Shares of Chembio Diagnostics Inc (CEMI), which rallied nicely following the launch of its rapid DPP COVID-19 serological point-of-care test for the detection of IgM and IgG antibodies in late March, are pulling back sharply Wednesday.

What Happened: The negative reaction stemmed from FDA's announcement regarding revoking the emergency use authorization accorded to Chembio's SARS-CoV-2 antibody test - DPP COVID-19 IgM/IgG system.

The FDA premised the action on performance concerns with the accuracy of the test. The FDA had accorded EUA approval for the test April 15.

"Data submitted by Chembio as well as an independent evaluation of the Chembio test at NCI 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," the FDA said in the release announcing the revocation.

The FDA saw risk to public health from the false test results.

"As such, the FDA decided to revoke the emergency use authorization of the Chembio test, and this test may not be distributed," the agency said.

Why It Matters: Chembio has been seeing revenue declines for the past two quarters. Amid the downturn, the company began to refocus its business around the emerging opportunity presented by the pandemic.

Chembio revealed in its first-quarter results released in early May that it secured a $4 million purchase order from Brazil's Bio-Manguinhos for the DPP COVID-19 System. With the U.S. revoking the approval, the company could see similar actions in the rest of the world.

The test has a CE mark approval FPR marketing it in the EU countries.

In pre-market trading, Chembio shares were plunging 59.72% to $4.