SONA Nanotech Surges on Anticipation of Covid-19 Test Kit Validation Results and Mass Manufacturing

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Sona Nanotech Inc. Announces Collaboration with University of ...

OVERVIEW

Sona Nanotech had been under the radar for quite some time now, but as the validation advances and steps fall into place, the world is quickly realizing the potential of Sona’s test kit. Not only will it be the most accurate test to come to market, but it will also include tracing technology thanks to UK’s BOND Digital Health (Sona’s partner), which is required by governments to track and trace the spread of the virus. 

Examples of this are Trudeau’s recent speech on May 22nd, where he mentions an app for tracing that will be introduced shortly. “It is our expectation that when the time comes for that to be released, we will be able to recommend strongly to Canadians a particular app that will help us manage the spread of COVID-19,” said Justin Trudeau (Prime Minister of Canada). 

The Canadian Government has invested $4.1m through the NGEN cluster program towards SONA as a grant to help the company complete the test kits. Under NGEN’s “basic project requirements”, they mention the following:

  • Canadian government procurement has first right of refusal on all products produced as a result of this funding program. 
  • Companies must prioritize sales to Canadian hospitals and meet those needs before sales outside of Canada can commence 
  • Companies should be willing to license and/or share new IP for rapid scale up of production with the Government of Canada and other companies that can manufacture the new technology.”

This tells us that the Canadian Government has not only invested in this technology, but did so because they are committing to purchase up to 1m test kits a week as per the release on PM Justin Trudeau’s website.

  • Sona Nanotech, together with a consortium of laboratories, universities, and hospitals, will use nanotechnology to develop point-of-care test kits that will improve the accuracy of virus detection and provide results in 5-10 minutes.
  • If successful, the project will yield 20,000 test kits available per week, with the potential to scale-up to 1 million test kits per week, while keeping costs within range of other comparable infectious-disease screening protocols.

Sona currently has 4.7m signed LOI’s for test kits upon validation results and expressions of interest for “tens of millions” of test kits as per news release confirming commencement of validation.

Optimization and Validation

In April 13th news release, SONA had commenced optimization. They mentioned “The company has begun to work with independent third party test validators to help direct test optimization and identify key test performance factors.” This tells us that Sona had already been working under the guidance of a third-party test validator to help direct optimization. It is also worth noting that the company stated it expects to take pre-payment on all test kit orders as soon as validation results are published, meaning the company will have the funds for manufacturing before the actual process begins.

Validation commencement was announced on May 22nd – as Sona engages MRI GLOBAL to lead the test validation studies. At this point, we know Sona had stated that they had been working with independent third party validators (as mentioned above), and it’s safe to say that they would of submitted the product to validation feeling confident under the validator’s guidance. This news release confirms “the company has begun technology transfer activities with secured manufacturers and expects to begin taking deposits on letters of intent and expressions of interest following completion and publishing of the validation results”.

Now one must wonder why is SONA taking deposits before HC and FDA approvals? Once 3rd party validation is complete and proves the required performance for the test, SONA expects to receive the approvals from HC and FDA within a very short period, as it has already undergone the required steps as instructed by both agencies. 

Bottom Line

Sona hit a low of $1.07 on May 21st and surged 40.7% on Friday to close at $2.80. Additionally we predicted this run in a series of earlier posts. This puts Sona at a market cap of $168.7m as they have a very tight share structure, sitting at 60.25m shares, which 24% is owned by insiders.

Crunching some quick numbers together, Sona expects to sell the test kits between 25-50$ based on the size of the order, with profit sitting between 70-80%. With the signed 4.7m LOI’s alone, this puts the company at $164,500,000 in rev (35$/test) and profit at around $123,375,000 (75% profit). An example of scaling up to 50m tests for the year would put Sona at $1.25 Billion in revenue at the minimum test price of (25$/test) and $937.5 Million in profits (75%). Biotech companies generally can trade up to 10x revenue figures (market cap).

Upon validation results, the company expects tens of millions of test kits to be sold, as well as they expect to be able to produce up to 100m test kits per year (currently capable of 10m/year) – based on the information given on Sona’s investors deck.

The company will generate revenue not only from test kit sales, but from direct sales of gold Nanorods and conjugates to lateral flow developers and researchers. They will also generate revenue through licenses and royalties based on in-market sales of tests. The company has the current interest of multiple countries including (but not limited to): Canada, United Kingdom and the United States.

SONA Nanotech Profile

Disclaimer: I own shares in Sona Nanotech and I am long on my position.

Guest Blog, Jack Z

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