As the world rushes to become vaccinated against the coronavirus (Covid-19), our strategy turns from infection mitigation to achieving herd immunity. The pandemic and the multiple lockdowns that followed have had a huge effect on the world’s markets, butchering some industries while allowing others to boom. The medical device field has been no exception, but different subsegments have been affected differently.

Last year saw the onset of the virus in the western world and the lockdowns and shutdowns that followed. This meant that the field of elective surgeries saw its sales numbers tank, as everyone was staying home and surgeries were postponed. Some companies saw as much as double-digit declines in their sales segments.

These same decisions, however, led to growth in the testing market. As Covid-19 tore across the world, correctly identifying who had the virus was of paramount importance to enforce quarantines and stay-at-home orders. Polymerase chain reaction (PCR), antigen and antibody tests skyrocketed from their original workflows to having to produce hundreds of millions, if not billions, of tests very quickly. But this explosive growth will not continue forever.

With Hologic and Thermo Fisher reporting diagnostics revenue growths of 390.6% and 150% respectively, it is somewhat disappointing to hear that their CEOs are bearish about the future of their markets. But this is due to how these markets sprung up as a response to an unprecedented situation. While they may still report modest growth numbers in future, as more and more of the world becomes immunised, the demand for tests will decrease until they are no longer needed.

This may lead to an unfortunate situation for the molecular diagnostics market, which is currently the source of around 66% of both Hologic’s and Thermo Fisher’s total revenue. As the need for Covid-19 testing collapses to a fraction of its current demand, these companies will be holding and maintaining facilities that can create immense supply. This mismatch between demand and supply will either lead to a collapse in prices of molecular diagnostic tests, as suppliers struggle to break even on their facilities maintenance costs, or a mass selloff or repurposing of these facilities.

Either way, the companies in the molecular diagnostics space will have to plan their next steps very carefully. They have made a lot of money in the ‘boom’ of the Covid-19 pandemic, but they must be careful not to be saddled with large illiquid material assets for a market that is a fraction of its previous price.