While small cap shareholders have become accustomed to major share price gains once a medtech or biotech receives FDA approval to commercialise their products, it’s not all sunshine and rainbows on the FDA horizon as Lumos Diagnostics (ASX: LDX) has found, following the rejection of their FebriDx test kits. 

As a rapid diagnostic test that can be completed within 10 minutes, FebriDx utilises biomarker technology to differentiate bacterial infections from viral infections. With COVID-19 being a virus, the intended aim of FebriDx was to eliminate COVID when patients instead presented with bacterial infections that could be treated with antibiotics. 

But despite the test being approved for sale in Europe, the folk at the US Food and Drug Administration (FDA) knocked back Lumos’ application citing concerns of false-positive results that could lead to missed opportunities to treat COVID-19 or contribute to further spreading of the virus. 

“Clearly this was not the outcome that the Company was seeking and this decision from the FDA is a significant disappointment for Lumos,” said Lumos Diagnostics CEO, Doug Ward. 

“The U.S. launch of FebriDx was a key component of Lumos’ future commercial plans. I will be actively working with our regulatory team and advisors to review this feedback and to develop a revised commercial plan for Lumos to incorporate this unexpected development.” 

Upon release of the FDA application outcome, LDX shares plunged to an all-time low of $0.057 per share, a 65% single-day decline from their previous $0.165 close. 

With a variety of diagnostic kits that saw major uplift in sales through the peak of the pandemic, LDX shares traded as high as $1.32 just 12 months ago as its test kits had been racking up regulatory approvals in Europe, Canada, UAE, Brazil and Australia. 

Although COVID cases in the United States are still raging with about 20,000 new cases confirmed daily, the nation has substantially relaxed its restrictions and is effectively learning to live with the virus. With approximately 67.5% of the nation fully vaccinated, the US is trending above the global rate of 62%. 

Ward remains steadfast in the value FebriDx can play in reducing the spread of COVID infections which is why Lumos has flagged plans to appeal the FDA decision, likely bringing with it further expenses to be added to the failed FDA application to date. 

As the rest of the world has started to live with COVID in their communities, sales have been on the decline for Lumos which reported USD $5.2 million for the 6 months ended 31 December 2021. This was down on the $8.4m reporting for the same previous corresponding half-year. 

Having capitalised on the need for rapid diagnostic test kits at the height of the pandemic when listing publicly on the ASX in July 2021 after raising $63 million at a $1.25 Offer Price, the FDA application outcome certainly isn’t the first false positive provided by Lumos.