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Why the Genetic Signatures (ASX:GSS) share price is surging 5% higher today

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The market may be struggling on Thursday, but that hasn’t stopped the Genetic Signatures Ltd (ASX: GSS) share price from charging higher.

In afternoon trade the specialist molecular diagnostics company’s shares are up over 5% to $1.99

Why is the Genetic Signatures share price charging higher?

Investors have been buying the company’s shares following the release of its first quarter update this morning.

According to the release, Genetic Signatures delivered record quarterly revenue of $10.5 million for the three months ended 30 September. This was a 50% increase on the previous quarter and a massive 585% higher than the prior corresponding period.

Pleasingly, management notes that it was cashflow positive during the quarter, adding $3.4 million in net cash from operating activities.

What were the drivers of its growth?

Management advised that it experienced strong demand for COVID-19 testing kits from customers in Australia.

It notes that COVID-19 testing in Victoria remained high as the state faced a second wave of infections. In addition, although the number of active cases in New South Wales was controlled, customer demand for testing kits continued throughout the period.

Genetic Signatures’ CEO, Dr John Melki, commented: “We are very pleased to report an exceptional quarter of revenue growth and positive cashflow. Strong demand from our customers following the second wave of COVID-19 infections, particularly in Victoria, contributed to the result.”

But it wasn’t just the domestic market contributing to its sales growth, Genetic Signatures also reported strong demand internationally.

“We are achieving good traction in EMEA, while our US sales team is actively pursuing COVID-19 opportunities under the recent FDA Emergency Use Authorisation (EUA) guidance. As countries around the world battle to keep infection rates under control, extensive testing remains an essential tool for safely re-opening economies,” added Dr John Melki.

Outlook.

Management believes the company is well placed to assist the pandemic globally due to its 3base technology.

North America represents the largest diagnostics market globally and the company is continuing to build inventory of its kits to ensure it can supply new customer contracts in the region. If successful, it believes this could represent a step change in revenue.

However, it warned that COVID-19 testing volumes globally remains fluid. As a result, it advised that the predictability of future revenue is difficult and dependent on measures imposed by various governments. This includes quarantining, travel restrictions, testing strategies, and reimbursement rates. As such, no guidance was given for the coming quarter or full year.

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Returns as of 6th October 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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