Remember back in the spring when Abbott, Quest and other COVID-19 testing laboratories announcing that test demand was falling fast and cautioning Wall Street investors to tone down their revenue expectations for the remainder of the 2021 fiscal year? Those days now feel like a distant memory. The turning point came in July when after steadily dropping for the first six months of the year, the number of daily COVID-19 tests performed began to rise again. In August, the U.S. processed an average of 1.9 million tests per day, the highest total since April. As the Delta variant continues to fuel a surge in new cases, demand for COVID-19 tests and the profits of the companies that produce them are expected to keep on increasing.

Recent COVID-19 Testing Utilization Patterns

While nobody expected testing labs and producers to be able to sustain the COVID-19 revenue windfalls of 2020 and 2021, it looked like the vaccination would put an end to the boom sooner than anybody had expected. As vaccination efforts picked up in the early part of the year, demand for COVID-19 testing peaked in January and February. Big testing laboratories began demobilizing the COVID-19 infrastructure they had worked so hard to build and began work to restore normal core businesses decimated by the pandemic.

Source: Johns Hopkins

The Delta Surge & the Demand Side

But before the ashes from the bonfires of COVID-19 testing cartridges and supplies had turned cold, those supplies were in demand again. As Delta variant cases started to surge across the country, COVID-19 test demand rebounded. And it was not all diagnostic-driven. The return of workers to offices, schools to full time learning and the public to concerts, ball games and other events fueled intense demand for rapid, point-of-care and at-home testing.

As a result, states and municipalities had to reopen testing sites that they had closed only months earlier. There were also shortages in rapid and home testing kits as products like Abbott’s BinaxNOW testing kit and Quidel’s QuickVue At-Home OTC COVID-19 Test Kit at-home test becoming hard to obtain. In late August, Ellume’s COVID-19 Home Test and Lucira’s Check It COVID-19 Test Kit were out of stock, with both companies vowing to ramp up production.

The Delta Surge & the Supply Side

The increased demand for testing has also extended the financial boom for COVID-19 test producers and laboratories. Thus, companies that were trimming down future revenue projections in May are now increasing their financial guidance for the third and fourth quarters and full year. For example, financial advisory firm Baird expects the increase in testing demand to add $149 million to Quest’s and $96 million to LabCorp’s bottom line by the end of the year.

The latest windfall is especially beneficial to producers of at-home COVID-19 test products. In early September, President Biden unveiled a new action plan to combat the delta surge and restore the country to pre-pandemic footing. As he did immediately upon taking office, the President has drawn on the federal government’s powers to mobilize private industry under the Defense Production Act (DPA) to step up production of COVID-19 tests and testing supplies.

To ensure that the big test laboratories keep their foot on the COVID-19 production gas pedal, the administration plans to purchase nearly $2 billion worth of rapid point-of-care and over-the-counter at-home tests—280 million total tests—from multiple manufacturers. The tests will be made available to long-term care facilities, community testing sites, critical infrastructure, prisons and jails and other programs supporting vulnerable populations, as well as to create testing stockpiles for the future.