In a research report sent to investors, Canaccord Genuity analyst Mark Massaro downgraded shares of Venaxis (NASDAQ:APPY) from Buy to Hold, and reduced the price target to $1.00 (from $5.00), following today’s news that the FDA made a determination that the company’s APPY1 test does not meet “substantial equivalence” criteria for its 510(k) filing.

In the report, Massaro commented: “The news serves as a major setback for Venaxis and is particularly disappointing given the company’s strong clinical data, unmet need, and existing pent-up demand from US physicians to adopt the test, in our view. While we expect Venaxis to continue selling APPY1 outside the United States, the US launch is presently uncertain. As a result, we are lowering our US revenue estimates to reflect our view that APPY1 is not likely to launch this year or the following year. We expect to learn more about the company’s strategic path in the next few weeks or so.”

The analyst continued, “Management is scheduled to speak with FDA next week to assess its options, beginning with the possibility to appeal FDA’s decision and/or continue down the path to obtain approval of the APPY-1 test as configured. Another option is to accelerate the development of APPY-2, the company’s next generation test that seeks to rule in (in addition to rule out) patients for appendicitis, seeking to raise the specificity of the test (currently 37.8%). We expect to have some more information within a few weeks following management’s conversation with FDA; however, we expect whatever path they choose likely pushes out our thinking for an FDA approval and US launch.”

Venaxis, Inc. develops and commercializes products for unmet diagnostic and therapeutic needs. The Company is developing a multi-marker blood test panel, APPY1, which is focused to be used by emergency department and urgent care physicians to aid them in the evaluation of possible appendicitis in children, adolescent and young adult patients (ages 2-20) that present with abdominal pain.