Comparing COVID 19 Test Kits: Sona vs XPhyto
By Marc Davis, Capital Markets Media Inc.
July 23, 2020
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An urgently needed COVID-19 vaccine may finally be on the horizon, according to health officials. However, many health experts insist that rapid point-of-care diagnostic testing will play an equally important role in containing this pandemic and future outbreaks.
Why is this?
In fact, the innovation of screening devices that are portable, affordable and easy-to-use promises to become critical for the monitoring, managing and mitigating new outbreak hotspots. Especially when they can be easily operated by non-medical-workers in hotspot settings where they are needed the most.
Remarkably two small Canadian companies are on-track to launch coronavirus detection devices within months, assuming successful trials and government approval. Known as lateral flow tests, these small, inexpensive devices look and function just like disposable drug store pregnancy tests. What represents a breakthrough here is their apparent ability to detect coronaviruses in as little as several minutes.
If these products make it to market within the next few months thanks to a streamlined regulatory process, these two companies could prove to be stock market sensations with extraordinary untapped upside.
Now is a great time to take a look under the hood and see how these two companies measure up to one another in a head-to-head comparison. Either way, there appears to be plenty of horsepower to propel both of them to pole positions in the race to commercialize critically needed diagnostic solutions for the containment of the COVID-19 pandemic.
Staying Ahead of the Investment Curve
The better known of the two companies among North American investors is Sona Nanotech Inc. (CSE: SONA), (OTCQB: SNANF) – an R&D nanotech life sciences innovator based out of Halifax, Nova Scotia. Its platform technology involves using gold nanoparticles to detect viral biomarkers in nasal swabs in a simple-to-use lateral flow assay test.
Vancouver-headquartered XPhyto Therapeutics Corp. (CSE: XPHY) (FSE: 4XT) is a highly diversified biosciences company that is doing cutting edge science in several business arenas in Germany. This includes the development of diagnostic technologies and advanced drug delivery systems for conventional and cannabis-based narcotics, as well as the innovation of medical-grade phytoceuticals for both clinical and commercial applications.
What both of these very different companies seem to have in common is the technological knowhow to develop rapid, disposable diagnostic tools that are well-suited to tackling the global pandemic. That said, neither of them has yet to file for government approval for commercialization of their products. So these stocks are still only well suited to risk-tolerant investors.
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Outlined below is a comparison between the two:
Comparing Share Price Trajectories
Based out of Halifax, Nova Scotia, Nova saw its share price catapult as much as 175% from CDN $3.13 a share to $8.65 after announcing validation results for its Covid-19 antigen test earlier this month. This was a hotly-anticipated news release and its findings prompted a buying frenzy among investors, triggering heavy volume. The stock is now trading well above $10.00 a share.
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Sona’s parabolic share price trajectory for 2020 has seen the stock appreciate a much as 10,000% to date
The company’s rapid detection COVID-19 antigen lateral flow test was shown to be 96% effective in preliminary laboratory tests. This very encouraging development added nearly $100 million to Sona’s market capitalization, taking it to around half a billion Canadian dollars at its current vaulted prices.
That’s not bad for a company that was flying so far under the radar at the beginning of the year that it’s share price was as low as CDN $0.11, translating into a market capitalization of less than CDN $7 million.
Meanwhile, XPhyto is a little further behind the developmental curve than its competitor. Ironically, its buoyant share seems to have little to do with its R&D work in infectious diseases. Instead, the stock has run from an IPO last year at CDN $0.50 to around $3 on the back of news developments almost entirely related to XPhyto’s other R&D projects.
In fact, it seemed to catch the market by surprise when XPhyto unexpectedly announced on July 06 that its own rapid detection COVID-19 technology has also been validated in preliminary testing.
The technology is being developed in collaboration with a small German medical diagnostics firm, 3a-Diagnostics GmbH, which already has plenty of expertise in developing point-of-care screening systems.
XPhyto CEO Hugh Rogers explains his company’s cautious approach to publicizing his company’s infectious disease R&D work, “A lot of companies in the capital markets have lately been making inflated claims about how their biotechnologies may be able to combat the COVID-19 pandemic.”
“But we have been intentionally low-key about what we are doing, instead choosing to focus on communicating our other business verticals in Germany,” he adds. “That said, we are now looking forward to the prospect of commencing a saliva-based pilot study within a few weeks for our coronavirus screening device, and we expect the results to speak for themselves.”
This leaves plenty of upside potential for XPhyto if its share price is to catch up with Sona in the coming months. And the sky is the limit for both companies if they succeed in commercializing their respective point-of-care pathogen detectors by 2021.
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XPhyto’s breakthrough COVID-19 new on July 06 has yet to register with investors, in spite of the company’s buoyant share price in recent months
Functionality of These Rival Technologies
Both products appear to measure up well on a head-to-head basis by ticking off the following boxes for ensuring optimal functionality and a likely widespread adoption of any rapid point-of-care antigen screening devices:
– anywhere (portable with no power or equipment required)
– anytime (decentralized and rapidly deployable)
– anyone (simple to use with no training needed)
– affordable (low production costs = affordable retail prices)
Summing up the big picture potential for such next-generation point-of-care products, Rogers says, “We see an enormous global market opportunity that includes individual households, schools, hospitals, public transportation, airports and border services as well as many private employers.”
Both rival technologies also promise to detect multiple coronaviruses in one test. As no such screening devices exist anywhere in the world (at the time of writing), both companies stand to benefit immeasurably from being first-to-market or at least early markets entrants.
Who Offers the Better User Experience?
XPhyto’s testing device is designed to screen saliva samples, as well as throat or nasal samples. But the company believes that the non-invasiveness of using saliva, rather than nasal secretions, offers a competitive edge in terms of its acceptability to consumers and medical patients alike.
Truth be told, the process of procuring a nasal swab in conventional COVID-19 testing at medical facilities and triage centres has been described by most people as uncomfortable at best and painful at worst. Whether a nasal swab is necessary with Sona’s screening device remains to be seen. But again, it is likely that a more user-friendly product will prove to be an easier sell in a commercial marketplace, especially when testing children, bed-ridden medical patients (including COVID-19 victims) and the elderly, as well as anyone looking for a convenient and painless screening method while on-the-go.
That said, it is worth mentioning that the US Food and Drug Administration has to date shown a preference for screening devices that use nasal swab tests. But alternative methods of screening – such as testing body temperatures – are a poor substitute for any form of direct viral screening.
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This reality may favour Sona in the US marketplace in the near-term. But eventually, saliva-based testing is likely to become the go-to form of screening worldwide, assuming that it generates comparable results to nasal swab testing.
Who Has the Fastest Turnaround Time?
Sona suggests in its promotional literature that its product will be able to deliver a colour-coded result within 5-15 minutes, according to the company’s website. This is a wide margin of difference that could prove to be a major factor in determining the commercial appeal of Sona’s product. Calls and a text to the company’s CEO to determine whether 5 minutes is a realistically attainable turnaround time were not returned.
However, XPhyto CEO Rogers says he is confident that his company’s viral RNA screening test can be performed in five minutes or even less. This may prove to be a distinct competitive advantage to XPhyto if Sona proves unable to match this turnaround time. After all, in a high-traffic environment like an airport or medical triage facility, every second counts in terms of how quickly large numbers of people can be processed for screening.
Price Point Comparison
In terms of a price point, Sona forecasts the “opportunity to produce 20-40 million tests at $25 per test” in its literature, which presumably factors in a very healthy profit margin. This is based on the fact that home pregnancy tests and other lateral flow assay tests typically cost about US $1.50 to manufacture and sell for about US $10 to $15.
XPhyto confirms that its costs will likely be as low as a pregnancy test when produced at scale and that its pricing will be comparable to industry norms for other commercially available lateral flow assay tests, like the home-use pregnancy ones. In other words, this suggests that its pricing may be half the cost of Sona’s product – or even less.
That said, one would expect that either company are likely to be willing to make bulk sales to sovereign state governments and large private buyers around the world for deep discounts, especially as a means of ensuring widespread adoption of these products globally.
Timeline to Market?
Owing to the fact that both of these coronavirus diagnostic screening devices appear to work, they could conceivably be fast-tracked to production within months, rather than years.
Sona recently announced that its product is now being tested in “in-field evaluation studies” by two independent third-party laboratories. Sona expects to have a government-approved product in “the hands of our customers in the coming months,” according to the company’s new CEO David Regan.
The current trial involves a minimum of 30 confirmed negative and 30 confirmed positive specimens and is expected to be completed by month’s end, according to the company. Applications for an emergency use authorization with the Food and Drug Administration (FDA) and Health Canada are expected to follow.
Further to its successful prototype testing, XPhyto is now gearing up for a short pilot study lasting less than 30 days, and involving testing human saliva from healthy patients and saliva spiked with COVID-19 RNA in its lateral flow assay devices.
Rogers predicts that all the regulatory authorizations could be in place for commencement of European commercial sales in late Q4 of this year. This is an aggressive prediction but not an unreasonable one considering how government regulators the world over, including Germany and the EU, are committed to fast-tracking screening devices for COVID-19.
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XPhyto’s coronavirus portable screening technology prototype has been successful in laboratory benchtop tests. The above photo, from left to right, shows activation of the COVID-19 probe, the universal coronavirus probe, and a control.
Investment Summary
As countries tentatively re-open their economies, there is growing consensus that on-the-spot testing on a massive scale will be required to keep economies open while still protecting the world’s population of nearly 8 billion.
Most notably, this will dramatically speed up the processing time for such tests, which currently take up to 48 hours when they are conducted in a laboratory. Above all else, this ability to screen people will ease the burden on overwhelmed health care facilities, such as hospitals and clinics.
Additionally, such point-of-care testing will prevent infected people from exposing others while they are experiencing the most contagious early stages of COVID-19. For instance, such real-time testing will prove very effective at intercepting them at airports, including people who are asymptomatic. By being able to test, trace and quarantine anyone who is sick, heath authorities should therefore be able to break the chains of transmission.
Both Sona and XPhyto stand to play pivotal roles in the containment of the COVID-19 pandemic and future coronavirus outbreaks. It is too early to assess which of these companies promises to sell the most diagnostic products – assuming they each make it to market. However, both are well positioned to earn massive market share in what will surely prove to be a multi-billion-dollar industry for coronavirus screening devices.
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 also 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, WallStreetOnline.de (Germany) and the Independent (UK). He has also appeared in business interviews on the BBC, CBC, and SKY TV. Marc is also an enthusiastic shareholder of XPhyto Therapeutics.
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