Chembio Diagnostics (CEMI) - Get Report shares tumbled Wednesday after federal regulators revoked the point-of-care diagnostic-testing company's emergency-use authorization for its coronavirus antibody test due to concern about accuracy.
Shares of the Hauppauge, N.Y., company at last check were down 63% at $3.68.
The Food and Drug Administration said in a letter that it concluded "it is not reasonable to believe the product may be effective in detecting antibodies against" the coronavirus, or "that the known and potential benefits of your device outweigh its known and potential risks."
The FDA on April 14 had granted Chembio's antibody test DPP COVID-19 IgM/IgG emergency-use authorization.
At the time of authorization, the FDA said, based on the information that Chembio submitted, the agency concluded that the test met the statute's "may be effective" standard for emergency use authorization, and that the test's known and potential benefits outweighed its known and potential risks.
"Data submitted by Chembio as well as an independent evaluation of the Chembio test at [the National Cancer Institute] showed that this test generates a higher than expected rate of false results and higher than that reflected in the authorized labeling for the device."
Craig-Hallum analyst Per Ostlund downgraded the company to hold from buy with a price target of $8, down from $24. He said in a note to clients that "the newly murky nature of its primary near-in value driver makes it difficult to endorse shares at present."
Chembio did not immediately respond to a request for comment.
In May, Chembio said it planned to produce 1 million tests that month and up to 2 million by September.
The company said it had raised $31 million in a stock offering and would use the proceeds "to support the refocus of its business strategy, including the manufacturing and further commercialization of the DPP covid‑19 system, to expand its sales force to support growth, to increase its manufacturing capacity, and for other general corporate purposes."