Interactive Investor

Novacyt: how the share price rose 18,000% in one year

Novacyt stocks are up 18,000% in a year, while Genedrive’s have risen 3,000 between March and May.

22nd October 2020 15:14

Graeme Evans from interactive investor

Novacyt stocks are up 18,000% in a year, while Genedrive’s have risen 3,000 between March and May.

Novacyt (LSE:NCYT) investors checking on the Covid-19 testing firm could be forgiven for their double-take today after the remarkable AIM-listed stock shot through the £10 barrier for the first time.

The latest 15% surge to 1,135p means that shares have soared 8,000% this year and are double the initial peak seen in April when investors first bought into the company's pandemic potential.

It also means a modest £140 spent on 1,000 Novacyt shares in January is now worth £11,350. If you go back a year to 22 October 2019, Novacyt shares were trading at around 6p, giving a 12-month gain of over 18,000%.

At one point in June they drifted back to 200p, but those who stayed aboard have been handsomely rewarded for holding their nerve as Novacyt has used the cash flows generated from Covid-19 testing kits to strengthen its position across the diagnostics market.

The move announced on 15 October certainly re-ignited the buying frenzy around Novacyt, given that shares had been trading near 830p the previous day. The renewed interest also came in the wake of the UK Department of Health's second major contract award to the company's Southampton-based molecular diagnostics division Primerdesign.

The first phase, which will involve the deployment of 300 polymerase chain reaction instruments for use in the rapid testing of NHS patients, is worth a minimum £150 million over 14 weeks. A second phase could be worth a further £100 million, depending on demand.

The contract compares with Novacyt's €72.4 million (£65.9 million) of revenues in the first six months of the year and the company's initial hopes to exceed 150 million (£136.5 million) across the whole year. It is now selling its Covid-19 testing equipment in more than 100 countries, with manufacturing capacity being ramped up to meet demand.

Novacyt is now worth almost £800 million based on today's share price rise. It had been trading at 7p a year ago, with the shares still only 14p in January before its rapid work on a new coronavirus test made it one of the most-bought stocks on the interactive investor platform.

Genedrive (LSE:GDR) is another Covid-19 testing firm where investors have seen explosive growth in its valuation, with the Manchester-based company up 3,000% between March and May.

The AIM-traded stock peaked at 222p before drifting to 67p in July and now stands at 105p after a fall of 7% today. The sell-off came despite Genedrive revealing progress in a new point-of-care (POC) solution to detect the Covid-19 virus in saliva.

This allows for rapid testing to be performed while a patient is present, with the POC detecting a positive sample in approximately 15 minutes, with fully negative samples taking just over 20 minutes to resolve.

The company is targeting the end of the year for completion of its preliminary product evaluations, with full release of the final CE-marked system in the first quarter.

CEO David Budd said: "Rapid testing for current infection is a cornerstone to any track and trace programme, to quickly accessing current infection, to limiting infection, and to giving assurance to people concerned about their status.

“We believe the Genedrive POC solution can contribute significantly to the ongoing management of this global health crisis.”

Genedrive's focus is on clinically verified assays that are easy to use and can be manufactured and delivered in high volume. The company's other tests include a field-deployed bio-warfare testing system for the US Department of Defence, as well as an assay for screening children for a genetic defect causing life-long deafness from certain antibiotics.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.