Dive Brief:

• LumiraDx is set to list on Nasdaq via a merger with a special purpose acquisition company (SPAC), generating additional capital to pursue a point-of-care testing opportunity it values at $76 billion.

• In a presentation about the merger, LumiraDx said it aims to crack the COVID-19 mass testing market by making more than twice as many kits as rivals such as Abbott and selling them at a lower price. 

• LumiraDx has secured $400 million in debt financing and $115 million from the SPAC to fund its ambitions. However, LumiraDx's decision to access public markets via a SPAC, rather than an IPO, exposes it to additional scrutiny amid questions about the model.

Dive Insight:

LumiraDx was founded in 2014 by a group of executives who previously built, run and sold other diagnostic companies, most notably the Abbott-acquisition Alere. The business began to take off in 2020, when the threat of the coronavirus pandemic helped it raise around $300 million, start to validate its POC testing technology and grow revenues.

Against that backdrop, LumiraDx plans to join the Nasdaq by merging with CA Healthcare Acquisition Corp, a SPAC set up with the goal of combining with a fast-growing healthcare company. CA Healthcare has $115 million in cash and will take an almost 3% stake in LumiraDx.

LumiraDx will use the funding to execute a growth strategy intended to upend the diagnostic industry.

"The world is at the tipping point of a transformation of community care, and we expect LumiraDx is the change agent," LumiraDx CEO Ron Zwanziger said on a conference call with investors to discuss the merger.

LumiraDx is targeting three multi-billion dollar markets, including a central lab industry it values at almost $45 billion. Zwanziger and his colleagues calculate the professional POC market is worth $12 billion and value the COVID-19 antigen and antibody testing opportunity at $19 billion. 

In COVID-19, LumiraDx competes against Abbott, BD and Quidel and claims its 12-minute microfluidic test picks up lower viral loads than those rival lateral flow antigen kits, giving it high coverage of infective individuals. At 97.6%, the sensitivity just beats that of Quidel's Sofia — with LumiraDx having the narrower confidence interval — and is well ahead of Abbott and BD. LumiraDx said it can make more than 1,000 platforms and 15 million tests a month.

The test received emergency use authorization last year. Next, LumiraDx plans to launch a disposable test for POC and over-the-counter COVID-19 mass screening and home testing. The company said it will charge $2 to $4 per test, which it calls Amira. That compares with $5 to $25 at Abbott and $30 at Ellume.

LumiraDx plans to take on rivals in terms of scale, too. By the time Amira comes to market in the fall of 2021, the goal is to be making 10 million tests daily. LumiraDx estimates Abbott will be making up to 4 million. In December, Abbott said its daily U.S. BinaxNOW capacity was around 1.7 million tests.

Beyond COVID-19, LumiraDx contends POC players have struggled to penetrate markets as they sell limited menus of expensive tests. LumiraDx has seven regulatory cleared tests and more than 30 in the pipeline, equipping people to run a wide range of tests at the POC on a single instrument. According to LumiraDx, its POC tests will cost two to three times the price of the central lab base price, compared to the five to 10 fold premiums it says are charged by other POC providers.

LumiraDx is still some way from showing it can deliver on its ambitious plans. The company made sales of $139 million last year and is aiming to grow revenues to between $600 million and $1 billion in 2021. Failure to deliver on the growth plan could negatively affect perceptions of SPACs.

Larry Neiterman, chairman of CA Healthcare, addressed the question of how investors will react to the merger amid dips in the share prices of SPAC stocks, in an interview with Bloomberg. "The market has dampened a little but I think the market will still be excited about it. We think it's all about reasonable valuation and we feel good about our valuation," the former Deloitte executive said.