymerase chain reaction”, which is the gold standard for coronavirus diagnostics due to its reliability for generating accurate results. It involves detecting COVID-19’s viral genome markers by magnifying them millions of times with the kind of diagnostic equipment that is ordinarily only found in most laboratories.

The key advantage of this extremely accurate testing is that it even allows for the detection of tiny quantities of viral particles and yields quantitative data, along with the qualitative results. Hence, it can detect people with low viral loads, such as people who are near the beginning or the end of their infection cycle. In fact, virtually every government in the world will only recognize PCR results as a definitive diagnosis. 

The fact that XPhyto and 3a have successfully compressed testing turnaround times from at least a few hours to less than 30 minutes represents a very dynamic competitive advantage. After all, the main bottleneck to testing en masse for COVID-19 has been the slow turnaround times for PCR tests – which typically range from a minimum of four hours to a maximum of up to several days. 

Hence, the partnership’s timely innovation is expected to be welcomed with open arms by over-worked laboratory clinicians, who have been overwhelmed since the onset of the pandemic with long processing backlogs involving millions of people. 

Additionally, the medical community is now presaging into action a new generation of less complicated, portable PCR testing machinery that can be used in a much wider range of point-of-care settings which allow for the inexpensive and rapid testing of vast numbers of people.

These point-of-care settings typically include clinics and doctor’s offices. Other environments that are ideal for such usage include transportation hubs, industrial facilities, hospital triage settings, and mobile sample collection sites.

Portable PCR technology is ideal for COVID-19 testing at point-of-care settings
Photo Credit: NUS Institute for Health Innovation & Technology

Targeting an Imminent PCR Test Kit Commercialization

XPhyto is headquartered in Vancouver, Canada. Yet, this small life sciences company is mostly active in Germany, where it is involved in developing a variety of drug formulations and diagnostics. 

The joint venture partnership is targeting the commercialization of this technology in Q1 of 2021. This is predicated on the assumption that regulatory approval will be forthcoming in Germany, as well as in the rest of the European Union (EU).

Rogers says he is confident that XPhyto can meet all the regulatory requirements for a commercial product launch within a few months. “We are on track for European regulatory approval early in the new year,” he says. 

The company anticipates filing for its “CE” certification in Germany in January, which demonstratesconformity with strict health and safety regulations for commercial products manufactured within the EU. The anticipated granting of this regulatory thumbs-up for Europe with Health Canada and US Food and Drug Administration (FDA) applications expected to follow, according to Rogers.  

A First-to-Market Entrant Opportunity

Health authorities have in recent months come to rely on rapid antigen testing as a relatively inexpensive screening tool for mass screening in non-laboratory settings. But their lack of accuracy is causing these tests to fall out of favour. Some North American health authorities have either banned or are considering banning rapid antigen tests all together. As a result, this has now left a void in the multi-billion-dollar market for point-of-care testing.

The medical establishment’s solution to the failure of antigen testing as a frontline diagnostic tool is proving to be tactically shrewd. No longer will there be a reliance on diagnostic methodologies that are inferior to PCR testing. Instead, health authorities in Europe and North America are mobilizing to bring scaled-down, portable PCR testing to the people. 

Rogers says that the ubiquitous adoption of PCR technologies with a very fast turnaround in point-of-care settings should prove crucial to containing the pandemic throughout 2021. Further, PCR testing systems and infrastructure is also critical to building and maintaining a robust pandemic response system for future pandemics. 

The likelihood that XPhyto will become a key player in this dynamic new market segment is supported by the test kit’s low cost to manufacture and inexpensive projected price point, which Rogers says will be competitive with slower PCR systems currently in use.

Sceptics may argue that the advent of at least three effective COVID-19 vaccines being commercialized in 2021 will solve all of our problems, negating any further need for testing large numbers of people. However, this view overlooks the fact that there are going to be massive logistical challenges to inoculating up to eight billion people, possibly twice per year on an ongoing basis. It will likely take many years to achieve population scale immunity. In addition, testing is actually expected to increase for several years just to monitor the efficacy of new vaccines which is yet demonstrated on any scale.

Furthermore, there still remains considerable skepticism among an estimated two thirds of the population in North America and Europe about the safety of any vaccines that are being rushed to market. 

This all helps explain why capital markets analysts following the health care sector estimate that the rapid diagnostic testing marketplace will be worth as much as US $39 billion by 2023. 

Investment Summary

As well as being a co-developer of this breakthrough PCR technology, XPhyto has exclusive marketing rights to its commercial launch. Accordingly, the company stands to benefit from access to a multi-billion-dollar marketplace in the EU and subsequently in North America.

As an early market entrant, this represents an unprecedented opportunity for a small life sciences company to be transformed into a power player in the fast-emerging, largely unfulfilled COVID-19 diagnostics marketplace. 

Accordingly, the advent of an anticipated PCR test kit product launch in Q1 of next year should be a powerful value driver for the company’s share price.    

On a technical note, XPhyto benefits from a very tight share structure of only about 62 million shares outstanding. Such a scenario, matched with a continuation of positive diagnostics news in Q1, is likely to set the stage for a powerfully ascendant share price in 2021.

In the eventuality that XPhyto meets its target of initiating commercial sales in Q1 of next year, the company’s share price is sure to enjoy a stock market re-rating to the upside, along with the prospect of an especially impressive share price performance.  

ABOUT THE AUTHOR: Marc Davis has a deep background in the capital markets spanning 30 years, having mostly worked as an analyst and stock market commentator. He is also a longstanding financial journalist. Over the years, his articles have appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, The Times (UK), Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post, AOL, City A.M. (London), Bloomberg, (Germany) and the Independent (UK). He has also appeared in business interviews on the BBC, CBC, and SKY TV. An enthusiastic shareholder of XPhto Therapeutics, his opinions are therefore biased and should not be relied upon for making investment decisions.

What is Test Sensitivity?

Test sensitivity is the percentage of people with coronavirus who test positive, compared to the percentage who have the virus but test negative. For instance, if one in five people with coronavirus who get tested are told they don’t have it, then the sensitivity of that test is deemed to be 80%. 

What is Test Specificity?

Test specificity measures the percentage of non-infected people who test negative. For instance, if only one in ten people receives a false positive test reading, then the testing equipment’s specificity is demonstrated to be 90%.

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