By Sarah Nassauer and Sarah Krouse

The billionaire Walton family that controls Walmart Inc. is among a group of investors backing a startup aiming to design at-home Covid-19 tests to sell for as little as $10 at the retail giant's stores and elsewhere.

NowDiagnostics Inc., based 20 miles south of Walmart's corporate headquarters, has filed requests for emergency authorization from the U.S. Food and Drug Administration for a Covid-19 antibody blood test, according to the Springdale, Ark., company.

It is also developing two at-home Covid-19 tests that would use a patient's salvia and deliver results in minutes, said Chief Executive Kevin Clark. One of those would be an antigen test that looks for virus proteins to diagnose an active infection and the other an antibody test, which looks for an immune response that can signal a previous infection.

None of the tests have been authorized by the FDA for use.

For several years Walmart has talked with NowDiagnostics about selling tests for ailments like the flu in its stores, as part of a push to offer more fixed-priced health-care services and products. Those discussions expanded during the pandemic to include Covid-19 diagnostic and serologic tests if they pass regulatory muster, people familiar with the discussions said.

NowDiagnostics is one of many biotechnology and diagnostic companies racing to develop easy-to-use at-home tests for Covid-19. To date, those tests have faced hurdles including ensuring users know how to collect high-quality samples and process them in a way that delivers accurate results.

While saliva samples are used for diagnostic PCR tests run in labs, and collecting spit is less invasive than swabbing a person's nose or throat, no saliva-based rapid tests have yet secured emergency approval. OraSure Technologies Inc., which has tried to create a saliva-based rapid antigen test, recently abandoned the development work.

"As research and development progressed, we found we could achieve greater sensitivity, and the best possible accuracy, by using samples collected with a simple, fast swab just inside of the nostril," said Dr. Stephen Tang, OraSure's chief executive.

The FDA this week approved the first at-home Covid-19 test that includes a nasal swab people can administer themselves and receive results in minutes. The company that makes the tests, Lucira Health Inc., said it plans to roll them out nationally by spring, likely costing about $50 apiece. Lucira plans to eventually sell its test online and deliver it overnight with a medical professional's prescription.

NowDiagnostics aims to sell each of its three Covid-19 tests for under $10, said Mr. Clark.

Investors in NowDiagnostics include members of the Walton family through Arkansas-based venture capital firm NewRoad Capital Partners, according to people familiar with the matter. NowDiagnostics investors also include several former Walmart executives, said these people.

A spokeswoman for the Walton family declined to comment. Mr. Clark declined to discuss the Waltons, saying the company has investors from across the country. NewRoad declined to comment on individual investors.

For years NowDiagnostic has worked to develop inexpensive at-home medical tests including for HIV, pregnancy and food intolerance, but it shifted focus to develop Covid-19-related products when the pandemic hit, said Mr. Clark. The company's blood-based pregnancy test for lab use is the only one that has been cleared by the FDA, he said.

Walmart isn't directly involved with NowDiagnostics and doesn't have an exclusive agreement to buy its products, said Mr. Clark, but the company has worked closely with current and former Walmart executives.

"This concept began out of some conversation with Walmart personnel, way back in 2012," he said.

A Walmart spokeswoman declined to comment.

In recent years Walmart has worked to broaden its health-care business, mostly by offering medical treatments at upfront low prices, often below the cost of an insurance copay. It has built a handful of clinics near or inside Walmart stores that offer doctor's visits, X-rays and dental services. Executives said during recent investor presentations that they plan to build more.

Walmart has hundreds of stores that offer Covid-19 testing from pharmacy windows or parking lots, in partnership with federal and state governments, labs and insurance companies. Those sites currently send samples to lab companies like Quest Diagnostics Inc. and eTrueNorth for processing.

The Walton family collectively owns around 50% of Walmart's stock, and three family members currently sit on the Walmart board. The family has invested previously in other upstart diagnostic companies including blood-testing company Theranos Inc. They were among the many investors burned by the startup when it dissolved after being accused of defrauding doctors, patients and its backers.

Write to Sarah Nassauer at sarah.nassauer@wsj.com and Sarah Krouse at sarah.krouse@wsj.com

(END) Dow Jones Newswires

11-20-20 1758ET