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Biotech bounce

10 July 2020 By Lisa Jucca

DiaSorin’s Covid-19 kits may not be as iconic as Prada bags or Ferrari sportscars. But they sell like hot cakes in a pandemic. If the emergency wanes, so will the Milan company’s virus tests sales. Still, the $11 billion biotech’s focus is a notable step-up from traditional Made in Italy products.

Immunodiagnostics isn’t something immediately associated with Italy, the land of great food and design. Yet, DiaSorin’s expertise in testing blood, which traces its roots to a 1968 joint venture between carmaker Fiat and former chemicals heavyweight Montecatini, became essential once the pandemic exploded.

In a few months, the group was able to detect Covid-19 antibodies in just an hour. The UK become on Thursday the fourth country to accept DiaSorin’s serology kit for mass testing. This explains a 51% share rise this year, outperforming a 12% fall in the benchmark STOXX Europe 600 index.

DiaSorin, which emerged in its current form from a 2000 management buyout backed by Chairman Gustavo Denegri, is now working to develop a coronavirus test based on saliva samples. This could take as little as five minutes, be cheap and easily mass produced. If the virus isn’t tamed by vaccine, widespread testing to prevent contagion will be the norm.

Enthusiasm for the Italian company carries risks. At 38 times its estimated earnings, its valuation is below a 43 times multiple for direct French rival Biomerieux but well above the 22 times larger rival Abbott Laboratories fetches. At nearly 175 euros, its share price is 15% above a mean analyst target price of 152 euros, Refinitiv data show.

And DiaSorin faces tough competition. Giants like Roche and dozens of startups are piling in to develop more rapid and precise Covid-19 tests. The emergence of a vaccine would send demand for testing kits plummeting. The silver lining is that people will restart asking for routine blood tests, which made up the bulk of DiaSorin’s 706 million euro revenue last year but dried up during lockdowns.

Nonetheless, the current crisis has demonstrated that immunodiagnostics is essential in managing a pandemic. And unlike handbags, sophisticated biotech work cannot be easily replicated nor shifted to low-cost developing countries. For Italy, one of the worst-hit nations by the virus, a greater focus on companies like DiaSorin may offer a path to a richer future.


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