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Chembio Diagnostics Looks to New Tests to Jump-Start COVID-19 Business

NEW YORK ─ Chembio Diagnostics believes the development of new tests for SARS-CoV-2 and launch of an assay for HIV-syphilis coinfection will help put the company back on track following the revocation of an Emergency Use Authorization by the US Food and Drug Administration of its serology test for the coronavirus in June.

On a conference call last week to discuss a 6 percent year-over-year increase in the Hauppauge, New York company's third quarter revenues, Chembio CEO Richard Eberly mapped out a plan for future growth, saying that new tests under development for SARS-CoV-2 detection, including assays for current and past infections, and a test for HIV-syphilis that recently received FDA approval mark "the beginning of our diversification into a higher value point-of-care diagnostic testing systems targeted for use by US customers."

"We intend to build upon our foundation of legacy infectious disease products consisting primarily of sexually transmitted disease and fever and tropical disease tests that are sold in the United States and internationally," Eberly said.

The submission of new EUA applications for its DPP SARS-CoV-2 IgM/IgG test system and DPP SARS-CoV-2 Antigen test system provides a basis for altering its "business model and focusing on a more diverse set of customers," Eberly said.

Chembio believes antibody tests will play a large part in the introduction of vaccines for COVID-19 and the evaluation of individuals' responses to vaccines, as well as in determining the overall exposure of people to SARS-CoV-2, the virus that causes the disease. 

Meantime, rapid antigen testing has become "the method of choice for evaluating patients in the US, as illustrated by the US government's purchase of 150 million tests from a single manufacturer," Eberly added, referring to Abbott.

Chembio does not have an anticipated timeline for when it might receive new EUAs from the FDA, however. The FDA is working through a large number of EUA applications, Eberly said. "Our hope is that the review process will speed up and we'll be able to get our applications reviewed and approved in the very near future."

For the firm, Q3 represented a quarter in which it tried to right the ship following FDA's revocation of an EUA issued previously to the company's DPP COVID-19 IgM/IgG test. On the call, Eberly attributed the revocation to a new methodology implemented by the FDA for evaluating antibody tests. "The results of that change triggered the revocation of the EUA for our antibody test," he said, adding the test had been "well-received by customers and generated significant sales."

For FDA's part, it said in its revocation letter that "data submitted by Chembio as well as an independent evaluation of the Chembio test at NCI showed that this test generates a higher than expected rate of false results and higher than that reflected in the authorized labeling for the device."

Eberly said on Thursday that the firm took "immediate action" following the EUA revocation and began designing "a new antibody test with the FDA's new evaluation methodology as a guide and a growing body of knowledge of how the virus interacts with our technology."

The firm submitted an EUA application at the beginning of September for its new antibody test, named the DPP SARS-COV-2 IgM/IgG test system, to detect antibodies to the spike receptor binding domain of the SARS-CoV-2 virus. "It is a multiplex test that combined with a micro reader provides two objective numerical results, detecting both IgM and IgG antibodies independently from a fingerstick blood sample in just 15 minutes," Eberly said.

Chembio CFO Neil Goldman said on the conference call that in the third quarter, the company had a higher concentration of product sales in countries with lower average selling prices. "Product sales in the US, where we have our highest average selling prices, were only 3.5 percent of net product sales during the third quarter of 2020 compared to 16.8 percent in the prior-year period," he said. The reduction in US sales was due to the FDA revocation and the impact of the pandemic on demand for HIV tests, he added.

Additionally, the company experienced operational inefficiencies during Q3, including those triggered by the recall of products stemming from losing the EUA. The inefficiencies involved shifts in product manufacturing schedules and  "activities related to qualifying automated manufacturing lines," Goldman said.

Eberly said he believes that, nonetheless, its new COVID-19 tests will "enable clinicians to address the needs of a broader patient population throughout all phases of the pandemic."

Until now, the company has been targeting family health clinics for sales of its HIV tests in the US, while it has focused on providing infectious disease tests, including for HIV, to governments and non-governmental organizations (NGOs) internationally, Eberly said.

Its new SARS-CoV-2 tests, he added, are suited to a range of healthcare settings, including city and state health departments, emergency rooms, hospital labs, medical clinics, physician offices, urgent care centers, nursing homes, and skilled nursing facilities.

"The most effective and efficient strategy for driving growth is ensuring we can address each of these markets," Eberly said.

The company plans to use direct sales and distributors to address those markets. It hired additional sales, marketing, and customer service employees, and has strengthened relationships with distributors, Eberly said. In May, the point-of-care test developer inked a multiyear, non‑exclusive deal with Thermo Fisher Scientific’s Fisher Healthcare business to distribute Chembio’s DPP COVID-19 System in the US.

HIV-syphilis testing

As it awaits an FDA decision on its new SARS-CoV-2 tests, Chembio is launching its rapid DPP HIV-Syphilis test, which received premarket approval from the FDA in October, and the company expects to book revenues for it in Q4.

The test ­consists of a multiplex DPP HIV-Syphilis assay and the DPP Micro Reader optical analyzer. For the test, Chembio is also doing direct sales and working with "distributors to pursue the approximately 15,000 physician office labs, hospital labs, and clinical labs with a moderately complex certificate," Eberly said.

"The market dynamics are such that the combination of HIV and syphilis testing has been talked about for a long time," and approval took two years, Eberly said.

The firm is further planning to pursue CLIA waivers that would enable it to expand the types of settings permitted to conduct the HIV-syphilis test and SARS-CoV-2 antigen test, he said.

"In the future, we envision an installed base of [customers] that have micro reader analyzers and can select from a portfolio of DPP assays that could include detection of other biomarkers, including respiratory, gastroenterology, and neurological conditions," Eberly said.