Health investors raise the stakes as Omicron spreads

The emergence of the Omicron variant of Covid-19 is the new rising tide lifting the value of some health stocks as investors rush to cash in.

Long queues for Covid testing, like the one at a clinic at Ultimo in Sydney on Thursday are a common sight, leading to soaring demand for home test kits. Picture: Richard Dobson

A speeding ticket issued to one ASX-listed health stock is indicative of the rising tide of investor interest in businesses that may have a role in the management of Omicron, the newest Covid-19 variant discovered over a month ago.

Shares in rapid test maker Atomo Diagnostics surged 37 per cent and volumes were significantly higher when the share market resumed trading on December 29 after the Christmas holiday break, triggering a “please explain” from the regulator.

The rise came a day after chief executive John Kelly warned of Australia being ‘left behind’ in the global rush to shore up kits as health systems worldwide buckled under the pressure of a rapid surge in cases attributed to holiday-related celebrations and travels.

In its response, Atomo referenced the fights among local states to shore up supplies and referred to its October 5 deal with US company Access Bio to buy 10 million tests for use in professional settings and another 10 million in for self-testing at home.

Atomo CEO John Kelly has warned Australia is being ‘left behind’. Picture: Hollie Adams

Atomo has not yet purchased any tests, so the investor interest seems to be more speculative, driven by prospective demand in future.

Access Bio’s CareStart test is approved for home use by the TGA – along with 14 others – but so far only in partnership with Pantonic – a Victorian family business run by the daughters of David Panton, the partner of former foreign minister Julie Bishop.

Pantonic has partnered with Victorian business Arrotex Pharmaceuticals – the second largest shareholder (10 per cent) in ASX-listed small-cap software company Corum – on the sale of test kits here.

The World Health Organisation first issued an alert about the Omicron variant of Covid-19 on November 26, after the first case was reported to it from South Africa on November 24.

While lesser known Corum’s shares have dropped 9 per cent from 6.7c on November 26 to 6.1c on Thursday, Atomo’s shares are up 30 per cent to 26c.

Overseas-focused Melbourne-headquartered group Lumos Diagnostics has also enjoyed a stellar run in its share price on the back of high demand for its US-made rapid antigen tests, which are not yet approved for sale in Australia.

While its Covid tests are gaining ground in US and Canada, it is working towards US regulatory approval for a path-breaking 15-minute, three-in-one Covid-19/Flu A/Flu B rapid antigen test.

Investors have rushed in to cash in on Omicron demand. Picture: NCA Newswire/Gaye Gerard.

Its shares have gained 11 per cent, rising from 84.5c in late November to 94c at close on Thursday.

Shares in ASX 200 diagnostic companies Healius and Sonic are up nearly 13 per cent to $5.37 and 12 per cent to $46.71, respectively, in the same period.

While hospitals group Ramsay Health Care has gained 7 per cent to $71.37.

Other companies attracting investor interest are in the telehealth space.

In September this year, UK-based virtual care services provider Doctor Care Anywhere Group, which is listed on the ASX, announced its entry into the Australian market with the purchase of GP2U Telehealth, including its mental health arm Psych2U for $11m.

Doctor Care’s main strategy is capitalising on the “ever-growing national mental health burden in Australia, particularly in rural and remote areas”.

Shares in Doctor Care surged 12 per cent to close at 61c on Thursday.

In May this year, the federal government has announced a $6.3bn spend on mental health services to respond to the impact of the pandemic – now close to two-years long – on mental health.

While Omicron is deemed to be less aggressive than the previous Delta variant, it is spreading rapidly, including among the vaccinated – spurred on by open borders and easing of restrictions in the midst of peak travel season.

Rapid antigen tests have since emerged as the one-stop solution to managing the pressure on health systems.

Victoria has bought 34 million tests, NSW 50 million and SA had sourced an additional 6 million, while the federal government has moved to increase its stock to 60 million.

Demand for kits has already reportedly outstripped current supply as more people try to circumvent ballooning PCR (polymerase chain reaction) testing queues.

On Thursday, NSW reported a record 12,226 new cases and one death, Victoria’s daily number nearly doubled to 5137 with 13 deaths, Queensland added 2222 cases, South Australia reported 1374 cases with the death of a 2-year-old, ACT reported 253 additional cases, Tasmania had 92 new cases and WA had one.

These numbers take the nation’s active case numbers to more than 100,000.