Why the Atomo Diagnostics (ASX:AT1) share price has rallied 15% today

Shares in the medical devices company are on the rise again. Here are the details

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The Atomo Diagnostics Ltd (ASX: AT1) share price has soared into the green during afternoon trade on Thursday.

Atomo shares are now changing hands at 33 cents apiece, a 15.79% jump from the open. This comes despite no market-sensitive news today.

Let's dive in to see what's fuelling the Atomo Diagnostics share price.

A quick refresher on Atomo Diagnostics' position

Atomo is a medical devices company that supplies rapid antigen tests (RATs) to the clinical diagnostics market.

Atomo has been supplying its own RAT for COVID-19 to Australian businesses in order to gain traction. However, it has received little support from the Australian government, which prefers the PCR pathology test.

Just a side note – Atomo's RAT isn't trying to replace laboratory tests, like the PCR version. But experts say RATs lend a better speed and rate of testing the masses than the current state-backed testing regime.

This is especially true as the Delta outbreak has quashed Australia's dreams of reaching a zero-COVID utopia. Instead, the complexity of lockdowns, lengthy pathology test result times, and vaccine rollouts have plugged the speed of Australia's COVID-19 recovery.

In comes the demand for rapid antigen testing

Various sources have voiced their concern about the turnaround times of pathology testing for COVID-19.

However, the federal government is concerned about the accuracy of RATs, versus the conventional PCR test regime that can take several days to turn around results. For comparison, Atomo's RATs can deliver results in 10 minutes.

Considering where Australia now stands with its "road to recovery" plan from COVID-19, it starts to make sense why Atomo's rapid testing protocol is an attractive proposition for businesses.

And given it is one of the only ASX-listed companies with a track record of producing rapid antigen testing for COVID-19, it starts to make sense why the Atomo Diagnostics share price could benefit from a surge in testing demand.

One roadblock to the full adoption of rapid testing is that the government fully subsidises PCR testing, but not rapid testing. Some say this creates a cost issue.

Although, Atomo has already supplied its CareStart EZ COVID-19 test to a number of agencies, such as the Olympic team and aged care facilities, and even for free in some instances.

What next for Atomo Diagnostics?

Currently, the company is manufacturing inventory in the US, after its COVID-19 rapid tests received regulatory approval there.

In fact, Atomo can "bring in up to a million tests a week" to Australia if the demand is there, the company's CEO John Kelly told The Australian yesterday.

"It depends on how extensive the rollout is and what government policies now start to appear on deployments outside corporates," Kelly said.

"We are about to roll out a program to offer testing to smaller businesses that want to reopen…They can register and get trained onsite and then set up their own staff testing protocols under telehealth supervision."

The Atomo Diagnostics share price has climbed 47% over the last week. This coincides with the NSW Government's pandemic rollback and "freedoms" announcements.

Logically, demand for COVID-19 tests will no doubt be high over the entire "reopening" as risk mitigation.

Atomo Diagnostics share price snapshot

The Atomo Diagnostics share price has posted a return of around 6% since January 1. Aside from this, Atomo Diagnostics' shares are down 11% over the past 12 months.

Both of these results have lagged the S&P/ASX 200 index (ASX: XJO)'s gain of around 25% over the past year.

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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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