As of this writing, there are more than 19.3 million confirmed cases of COVID-19 across the world, which have resulted in nearly 720 thousand deaths. A few countries — namely the US, Brazil, India, and Russia — have accounted for the largest concentrations of cases and deaths. To combat the crisis, early detection through quick and widespread testing is necessary at this stage. Some countries have succeeded in stomping the virus into submission following drastic measures. For those nations that have not found success, testing is needed. That is easier said than done though. Some experts believe that the US needs to get daily testing up to at least 5 million people in order to get on top of the virus. Our best day saw nearly 930 thousand tests conducted, but as of early August that number is trending down to about 731 thousand.

One company that believes it has the solution to this issue is 3C Bio. The firm wants to offer the rt-PCR test through mobile labs. This approach would make its testing available everywhere, hopefully expanding the US’s ability to test for COVID-19. 3C Bio plans to use 53’ semi-trailers in North America and smaller trailers (20’ to 45’) that can be transported by ship, plane, and truck internationally. 3C Bio believes it can run tests on as many as 2,400 people per day in its mobile labs. If the area they are testing needs more than that, it wants to be able to add labs to handle the volume. The beauty to this approach is that the firm can easily pick up in one area and move to a location that needs their services more. The downside, though, is the high cost of a single lab. With its current capital raise, the company expects to construct its first two 53’ labs. One of these they plan to sell, while the other they want to manage.

The rt-PCR test is currently considered the gold standard of COVID-19 testing. It has been designed for quick turnaround times, which is why it would be possible to run up to 2,400 tests every day. They are also considered highly accurate according to the CDC. The turnaround time is often same-day when conducted on site with the equipment needed to verify it. Only labs certified under CLIA (the Clinical Laboratory Improvement Amendment) can administer the test in the US. Though under EUA requests, the government has made it easier for many labs to qualify for testing.

Due to how new this crisis is, 3C Bio only recently came into existence. The company was founded this year, so no financial results exist for 2019. Some financials for 2020 do exist though. Through July 17th, revenue for the business was $0 and net loss was $53,280. Operating cash outflows, meanwhile, totaled $40,595. According to management, operating costs are averaging about $18,000 per month now. If this remains unchanged, that works out to an annualized net loss of $216,000.

The broader diagnostic market that 3C Bio operates in is significant. But the direction it’s headed near-term may be surprising. According to one source, the global market in 2019 was worth $126.4 billion. You might think that the COVID-19 pandemic would cause rapid growth here, but that would be a mistake. While COVID-19 testing is important and significant in size, the crisis has caused other diagnostic activities to fall. This year, it’s forecasted for the market to total $108.8 billion. That would work out to a year-over-year drop of 13.9%.

The COVID-19 testing market is far smaller, but its near-term prospects look appealing. According to one source, this niche is worth about $5.2 billion this year. The forecast is for the niche to grow at a rate of 5.96% per annum, eventually hitting $7.8 billion by 2027. Another source pegs the market at $4.9 billion and forecasts that its 6.1% projected growth rate will take it to $8.3 billion by 2029. Yet a third source estimates the niche to be worth $6.7 billion. Its annualized growth rate, at 7.9%, is the highest out of the sources we identified. If this proves to be accurate, then by the end of the forecast period (2027), the market should grow to $11.4 billion annually.

It may be difficult to believe that the diagnostic market here will continue growing. After all, once a vaccine is made and widely administered, the need for testing will eventually decrease. This may take a few years, depending on how quickly a vaccine gets developed. But at the same time it’s possible the virus will continue to evolve and stay with us like the seasonal flu. This creates a significant degree of speculation regarding the market opportunity. What is known today, though, is that more testing is needed and it’s needed now. The US should be testing 5 million people per day and it’s testing less than one-fifth that figure. Despite accounting for 4.5% of the world’s population, the US accounts for 22.4% of the world’s deaths and 25.6% of its confirmed COVID-19 cases.

The team at 3C Bio is rather extensive and includes an MD with experience as an epidemiologist and expert of infectious diseases. There are, however, two main members of the team that investors should be focused on: Mark Mendel and D.A. Therrien. Mendel serves as the President and CEO of 3C Bio. In the past, he worked as the Managing Director at Mendel Consulting, a venture funding consulting business with an emphasis on biopharmaceutical and medical device companies. Before that, he worked as a Senior Consultant for Broadmark Capital and as a Venture Partner at Novita Therapeutics. Therrien, meanwhile, serves as 3C Bio’s Chief Strategic Officer and Chief of Design. He previously founded and served as Director for testingLAB, an art/tech lab that is presently on hold while he works on 3C Bio. Before that, he was a Spectacle Artist at Beautiful Light, and his role prior to that was as the founder of ARTcon.

Based on all of the data we have seen, our team is rating as 3C Bio an Underweight Deal. The company certainly is trying to meet demand where other players have not yet managed to satisfy it. This could present the firm with attractive prospects — especially when you consider the opportunity to deploy its mobile labs globally. Analysts are also projecting that demand for testing will grow in the years to come, but that is certainly a speculative call. Despite these positives, there are numerous issues that investors should consider.

For starters, 3C Bio is awfully late to the game. Other labs are already scaling up capacity, and it’s likely that a vaccine will be completed in the next several months. This leaves a narrow window of opportunity for the firm to really benefit from the pandemic. This doesn’t mean it won’t make money, but it does make it a risky, time-sensitive prospect. The firm could, in theory, retrofit its mobile units for other disasters once COVID-19 testing dies down. But that could leave the units sitting — potentially — for years. Retrofitting could also be costly. Another issue is the high valuation for the firm. Right now, the project is not generating any revenue. There’s nothing proprietary about its platform that couldn’t be worked around easily. Its costs are also high for the stage that it’s in. In short, a project of this nature should probably have a valuation cap far lower than what management is asking for. As it is, 3C Bio doesn’t seem to make for a sensible risk/reward prospect.