Here's why Ellume is making big news today

The Brisbane-based Ellume has reportedly developed a highly effective COVID-19 test which has just gotten approval from the FDA.

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Ellume, a small Brisbane-based private biotech company, is in the news today. And for good reason – Ellume has just received an endorsement from the all-powerful United States Food and Drug Administration (FDA).

According to reporting in The Australian today, Ellume has been working on rapid diagnostic technology over the past 10 years and has developed a test for COVID-19 infection. This test, which costs around US$30 and can reportedly detect traces of coronavirus within 20 minutes, is apparently bound for America. The test has a 94% "sensitivity" for detecting the virus. It is also 96% effective for identifying negative cases. Those statistics are according to clinical trials of the test.

The Australian reports that, following endorsement from the FDA, Ellume is about to send "more than 100,000 of its tests" to the United States, beginning "at the start of next month". Ellume plans on delivering more than 5 million tests each month to the United States by March next year.

Ellume in FDA spotlight

The FDA is often touted as one of the strictest pharmaceutical regulators in the word. It has called Ellume's test a "major milestone in diagnostic testing for COVID-19".

The report quotes FDA commissioner Dr. Stephen M. Hahn on Ellume's approval:

By authorising a test for over-the-counter use, the FDA allows it to be sold in places like drug stores… A patient can buy it, swab their nose, run the test and find the results in as little as 20 minutes…

As we continue to authorise additional [Ellume] tests for home use, we are helping expand Americans' access to testing, reducing the burden on laboratories and test supplies, and giving Americans more testing options from the comfort of their own home.

The US government has reportedly "injected" US$40 million into Ellume to assist with this process and accelerate production of the testing kits. According to Ellume chief executive Dr. Sean Parsons, this money is going towards adding "50 people a week to [Ellume's] 250-person workforce".

Dr. Parsons also told The Australian the company expects this development to "generate an expected 20-fold increase in revenue for Ellume".

Even though the US Government has given Ellume the green light, there are no signs that our Australian Government will follow suit. As such, it seems we will have to wait a lot longer than the Americans for access to this technology.

This positive development for Ellume could also explain why some ASX biotech shares, such as Memphasys Ltd (ASX: MEM), are performing well today. It's certainly a good news story for a small Aussie company.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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