Atomo Diagnostics (ASX:AT1): Not just another Rapid Diagnostic (RDT) company

Atomo Diagnostics (ASX:AT1) may be written off by some investors just because it is a rapid test kit company. Yes, we know rapid COVID tests were a booming market during the pandemic, but demand is well off all time highs – and indeed, the company no longer performs COVID testing. But there was, is and will be far better market opportunities for Atomo. And even though its share price has lagged, it is a better company than it was pre-pandemic.

Why Atomo Diagnostics is on to something special

Atomo has technology that makes Rapid Diagnostic Tests (RDTs) easy to use without errors common with existing formats. Its traditional focus has been HIV/AIDs test kits and to that end, it has the only TGA-approved kit. Since commercialisation, the company has gained approval in over 40 countries and sold 7m. Its annual revenues have jumped from $500k to $4m today.

Source: Company

They are easy to use in centralised and decentralised settings alike, produce fast results (within 3 minutes), are easy to obtain and are affordable. They reduce common errors by around 90% when compared with multi-component kit formats. They are finger-prick blood tests and look for biomarkers that may indicate the presence of HIV. 

You might think there’s less of a need for HIV testing today because it is less prevalent and less of a problem. This isn’t true. In 2023, there were 1.3m that acquired HIV and 40m had HIV. Although there are diagnostics available like Pre-Exposure Prophylaxis (PrEP), there is still a need for testing to see if people have it or not.

Atomo reckons there are 3m tests used in Australia per annum, and there is opportunity for growth in countries where self-testing is less common. There have been plenty of initiatives at home and abroad to promote the adoption of self-testing kits. These include the NSW government and UK governments providing rapid test kits to the public.

Other opportunities

But HIV testing is the tip of the iceberg for Atomo. We noted that the company’s foray into COVID-19 test kits was brief, but it was not all for nothing. It enabled the company to show its platform could be adapted for other health emergencies. More importantly, the pandemic established the viability and acceptability of home-based self-testing as a key pillar of public and consumer health in the future.

Atomo has its eyes on several markets, particularly syphillis and pregnancy tests. Although the first of these indications will likely take some time for the company to enter, Atomo has a version of the test that is approved in Europe, the UK and Brazil.

Many investors may not know this, but Atomo has a partnership with Lumos Diagnostics (ASX:LDX). Lumos’ FebriDx finger-prick blood test is enabled by Atomo’s Lumos platform. The test is the only rapid, all-in-one point-of-care test in the world that can distinguish a clinically significant acute respiratory infection (ARI) and differentiate viral from bacterial infections.

Beyond being a revenue opportunity for Atomo, the collaboration with Lumos provides a predicate device for future 510(k) approvals in the US market. This means Atomo‘s or partner‘s own tests could have a reduced pathway to market by demonstrating that the usability is substantially equivalent to FebriDx. It is no guarantee that Atomo will take this path or that it will succeed in proving substantial equivalence to the FDA, but its task is less complicated and less expensive than if had to seek approval for its own tests. 

Atomo is making progress

Atomo is experiencing improved financial health with substantially growing revenues. Sales have improved from $500k to >$4m in the last 5 financial years and rose 60% in FY24 compared to FY23. The company is also improving its bottom line, having implemented measures over the last 18 months, resulting in a 30% reduction in underlying business costs.

We see potential for Atomo to re-rate from current levels as this progress continues, and as it commercialised its tests for other indications. Our friends at Pitt Street Research released a report this morning valuing the company at $0.10-0.143 per share. Readers should check out Pitt Street’s report for further details on the company.

We think it is destined for good times over the next 2-3 years!

Atomo is a research client of Pitt Street Research. Pitt Street directors own shares. 

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