Hong Kong biotech start-up Phase Scientific International (PSI) aims to raise its production capacity for Covid-19 rapid test kits fivefold by midyear, as record infections drive huge demand for early detection.

The biggest customer in the near term is the Hong Kong government, which plans to distribute test kits to the entire population. The city’s Hospital Authority made a bulk order for over one million units last summer for its workers to do weekly tests.

The Kwun Tong-based start-up plans to produce up to 50 million sets of its Indicaid kits per month by June. Production has already been ramped up from less than 2 million sets at the end of last year, to 17 million this month and 30 million targeted for next month.

“With the onset of the fifth wave of infections dominated by the much more transmissive Omicron variant, the Hong Kong government has recognised that PCR tests can no longer be relied upon to meet the city’s diagnostic needs,” chief executive and founder Ricky Chiu Yin-to said in an interview with the South China Morning Post.

Phase Scientific’s founder and chief executive Ricky Chiu Yin-to.

The Home Affairs Department bought 300,000 kits from the firm ahead of the Lunar New Year. PSI had to shift some stock originally destined for the US market to meet Hong Kong’s needs, said Chiu, adding the government’s current order placement is “in the magnitude of millions”.

PSI is the first company from mainland China, Hong Kong, Macau and the Taiwan region to have obtained the approval from the US Food and Drugs Administration for emergency use for its Covid-19 test kits.

Phase Scientific International’s Indicaid Covid-19 rapid-tesk kit.

Most of the company’s sales to date have been for the US market, where the government and businesses saw rapid tests as the primary early detection tool earlier. PSI has delivered over 30 million units since launching its kit last year.

PSI’s Indicaid kits were one of three authorised by the Hong Kong government last April for use before care home visitations. Abbot Laboratories’ Pandio and Roche Diagnostics’ Sars-COV-2 were the other two.

As confirmed cases in the city surged to 625 on Tuesday, RAT kits of all three companies were sold out on the e-commerce sites of Mannings and Watsons, two of Hong Kong’s biggest beauty and health products retailers.

“Hong Kong is a latecomer to rapid tests,” said Chiu. “Outside China, most major markets have adopted rapid tests as their main diagnostic strategy. The Biden administration last month already announced it would buy one billion kits to give to Americans for free, and this was done even earlier in Europe.”

This has meant that the international supply of a key material – the nitrocellulose membrane, where the test reaction takes place – has been tight with prices surging over 10 times during the course of the pandemic.

“We have had great difficulties procuring this material in the US, which means we have had to buy from indirect channels at much inflated prices,” he said.

Logistics has been another challenge for PSI, with air freight charges doubling after flagship carrier Cathay Pacific suspended all long-haul cargo and cargo-only passenger flights on December 30, 2021. This came after hotel quarantine for aircrew was increased from three to seven days.

“We were forced to seek capacity on chartered flights, and the price hike was on top of a doubling in rates from pre-Covid levels,” he said. “Shipping was not viable as limited capacity due to US ports congestion meant rates were similar to air freight but delivery was months later.”

PSI has increased its staff count from less than 20 in the middle of last year to around 400 at its factory in Shenzhen and its assembling and quality control operations in Hong Kong. This is to meet its 30 million units monthly target, and the company will hire more staff in the coming months, said Chiu.

Hong Kong chief executive Carrie Lam Cheng Yuet-ngor said on Friday that the government would secure “tens of millions” of Covid-19 rapid testing kits to carry out voluntary screening among the entire Hong Kong public.

PSI’s kits were approved last July by the US FDA for use in authorised laboratories. Chiu expects its application for approval for over-the-counter sale to be granted in a month or two.