Consumer Led Diagnostics is Coming, Who's Ready?
In my first post on Abingdon Health entitled Abingdon Health - Some Key Thinking, I touched upon the upheaval that the Covid pandemic has and will bring to the point of care testing market. I would now like to delve deeper into this thinking because it plays a significant role in future of companies operating within this sphere such as Abingdon Health (ABDX) and Avacta Group (AVCT).
First a bit of background.
As many already know ABDX is already a manufacturing partner for Avacta Group for their pending AffiDX® SARS-CoV-2 rapid antigen lateral flow test. Assuming that this test delivers on its early promises, it should go on to meet the substantial demand for quality LFTs that currently exists within the global market.
That achievement alone should stand both companies in good stead and provide them with the sort of revenues that can bolster both their future paths significantly. However, as I have discussed many times before on Twitter, the Covid opportunity is about far more than just the front end Covid test market. It is about the long-lasting legacy that this pandemic has created.
In addition to their partnership with Avacta, ABDX is also part of the extended team that is working with a rejuvenated MyHealthCheck Plc. On slide 10 of their latest January 2021 presentation (available here), they provide the following quote from an August Deloitte article entitled ‘Are consumers already living the future of health?'
“The COVID-19 pandemic has turned the healthcare system upside down and challenged consumers' sense of well-being, according to the report. In other words, consumers are taking charge of their health more than ever before”
In the Deloitte article itself, the results of 'The Health Care Consumer Response to COVID-19 Survey' demonstrate the effect that the pandemic has had on consumer behaviour.
"Consumers have increased virtual visits and interactions with health technology and are more willing to share their personal data."
That survey was conducted in March 2020, so very early in the pandemic. Move forward to today and what we are now witnessing is a significant global push towards self-testing, further reinforcing that above thinking and it's a move that is only going to get stronger as more countries shift towards the same approach.
To this, we then need to add the burden that the pandemic has and is continuing to have on governments finances.
government debt-to-GDP in developed markets grew by 21 percentage points.
When this is all over, solutions are going to need to be found to start paying it all back. Tax increases are one avenue but it's no stand-alone solution for sure.
Let's now focus this on the UK. Why? Well, it's a very good example of a government loaded with debt that is heavily affected by its personal commitment to its healthcare system.
Here's the UK 'Healthcare expenditure, UK Health Accounts: 2018.'
"Government-financed healthcare expenditure was £166.7 billion in 2018."
Of course, this is pre-pandemic but it demonstrates the size of the expenditure and the opportunity available.
If we now return to the Debt-to-GDP table above, we see that UK debt has risen by a reported 20% between Q3 2019 and Q3 2020. Whilst there are arguments to be had about the exact figures, there's no denying the direction and the fact that another six-month jump down the line clearly demonstrates to us all that there's much more to come.
Very simple analysis yes but it's about the pattern and it's a clear one.
In the case of the UK, we have substantially more government debt coupled with a creaking health care system, but with an opportunity that an already trained and receptive consumer market can continue to relieve that burden through enhanced self-testing and monitoring.
Here's now an article from Beckton. Dickinson. U.K. Ltd, a global medical technology company, on "How integrated diagnostics will play a key role in the future beyond COVID-19"
"Daily press briefings have highlighted the link between patient safety and rapid access to accurate diagnostics, and have ensured that the public will demand better from the NHS with respect to diagnostics provision in the future, and as the NHS moves towards a ‘re-set’ approach to workload."
They then go on to highlight 5 diagnostic related initiatives that the government could consider. One of which was,
"facilitate direct consumer access to diagnostic services: improve public access to specimen kits, convenient sampling locations and test results to facilitate better personal management of individual health."
The reason I point out this BD article is that they were the central authors to "The UK Diagnostics Industrial Strategy." There they set out the approach needed to build a lasting legacy from the mass mobilization of diagnostics for the Covid pandemic and harness it towards a sustained transformation of the UK health service.
Unfortunately, the document is PDF only and so I can't link it here but it's well worth searching out the Summary version online.
Full title is 'Diagnostics Industrial Strategy 2021 Summary - EN_UK .pdf'
The essence of the paper builds upon the combination of ;
debt burdens and NHS stresses,
the need for a robust UK diagnostic industry that is battle-ready, should another Covid style crisis come along,
post-Brexit UK made in Britain sovereign services and job creation,
a change in the consumer's approach to dealing with their own health.
All of which help deliver a substantial opportunity for the UK government to maintain this drive to expand and support a UK based diagnostics industry.
A move that in turn, builds upon the strategies that we are seeing come from the likes of Abingdon, Avacta and indeed MyHealthCheck Plc.
There is no denying that the continued control of the Covid virus presents a front end opportunity for UK based diagnostic companies, which is currently difficult to steer away from. However, there is a much bigger picture to be seen here, whose surface I have merely tried to scratch here, and it centres around a sustained build-up to a direct to the consumer market.
Such a market is going to require new easy to use diagnostics and a significant UK manufacturing base to support it. The likes of Abingdon Health, MyHealthCheck Plc, Avacta and Omega Diagnostics, have already seen the opportunity and have been attempting to build it out for some time now. What Covid has done is accelerate these companies timelines and in some cases, delivered the necessary funding and market attention that will be required to see the opportunity through.
For now, Covid opportunities will continue to remain the central focus but there's potentially a much bigger story riding on the back of it all, which is worthy of greater attention because it has the ability to shape the futures of these companies, far more than Covid ever will.
Note - This article represents the opinion and research of the author only and the author currently holds a position in one or more of the stocks mentioned. Nothing shared in this article is to be deemed financial advice. Where possible all facts have been checked and references provided, however, it is the responsibility of the reader to check all details for themselves before making any financial decisions. Please also refer to the disclaimer policy