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Healthcare ETFs to Gain on Progress in COVID-19 Antibody Tests

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The coronavirus pandemic has reached a grim mark, infecting more than 2.06 million. The death toll has risen to at least 137,000 globally, according to Johns Hopkins University. The number of confirmed cases in the United States have soared to at least 638,000, with more than 30,000 deaths. In this health crisis, global economies are under huge stress due to shutdown of economic activities and social distancing measures.

It is being believed that testing for COVID-19 is the major key in controlling the outbreak and making important decisions like treatment protocols, appropriate resource allocation and drafting the right healthcare policies. Along with molecular testing, antibody testing is gaining immense prominence as economies are struggling to reopen.

Amid these desperate times, Abbott ABT has launched its third COVID-19 test. This time it is a lab-based serology blood test for the detection of the antibody that tells if a person has suffered from the COVID-19. The company will begin shipping these tests from Apr 16 and aims to distribute 4 million tests this month. It will gradually expand to 20 million in the United States per month in June and beyond. The shares of Abbott gained 2% after announcing the launch on Apr 15.

Rising Demand for Antibody Tests

Antibody tests provide better understanding of the virus. These tests tell us how long antibodies stay in the body and if they provide immunity. The antibody tests will provide the number of infected cases more accurately as they include those cases that may be asymptomatic or have recovered. The identification of immunity level to the virus will aid in combatting the serious concern of staffing shortages.

Therefore, demand is high in countries struggling to return to normalcy and reopening economies as the outbreak seems to be a little under control. For instance, New York Governor Andrew Cuomo asked the FDA for fast approval of an antibody finger prick test that could allow testing of up to 100,000 New Yorkers a day and in this regard he said, “the more testing, the more open the economy. But there’s not enough national capacity.”

Other Companies Providing Antibody Tests

Henry Schein HSIC has informed about availability of an antibody rapid blood test, known as Standard Q COVID-19 IgM/IgG Rapid Test. This test can deliver results within 15 minutes from a pinprick, with no need for instrumentation.

Going on, FDA has awarded its Emergency Use Authorization (EUA) for a rapid antibody blood test for coronavirus, developed by Cellex, according to a MedTech Dive article. The serological test utilizes a fingerprick of blood and a small strip, and will deliver a reading in 15-20 minutes. The FDA has also granted EUAs  to Chembio Diagnostics and Ortho Clinical Diagnostics for antibody tests (per a MedTech Dive article).

Efficacy of the Tests

The FDA’s policy for COVID-19 public health emergency is allowing private companies increased access to market the serology tests after determining the accuracy and reliability of these tests, according to a USA TODAY article. Abbott has launched the new antibody test under FDA's diagnostic test policy for the COVID-19 public health emergency. The company plans to file an EUA request and will try to get a CE mark.

However, the FDA’s policy has raised fears among lab experts that some unproven and potentially unreliable tests might be in the market (per a USA TODAY article). In this regard, Association of Public Health Laboratories (APHL) has raised concerns. In fact, Kelly Wroblewski, APHL’s director of infectious disease programs, has said that “we now have at least 90 tests on the market, and we don’t know about the accuracy of the results. Having many inaccurate tests is worse than having no tests at all” (per a USA TODAY article).

Healthcare ETFs That Might Gain

The continuous race to introduce treatments for COVID-19 is opening up near-term opportunities, making the healthcare sector a good space for investments. Therefore, we discuss a few ETFs that seek to provide exposure to the healthcare sector (see all Health Care ETFs here):

iShares U.S. Medical Devices ETF (IHI - Free Report)

The fund provides exposure to U.S. companies that manufacture and distribute medical devices by tracking the Dow Jones U.S. Select Medical Equipment Index. In total, the fund holds 56 securities in its basket, with Abbott, holding the top position with 14.6% weight. It charges 43 bps in fees per year.

The Health Care Select Sector SPDR Fund (XLV - Free Report)

The most popular healthcare ETF, XLV follows the Health Care Select Sector Index. In total, the fund holds 60 securities in its basket, with the pharma sector taking the largest share at 33.4%. Healthcare equipment and supplies, healthcare providers and services, and biotech also have double-digit exposure each. Abbott holds fifth spot with 4.5% weight. The expense ratio is 0.13% (read: Healthcare Stocks & ETFs to Gain on Coronavirus Test Progress).

iShares U.S. Healthcare ETF (IYH - Free Report)

The fund provides exposure to the Dow Jones U.S. Health Care Index. It holds 119 stocks in its basket and has a 0.43% expense ratio. Abbott holds fifth spot with 4.1% weight in the fund.

Vanguard Health Care ETF (VHT - Free Report)

The Vanguard Health Care ETF seeks to track the performance of the MSCI US Investable Market Health Care 25/50 Index. This fund comprises stocks of companies involved in providing medical or health care products, services, technology, or equipment. The fund holds 389 stocks in its basket and has a 0.10% expense ratio. Abbott holds fifth spot with 3.6% weight.

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