In less than 24 hours, the stock price of Aytu Bioscience Inc. (NASDAQ: AYTU) set both a 52-week high and a 52-week low earlier this month. The low was $0.34 per share, posted on March 10, and the high was $2.99 set the next day. That doesn’t happen too often, even for small-cap biotech stocks.

The one-day rocket ride came after the company announced that it had licensed North American rights to distribute a coronavirus test kit manufactured by China’s Zhejiang Orient Gene Biotech. The next day, Aytu announced an at-the-market offering of 16 million shares of common stock plus an associated warrant priced at $1.25 per unit. The exercise price on the warrants is $1.25, exercisable for one year. The stock price dropped from $2.05 to $1.35.

Since then, shares have traded above $2.00 just once, on March 23, the day after Aytu announced that it had received confirmation from the U.S. Food and Drug Administration (FDA) that the company could begin distribution of its coronavirus test kit. Aytu said it expected to receive its first shipment of 100,000 tests this week. The company also said it had been discussing how to begin distribution into the U.S. health care supply chain with health care distributors, health care institutions, medical practices and government agencies.

Even an announcement on March 25 that Aytu had regained compliance with Nasdaq’s minimum price requirements didn’t move the stock higher. There seems to be a problem here.

How the FDA Manages Diagnostic Tests for Coronavirus

Under the FDA’s emergency rules, companies like Aytu that want to distribute a coronavirus test kit may simply notify the agency of their intent to begin distribution and follow that with an emergency use request. The confirmation Aytu received on March 23 allows the company to sell the 100,000 kits it says are on the way to its Colorado warehouse.

The COVID-19 IgG/IgM Rapid Test that Aytu licensed from Zhejiang is a point-of-care test that reports results in two to 10 minutes. The test has been validated in a clinical trial (in China presumably) and has received the CE marking, indicating that a product conforms to European standards for health, safety and environmental protection.

Assuming that the FDA follows its approval for distribution of Aytu’s Rapid Test with an Emergency Use Authorization (EUA), then the company would be able to sell as many of the kits as it wants. If, for some reason the FDA demurs, the situation gets complicated.

All Aytu Has to Do Now Is Execute

Maybe not quite all. There is plenty of competition among companies wanting to sell coronavirus test kits.

The FDA’s list of all current EUAs for a variety of diseases, including COVID-19, shows 16 competitors. When Aytu announced its deal with Zhejiang, there were just two. An EUA granted on March 12 to a test from Roche took a lot of the wind out of Aytu’s stock.

Aytu has experience distributing FDA-approved medicines, but that experience appears to have been limited to the commercial sector. That the nation faces a crisis of almost unimaginable reach has created a space for new players, and Aytu has placed a bet on its ability to help beat the coronavirus outbreak. Still, as a newbie in professional circles, it must both overpromise to get business and overdeliver to keep it. That’s the challenge.

So far this year, Aytu shares have traded up almost 75%, compared to the S&P 500, which has lost 21% or so in that time. The stock closed up almost 14% on Friday, March 27, at $1.82. Busting through $2.00 again even seems possible again.

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