Covid-19 Testing Could Be a Viable Long-Term Business Bet

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With slow vaccination rates threatening the likelihood of herd immunity, companies and federal and state governments are pouring billions of dollars into a future in which Covid-19 testing remains a key component for resuming normal life in the U.S.

Public-health officials increasingly expect pockets of America will remain largely unvaccinated. That has businesses and health officials counting on testing as a means for controlling the virus.

Test developers including

Abbott Laboratories,

the University of Illinois and Mount Sinai Hospital in New York have been testing their own employees and students to prove that—short of herd immunity—frequent testing can allow for the safe return to work and school. So far, they have sold tests to companies and organizations like

Archer-Daniels-Midland Co.

,

Toyota Motor Corp.’s

manufacturing plant in Lexington, Ky., Amy’s Kitchen Inc.,

Bloom Energy Corp.

and Argonne National Laboratory, as well as universities and public schools.

Abbott has done more than a million tests on its own employees—and says the testing has helped it stave off outbreaks, even before vaccinations began.

Testing nationwide has declined as the U.S. vaccination campaign has picked up speed, and the pace of testing isn’t expected to return to pandemic peaks. But many predict Covid-19 tests will continue to be a sustainable business, because they remain critical for people who have symptoms, who are unvaccinated or who are in outbreak situations, public-health experts say.

Developers are competing to bring test costs down and to convince businesses that testing can keep children in school and employees in offices. Abbott Chief Executive Officer

Robert Ford

said the company is making a bet that testing will be crucial even beyond the phase of widespread vaccination.

“To think about buying these tests and providing them free of charge to your employees is definitely a way to kind of augment your strategy of bringing everybody back and opening up,” he said at a CNBC conference in May.

Abbott has developed 12 Covid-19 tests, including an at-home, over-the-counter test approved in March, and it spent hundreds of millions of dollars in 2020 building two manufacturing plants.

An Abbott employee registered for Covid-19 testing; Abbott screens employees once or twice a week.

Mr. Ford last week projected Abbott’s Covid-19 testing sales this year would reach between $4 billion and $4.5 billion, up from $3.9 billion in 2020. Abbott’s overall sales in 2020 were $34.6 billion.

Abbott hasn’t given longer-term forecasts, but UBS Securities analysts project the company’s Covid-19 test sales would shrink to $455 million in 2022 and $298 million in 2023—numbers they deemed comparable to the sales of a large player in flu testing during a strong flu season.

Abbott also is pitching its own screening program as a showcase for customers. Employees are screened one or two times a week with antigen tests that produce results in minutes and without lab equipment. This lowers costs to $5 a test, compared with more than $100 for a lab-based test, allowing for more frequent testing.

Abbott has conducted more than a million tests on its employees and says it has managed to stave off outbreaks, even before vaccinations began, through its testing program. The company has a positivity rate of less than 0.5% globally, both pre- and post-vaccination.

The company’s antigen tests, which search for viral proteins, are less sensitive than tests that require a lab, such as PCR, or polymerase chain reaction, tests that search for the virus’s genetic code. Manufacturers, however, say antigen tests can catch individuals just before they become infectious.

Abbott also has modified office conditions, including using weekly color-coding to indicate who is working in the office and who is remote.

Abbott’s sales pitch got much harder last month when the U.S. Centers for Disease Control and Prevention said vaccinated individuals don’t need to undergo regular testing. Abbott this week lowered its 2021 earnings guidance to between $4.30 and $4.50 a share, down from $5 a share, citing lower projections for Covid-19 testing. Declining cases and increased vaccination rates contributed to the revision, the company said.

The seven-day average of daily new molecular tests—which are mostly PCR—was just over 814,000 for the week ending in May 27, according to CDC data, a drop of 11.2% from the prior week and well below the peak of more than two million a day during the fall and winter last year. There is no national data set on the number of daily antigen tests.

Many businesses are still wrestling with whether to implement testing programs, said Dr. Mary Kay O’Neill, partner and clinical-services consultant at human-resources consulting firm Mercer LLC. Concerns range from the inconveniences and costs associated with setting up a screening program, to skepticism about testing’s usefulness given rising vaccination rates.

“We’ve had this explosion of test types and vendors that are able to do testing, and we’ve evolved to self-testing protocols and rapid testing,” she said. “But testing hasn’t been extremely prevalent” so far among business clients, she said.

Indoor dining, workout classes, concerts. These once commonplace events are coming back into daily life. But because of Covid-19, everyone now has a different level of comfort. What happens in the brain as we decide what’s risky or not? Photo illustration: Laura Kammermann

Billionaire investor William Ackman is one believer that testing is here to stay. His Pershing Square Foundation is helping to bankroll Mount Sinai’s Covid Lab initiative, which is working to provide saliva-based PCR tests that can be rolled out in public schools for $20 to $25 a test, subsidized by sales of tests to corporations. “The idea is to make a profit on the private sector and use the funds to fund the schools,” Mr. Ackman said.

The foundation is providing $20 million to help convert an old lab at Mount Sinai into a Covid-19 testing center that can process 100,000 tests a day.

In Illinois, the University of Illinois system ran nearly 2.5 million tests of its students and employees, using saliva-based PCR tests it developed in-house, to help prove that testing works.

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Through its nonprofit arm, Shield Illinois, the university system received hundreds of millions of federal dollars to provide testing at universities, colleges, high schools and middle schools at low or no cost. In March, the Biden administration announced that $10 billion from the American Rescue Plan, which provides emergency Covid-19 relief, would be allocated for Covid-19 screening in schools.

Through a for-profit venture called Shield T3, the University of Illinois system now has mobile labs running in four states and Washington, D.C., where it charges corporations about $30 a test, lowering costs by centralizing labs around pockets of demand.

“If you got 85% of people vaccinated, testing would become less and less relevant,” said

Bill Jackson,

Shield T3’s principal officer. “But in some areas you’ll be in the 40% range, so all of a sudden you’ll have to do testing.”

Explore Covid-19 Testing

Dig deeper with articles curated by editors at The Wall Street Journal.

Write to Julie Wernau at Julie.Wernau@wsj.com

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