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Regulators keep watch as companies jump on Covid-19 bandwagon

Uma Devi
Uma Devi • 7 min read
Regulators keep watch as companies jump on Covid-19 bandwagon
Healthcare companies are now in the spotlight as the Covid-19 pandemic continues. Listed companies such as Biolidics and Q&M Dental Group have announced their intention to produce Covid-19 test kits. And markets have reacted accordingly.
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SINGAPORE (Apr 30): At the beginning of the Covid-19 outbreak back in January, listed glove-makers experienced a surge in their share price as investors scurried to scoop up these counters.

The day after Singapore declared its first virus case, names such as Top Glove Corp, Riverstone Holdings and UG Healthcare Corp led the top gainers in the market with increases of some 30%, 18% and 52%, respectively, in their share prices.

Four months down the road, the pandemic has shown no signs of easing. Instead, the virus has crossed borders relentlessly, causing panic in countries. This has led to a jump in the number of Covid-19 tests being carried out in these countries on a daily basis.

Singapore, for one, has been increasing its testing capacity on a national level, with more than 8,000 tests being done per day from just 2,900 on April 6. In particular, the government has been focusing on migrant workers living in dormitories, with one in 15 workers having been tested for the virus as at April 27.

Covid-19 test kits

Naturally, healthcare companies are in the spotlight. Listed companies such as Biolidics and Q&M Dental Group have announced their intention to produce Covid-19 test kits. And markets have reacted accordingly.

At end-March, medical technology firm Biolidics launched a rapid test kit which would allow for the detection of the virus within 10 minutes — a far cry from the current tests which require several hours. The company said that it had obtained provisional authorisation from Singapore’s Health Science Authority (HSA) for its rapid test kit to be used here.

On April 22, in response to an SGX RegCo query on unusual share price movement, Biolidics reported that it is in the final stages of negotiations with a potential distributor for the sale of its Covid-19 rapid test kits in the US. It was also reportedly pursuing regulatory authorisation for test kits to be distributed in other jurisdictions such as the Philippines and the EU.

Earlier on April 22, shares in the company surged as much as 54.1% within an hour after the opening bell, reaching 82.7 cents. This triggered the query from the SGX RegCo.

By the midday break, the counter gave up some gains and eased back to 72.5 cents, but was still 35.5% higher. Some 79.7 million shares had changed hands by then, making Biolidics one of the most actively traded counters for the morning. The company requested for a trading halt at 1.09pm, pending the release of an announcement. Biolidics responded to the regulator’s queries in a separate filing after market hours that day, and the potential distribution agreement was announced.

Clearbridge Health, which owns a 24.8% stake in Biolidics via a wholly-owned unit called Clearbridge BSA, enjoyed a lift too. Its share price surged 69.6% within the first hour of trading to 26.8 cents on April 22, and closed 61.4% higher at 25.5 cents at the end of the day.

Q&M in the fray too

Meanwhile, Q&M Dental Group, better known as one of the largest private dental chains in Singapore, has jumped on the Covid-19 bandwagon too. On April 23, it announced it was investing $3 million in a joint venture with scientist Ong Siew Hwa, the sole shareholder and director of local biotech company Acumen Research Laboratories (ARL).

ARL’s Acu-Corona 2.0 Diagnostic test had been given provisional authorisation by HSA, meaning that the test can now be supplied to healthcare institutions, private hospitals, medical clinics and clinical laboratories in Singapore. Accordingly, the counter’s share price gained as much as 57.3%, from 44 cents to 70 cents, that day, but eventually corrected to close at 54 cents.

In an interview with The Edge Singapore, Ng Chin Siau, CEO of Q&M Dental Group, refers to the share price movements as “market gyrations” and says he will not be obsessed with market sentiments. Ng says he had been actively scooping up shares from the beginning of the year when the counter was “unappreciated” by the market. He has since stopped share buybacks as he knew the new joint venture was a “positive development” for the group which would affect its share price accordingly.

Mass screening

Speaking at the same interview, both Ong and Ng say their test kits are “different” from others in that they test for two genes instead of one. This ensures a two-pronged confirmation of the Covid-19 virus, and a more accurate result.

However, they both confirm that the testing of two genes inevitably results in a higher cost, one that they are willing to shoulder in light of the increased accuracy these test kits can provide. “You need to strike a balance between costs and performance,” reasons Ong.

Ng says that Q&M has increasingly become more active and multi-faceted in the battle against the virus. Back in Feb 27, it donated 50,000 surgical masks. It then set up a surgical mask manufacturing company with two Chinese companies in March. On April 27, some 90 Q&M dentists and staff volunteered to help do tests at the workers’ dormitories, where the bulk of the infections in Singapore took place.

Ng says the group has become an “investor in test kits” with the latest joint venture, but this was not the original intention. “I notice that Singapore needs a lot of test kits now.

My original intention was to buy and donate 20,000 test kits, and I was scouring the market for good partners,” he says.

He then chanced upon ARL, which produces what he terms “high-quality” test kits that have seen a demand surge in countries around the world.

“The market is huge, and there’s a place for everyone,” says Ong. “We’re focusing on a full range of delivery, including the manufacturing and clinical testing services, which allow synergies and cost reductions,” she adds.

Regulators’ scrutiny

Even as investors cheer news of the test kits, market regulators have increased their level of caution over the counters concerned. Biolidics, in particular, was subjected to several rounds of queries by SGX RegCo and the retail investors’ activist association, SIAS.

US-based Aytu Biotech, Biolidics’ partner, faces a probe over claims that the company had supplied healthcare providers with test kits from unapproved Chinese manufacturers, and might have breached US securities laws in the process.

The regulator queried the company on matters such as how the decision was made for Aytu to distribute the test kits, as well as the potential financial impact of the investigation on the company.

Biolidics replied that it had been aware of media reports on the probes, but went ahead with the distributorship as it believed Aytu would be a suitable distributor for the test kits after an assessment of its financial standing and track records.

Biolidics averted a query from SIAS pertaining to the additional value it stands to gain from reselling test kits made elsewhere.

The company noted that the information was “commercially sensitive” and therefore if disclosed, may “negatively impact the competitive strength” of the company.

Biolidics was also queried by SIAS over an executive’s remark about commissioning some two million test kits in two months. “[This] was referring to the intended build-up in inventory in anticipation of orders for the test kits and not firm orders,” said Biolidics.

“As such, the company would like to clarify that the statement should not be interpreted as a projection by management,” it added. “The decision on the order volume by the company in the next two months will be dependent on the sales volume as well as availability of capital and human resources.”

Following the response, Biolidics’ shares sank 49% from their all-time high of 88 cents on April 23 to close at 44 cents on April 28.

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