It’s one of those words that have taken on very different meanings these past few months.
It used to be a familiar word in my past life as a chemical engineer where I did plenty of “testing.” Testing chemicals for purity. Testing plant equipment to make sure it met specifications – which – also tested the patience of my co-workers…
Like parents all over the country, I helped my children study for their “tests,” and have passed a fair few myself.
And before I go full bore with any new trading strategy, I “test” the system rules in real-life, real-money conditions.
Nowadays, you hear anyone say “testing” and you know instantly that they don’t mean any of that. They mean “testing for COVID-19.” It’s a crucial step toward protecting healthcare workers, meat packers, checkout clerks, and other front-line workers. It’s also an essential component in all of the many plans for how to restart our economy.
More testing is what we desperately need as a nation. Unfortunately, we have done a poor job of testing at many stages during this pandemic. Maybe we shouldn’t be surprised that there’s a lot of confusion around what “testing” is, what it could do for us, why we still don’t have enough of it, and so on.
Let’s clear up some of these misconceptions today – and look at two great recovery stock plays at the same time…
Exactly What Are We Testing?
The new coronavirus first started spreading between humans in Wuhan, China sometime in November of last year and has been officially labeled “SARS-CoV-2.” You may also have seen its provisional name from earlier this year thrown about: “2019-nCoV.” Researchers, scientists, some public health officials, and some test manufacturers regularly use these two variations of the moniker for the virus.
Of course, SARS-CoV-2 doesn’t exactly roll off the tongue. Instead, “COVID-19” or just “Covid” has caught on as the name of the invisible bug that’s stalking the globe right now. Remember that strictly speaking, “COVID-19” is the name of the disease that the SARS-CoV-2 virus can cause in people.
The difference between the two is like the difference between HIV and AIDS. HIV and SARS-CoV-2 are both viruses. When these viruses infect people and their immune systems or medicine are unable to stop the infection early enough, the viruses make people sick. In the case of HIV, we call that sickness “AIDS.” In the case of the SARS-CoV-2 virus, we call the sickness “COVID-19”.
When we talk about “testing” right now, we mean testing for signs that the SARS-CoV-2 virus has infected someone. As you’ll see below, however, some newer tests instead look for signs that someone has in the past been infected with SARS-CoV-2.
Understand that we don’t test for the conditions of COVID-19. If you have severe COVID-19, you’ll know because the symptoms are hard to miss: fever, pains, severe difficulty breathing, and so on. Milder cases of COVID-19 are easier to mistake for a common cold or mild flu. In any event, the point of testing is to help limit the spread of the virus, so we test for the virus.
SARS-CoV-2 and COVID-19 – Why The Difference Matters
This pandemic has spread far and fast across the globe. The numbers that describe this spread are stunning. How did this happen? Most people who are infected by SARS-CoV-2 develop COVID-19 days later or weeks later – if they get any symptoms at all. Even without any fever, dry cough, breathing trouble, loss of smell, and the other symptoms that make up the COVID-19 disease, asymptomatic people still actively spread the SARS-CoV-2 virus to others. Asking people who feel bad to stay home is simply not enough to stop the spread of the virus. By the time people start feeling bad – that is if they ever do – they may have been spreading the virus for days or weeks.
As a result, a lot of confusion has surrounded the issue of COVID-19, children, and younger adults. A lot of talk about people under 50 “not being at risk” and “not getting sick” is wrong. While rates of hospitalization and mortality rates increase significantly with age, let’s be very clear – young and middle-aged adults are getting severe COVID-19 symptoms. In many tragic cases, younger adults have died from it.
For those of you out there thinking you are young and don’t have to practice social distancing, hear this well — people under 50 are just as likely to catch the SARS-CoV-2 virus and spread it. Younger people may actually be more likely to catch and spread the virus as they tend to meet with more people in their ordinary life than older people. In any event, younger people are still a chain in the transmission of the virus.
Importantly for every age group, we have no scientific explanation for why some don’t get symptoms and others get severe symptoms. And yes, physically fit people are also getting sick and dying from this virus. Remember, even if you don’t ever show any symptoms, you can spread the virus to someone who will get sick.
Why Testing for SARS-CoV-2 Is So Important
To save lives and return to anything resembling normal life prior to this pandemic, we will need to break the chain of SARS-CoV-2 transmission. We can break that chain by isolating people infected with the SARS-CoV-2 virus from those who don’t have it. This looks like the best plan currently. Why? Isolating every sick person does nothing about all of the people who catch the virus, show no symptoms, and keep spreading it. We will have to perform mass testing of as many people as possible. Then, we will have to repeat these tests frequently as long as the virus keeps spreading to catch new outbreaks.
Mass testing, isolation, treatment of the infected, tracing, and testing everyone they’ve met will eventually stop the virus from jumping from person to person. That’s what South Korea and especially Taiwan did, and is also that’s worked well in Australia and New Zealand.
OK, so how do these SARS-CoV-2 tests work?
Almost all the tests we currently use in America look for active SARS-CoV-2 infection and use variations of a technology called polymerase chain reaction (PCR), a mainstay of biological research. American chemist Kary Mullis invented the technology in 1983 and 10 years later, he shared the Noble Prize in Chemistry for this discovery.
The process starts with swabbing a person’s nose, throat, or mouth. For full accuracy, the nasal swab should be taken from all the way back in the person’s nose where it meets the throat. As you can imagine, people describe this swabbing as “uncomfortable” at the least. In addition, swabbing also puts at risk the person administering the test. Something touching the back of anyone’s nose or throat will often cause them to cough or sneeze – right at the person holding the swab.
After the sample has been gathered, the testing process has multiple steps. First, the swab is treated to make it safe for the transport back to the lab. The preservation solution also kills any viruses and bacteria that may be in the sample. At the lab, two sets of reagents are added to the sample and it’s inserted into a PCR machine. These machines can handle many samples at once but can take hours to days to finish their work. The reagents do all of the heavy lifting and without going into too much detail, here are the basics of what they do:
- They turn the genetic code of the SARS-CoV-2 virus from RNA into the easier-to-work-with DNA.
- They split that DNA open.
- They bind to a bit of that DNA that the test maker has identified as being unique to SARS-CoV-2.
- They make millions and millions of copies of just that bit of DNA.
Once the sample has run out of reagents and DNA, the process stops. If the SARS-CoV-2 virus was present, the sample will be now absolutely chock-full of the targeted bit of DNA and contain little else. This can easily be determined with a variety of quick methods. The test takes time as all of these steps have to be done in the right order. So the reagents chosen for each step only work at very specific temperatures. That’s where the PCR machine comes in – it heats and cools the samples at the appropriate times.
Is That The Only Test?
No. You may have heard of some newer processes called “antibody tests.” Instead of testing for the presence of the SARS-CoV-2 virus, these tests look at the antibodies in a person’s blood. If someone has been infected with the SARS-CoV-2 virus in the past and fought it off, then their body will have produced antibodies that defeated the virus. In theory, now the person is immune to the virus.
Roche Holding AG (RHHBY), received FDA authorization for an antibody test on Monday, May 4. Many are hoping these antibody tests will tell us who has them and so we know they are immune to SARS-CoV-2. These people should, in theory, be able to go back to work without risk of getting infected and spreading the virus. As a side note, the Cleveland Clinic reports that Roche also makes one of the most accurate PCR tests for SARS-CoV-2.
There is much, we still don’t know here. For one, SARS-CoV-2 is very similar in many ways to some other coronaviruses which cause common colds. Early antibody test prototypes often mistook antibodies against the common cold for antibodies against SARS-CoV-2.
Moreover, we don’t know how long these antibodies will last. If the antibodies for SARS-SoV-2 fade along with the immunity after a few months, as happens with the common cold coronaviruses, then these antibody tests will be only a temporary solution.
To make matters worse, early research suggests that even for survivors of severe COVID-19, the amount of antibodies against SARS-CoV-2 varies a lot from person to person. We don’t know yet if that means some people are immune and some are not, or whether some will stay immune for longer, and so on.
Can’t We All Just Get Tested for SARS-CoV-2 Now?
Unfortunately, there are limitations and bottlenecks to almost every step of the PCR tests.
For example, the PCR process is prone to errors and contamination. That’s why the accuracy of tests varies quite widely from manufacturer to manufacturer, as well as based on how the swab is taken.
According to Dr. Alan Wells, a professor of pathology at the University of Pittsburgh, current tests “miss a number of patients – anywhere from 5% to 30%” depending on the test. That number is going to have to come down to make mass testing truly effective.
Beyond those limitations, some research suggests that the SARS-CoV-2 virus moves from the nose and throat down to the lungs about a week after infection, which is why nasal swabs may not show a sign of the virus despite people clearly having COVID-19. This limits the accuracy of the test.
Then there’s the problem of compatibility. Every test manufacturer makes their test with slightly different reagents that may be certified to work at slightly different temperatures in different PCR machines. Different labs have PCR machines from different companies so only some tests can be analyzed in some labs. And because the temperatures required may be different, test samples from some manufacturers may not be able to be analyzed at the same time as tests from another manufacturer.
Shipping these tests from the testing site back to a lab for processing also takes time. Not to mention that we simply have too few lab technicians, lab equipment, or lab space to do PCR tests on every American. Dr. Deborah Birx of the White House Coronavirus Task Force said bluntly on April 17 “There will never be the ability for a [PCR] test to do 300 million tests a day or to test everybody before they go to work or to school.”
Finally, as every country in the world is ramping up testing right now, there is a huge shortage already and demand is only growing for the test reagents. Even the test swabs are in short supply. As many of these items are sourced from China, shipments have been slow, delayed, and the quality has been questionable sometimes.
What’s the Difference Between All the Active Infection Tests?
As discussed, the tests all differ in terms of what equipment they can run on, what reagents are used, what temperatures they need, and how long the full process takes. Test processing time can range from hours and days, down to just minutes in one particular type of test you may have heard about.
The test that takes only minutes is the ID NOW test made by Abbott Laboratories (ABT). Using an advanced variant of the PCR technique, this technique runs at a constant temperature which enables quick, easy tests in a small machine. In fact, the ID NOW machine weighs just 6.6 pounds and is about the size of a toaster. The machine tells you in five minutes if your sample has the virus and takes thirteen minutes to return a negative result. This means these ID NOW tests by Abbott can be analyzed while you wait. This is a game-changer and makes Abbott a leader in testing for SARS-CoV-2 right now.
Can’t Everyone Just Get The 5-minute Test?
Abbott’s five-minute ID NOW test is most famously used at the White House, where President Trump and staff around him are regularly tested for SARS-CoV-2. Unfortunately, the 5-minute test only works on Abbott’s toaster-sized machines. The company says it’s performing 50,000 tests a day on the ID NOW platform, but to scale this up for mass testing the American population, we would need hundreds of thousands of the machines, and many more test kits.
There’s also a concern that the higher speed comes with lower accuracy. In the Cleveland Clinic’s testing, the Abbott ID NOW platform only detected the SARS-CoV-2 virus in 85.2% of infected samples. That’s below the 95% golden standard for testing. For comparison, the CDC’s test was 100% accurate, Roche’s test was 96.5% accurate, and Cepheid’s 45-minute test was 98.2% accurate.
Now, Abbot disputes these results because the Cleveland Clinic stored the samples in transporting liquid first, rather than inserting them into the machine directly. Clearly, we need more research on whether that affects results. Abbott announced that the FDA has approved new instructions so that transporting liquid is not used. We don’t yet have independent tests of the accuracy levels with the new instruction set. In the meantime, the speed and convenience of the Abbott test is likely to make it a front-runner until a new technology comes to solve the many problems of PCR-based testing.
I like Abbot’s stock (ABT) and that of Danaher Corp. (DHR), the parent company of test-maker Cephid. I believe they will both be winners in a world where everyday testing becomes routine in the near future.
Remember to send me your thoughts on this article and any other “I wonder if that’s true” issues to drbarton “at” vantharp.com.
Great trading, stay safe out there, and God bless you,