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Sona Nanotech Inc. Buy INSTITUTIONAL Maxim Group LLC

Striking Gold in Sona Nanotech; Disruptive Gold Nanorod

Technology for COVID and Beyond – Initiating with a Buy &

$3 PT

Summary

• We are initiating coverage of Sona Nanotech with a Buy rating and $3 price

target. Sona is a nanotechnology company developing gold nanorods (GNRs)

for a number of applications, initially targeting lateral flow assays (LFAs)

for diagnostics. A near-term catalyst is COVID-19, but the long-term driver

may be disrupting the larger LFA space (2B LFA tests annually for a number

of applications including infectious disease, pregnancy tests, agricultural

testing and environmental testing).

• COVID-19: Sona is working with GE Healthcare (GE - NR) to develop an LFA for

COVID-19 biomarker(s), not an antibody or PCR test. It is essentially as simple

as a flu test; swab, place on the 'stick', see if color bar shows up indicating a

positive test. This type of testing is more likely applicable to pandemic-scale

testing, whereas PCR, even with more rapid options, may not be.

• Conclusion: Gold nanoparticles have utility in numerous applications and

Sona Nanotech’s GNR platform could be disruptive to the larger LFA market.

COVID-19 represents a near-term opportunity for both revenue, and most

important in our view, exposure for Sona’s GNR platform, which is the longterm

driver.

Details

Gold nanorods and LFAs. Due to their unique optical properties and surface

chemistry, gold nanoparticles play an important role in a number of industrial,

biomedical, and electronic applications. Though the standard in most cases is gold

nanospheres, other shapes such as nanorods, nanostars, and nanoshells have

certain advantages. Sona’s Gemini GNR platform is manufactured without CTAB,

a surfactant that prevents other GNRs from proper flow in LFAs. We review GNRs

and LFAs extensively in this report, which we see as the long-term drivers for Sona.

However, let's discuss the COVID-19 opportunity.

COVID-19 testing – Going beyond PCR and antibodies. Testing from the WHO,

CDC, or anywhere else, is PCR-based. While highly accurate, it is time consuming

and faces reagent supply chain challenges as well as availability issues. While

advances in PCR for COVID-19, particularly from Abbot (ABT - NR) and Cephied

(Danaher, DHR - NR) may help improve output, in our view, it is still PCR, which

means it still requires equipment, reagents, time, and a tech. It will also be interesting

to see how the IgG/IgM tests are adopted; antibodies take time to mount and do

not necessarily tell if there is an infection now, but can provide epidemiological data.

Testing space needs to go beyond molecular testing to drive large scale, practical,

and cost-effective testing for pandemic-scale testing, which is where LFAs are an

attractive option. Think of the basic flu test, a pregnancy test etc.- large-scale, simple,

and cost-effective ($10 - $30 per test).

Sona's GNR-based LFA will detect viral components from patient samples within

minutes and determine if COVID-19 is present. This can be administered at the pointof-

care or eventually even at home. On 3/30, Sona entered into a letter-of-intent

agreement with a distributor representing the health authority of a G20 country for 2M

COVID-19 tests. The company also was awarded on 3/31 a $4.1M grant from NGen,

Canada's Advanced Manufacturing Supercluster to develop and commercialize its

COVID-19 test.

https://sonanano.com/wp-content/uploads/2020/04/SONA.SNANF_.Initiation.Maxim_.0402206.pdf