Equity Research Immunovia: Regulatory tailwind in the USA following ruling against the FDA

On 31 March, a federal judge ruled against the FDA regarding laboratory-developed tests (LDTs). The new ruling has significant implications for both Immunovia and the diagnostics industry as a whole

The FDA overstepped, according to Texas judge

After proposing a rule aimed at ensuring both safety and effectiveness of IVDs in October 2024, the FDA announced it had finalized the rulemaking on April 29, 2024. A week later, the rule was announced fully. The rule intended to amend the FDA’s regulations to make explicit that products categorized as in vitro diagnostic products (IVDs) are devices that fall under the Federal Food, Drug, and Cosmetic Act (FD&C Act), even when the manufacturer is a laboratory. As mentioned in our initiation of coverage, there was a phaseout policy that was intended to begin on May 6 of 2025. This would, in essence, force manufacturers to comply with Medical Device Reporting (MDR) requirements as well as correction and removal reporting requirements and quality system requirements regarding complaint files. Over the years following, the demands would increase, forcing devices intended for the US market to go through the regulatory gauntlet that “typical” medical devices go through.

However, as was announced on Monday, 31 March, the US District Court for the eastern district of Texas reached the verdict that the final rule issued by the FDA on May 6 in 2024 was an overstep of the FDA’s authority, in turn making it unlawful. The ruling landed following complaints and lawsuits from the American Clinical Laboratory Association (ACLA), member company HealthTrackRX, and the Association of Molecular Pathology (AMP). According to judge Sean Jordan “Congress has considered but declined to enact several bills over the past two decades that would have reshaped the regulatory framework over laboratory-developed test services.” and “Under the circumstances, agencies cannot circumvent, and courts must enforce, the statutory framework Congress enacted as it exists”, as cited in an article written by Nicole Defeudis of Endpoint news. Furthermore, according to the previously mentioned article, the regulation would have impacted an initially estimated 1,200 laboratories and cost them an estimated total of over USD 1 billion per year in compliance costs.

It is unlikely that this is the last chapter in the book of LDT legislation, however, it is positive news for laboratories developing LDTs, with lower costs and risks being the highlight. As for Immunovia, the implications described previously also apply. We still expect Immunovia to pursue FDA approval for reasons of reimbursement, however, this will now be optional rather than mandatory.

We expect to release research update that factors in the latest data and information in the near-future.

Read our initiation of coverage here.

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