Shares of Abbott Laboratories (ABT) are under pressure on Monday after Goldman Sachs analyst Amit Hazan downgraded the stock to Sell from Neutral as he believes shares have overreacted to the company's COVID-19 testing opportunity. On the flip side, the analyst sees Roche (RHHBY) as one of the best positioned companies relative to the coronavirus testing dynamics.

OVERREACTION TO TESTING OPPORTUNITY: In a research note to investors, Goldman Sachs analyst Amit Hazan downgraded Abbott Laboratories to Sell from Neutral with a price target of $84, up from $79. The analyst argued that the stock has overreacted to the company's COVID-19 testing opportunity. Despite taking an early lead with multiple viral and antibody emergency use authorizations in the U.S. and a "sizable" test production outlook, competitors have steadily diminished Abbott's early advantage with their own approvals on high throughput systems, the analyst said. Hazan sees 10% downside in the shares and remains skeptical that the demand for antibody testing will reach a material level for Abbott revenues given the much lower price point for those tests.

Hazan also told investors that he sees Roche as one of the best positioned companies relative to the COVID-19 testing dynamics. One of the broadest installed bases of diagnostics machines, two validated tests with very high accuracy, and among the highest capacities globally for these tests all combine to provide Roche with an opportunity to offset the headwinds it sees in the other parts of their routine diagnostics business, he contended.

Given the company's limited presence in the molecular market, the analyst also pointed out that he sees antibody testing opportunity as offering the more significant revenue and earnings potential for Siemens (SIEGY). That said, demand for this type of testing is only beginning to ramp up, and the ultimate size of the opportunity will depend on a variety of factors, including the use of antibody testing for individual as opposed to population-level screening, Hazan contended. Overall, he sees the potential upside from COVID-19 as unlikely to compensate for the downside to the core business given lower healthcare utilization.

The analyst also highlighted that Henry Schein (HSIC) could play a role in the distribution of point-of-care tests and testing supplies to the provider sites where testing is likely to occur. While it is unclear to what extent point-of-care testing will be used to screen and diagnose COVID-19, rapid diagnostic tests at POC could be an important tool used to manage COVID-19, and Henry Schein is working with manufacturers to bring tests to market and address shortages of supplies like reagents and swabs, he contended.

FDA APPROVAL: Last month, Abbott announced that the U.S. FDA has issued Emergency Use Authorization for the company's molecular test for the novel coronavirus for use on its new Alinity m molecular laboratory instrument. The company also said that the FDA issued EUA for its SARS-CoV-2 IgG lab-based serology blood test on the Alinity i system. Back in April, Abbott had received FDA EUA and CE Mark for its SARS-CoV-2 IgG antibody blood test on the Architect system.

Meanwhile, Roche announced on May 3 that the FDA had issued an EUA for its new Elecsys Anti-SARS-CoV-2 antibody test. The test is designed to help determine if a patient has been exposed to the SARS-CoV-2 virus and if the patient has developed antibodies against SARS-CoV-2. Roche said at the time that it had already started shipping the new antibody test to laboratories globally and would ramp up production capacity to high double-digit millions per month to serve healthcare systems in countries accepting the CE mark as well as the U.S. Roche added that its SARS-CoV2 antibody test has a specificity greater than 99.8% and 100% sensitivity.

PRICE ACTION: In afternoon trading, shares of Abbott have dropped about 2% to $93.04.