During the COVID-19 pandemic, diagnostic kit companies that experienced rapid growth now find themselves at a crossroads. According to the industry on the 7th, the current stock prices of major domestic listed diagnostic kit corporations, which benefited from the COVID-19 pandemic from late 2019 to 2022, have fallen by more than 80% compared to their peak.
Business performance varies from corporation to corporation. Some companies are showing overseas expansion and improvements in management performance, while others have seen declining business and stock prices, leading to conflicts with shareholders amid rumors of potential sales. As the business performance has diverged since the endemic phase of COVID-19, a sifting through the market has commenced.
◇Diversification and encountering obstacles in overseas business
Humasis, a domestic in vitro diagnostics corporation, saw its annual revenue rise to 471.3 billion won in 2022 when COVID-19 spread, but it plummeted to 25.4 billion won last year. The corporation also recorded a net loss of 35.6 billion won, continuing two consecutive years of deficits. To diversify its business, the company acquired Kyungnam Pharm last year and has been pushing forward with the development of lithium mines, essential materials for secondary batteries, although there have been ongoing disputes related to these initiatives.
Humasis acquired Kyungnam Pharm last May for 48 billion won. Critics, particularly among general shareholders, have pointed out that the company paid an excessive management premium, acquiring a loss-making company when its stock price was between 1,000 and 1,300 won at the time of the stock transfer agreement.
The company's new business endeavor to develop lithium mines in Zimbabwe was also halted due to changes in local policies. Recently, reports in the investment banking sector indicated that Humasis is seeking to sell Kyungnam Pharm, coupled with rumors about the potential sale of Humasis itself by its largest shareholder.
Genesystem, which sold COVID-19 diagnostic kits, has focused on the Indian tuberculosis diagnostic market as a new revenue source after the COVID-19 endemic. The company also achieved a contract worth $20 million to supply tuberculosis diagnostic kits and molecular diagnostic equipment to the Indian company 'Genetics Biotech Asia' by the end of last year.
As the contract amount reached 3,286% of the previous year's revenue, the company's stock surged at that time. However, Genetics Biotech failed to pay the advance payment, which is 5% of the contract amount, by the deadline of June 30 this year, leading to the contract’s cancellation. After incurring an operational loss of 10.1 billion won last year, the company recorded an operational loss of approximately 2 billion won in the first quarter of this year.
Genesystem is exploring opportunities in China. On the 4th, it announced that it signed a business agreement with Tianlong, a Chinese automation molecular diagnostics corporation, and plans to enter the pet molecular diagnostics market in China in the second half of this year.
◇Companies experiencing non-COVID revenue growth overseas
During the COVID-19 pandemic, Seegene, a leading diagnostic kit manufacturer, has shown signs of recovering profitability by achieving results in non-COVID diagnostic reagents and polymerase chain reaction (PCR) testing since the second half of last year. PCR testing is a method that amplifies genes for examination.
Seegene's consolidated revenue for the first quarter of this year rose by 29% compared to the previous year, reaching 116 billion won. Operating profit turned to a surplus from the previous year, achieving 14.8 billion won. Notably, revenue from gastrointestinal diagnostic reagents and human papillomavirus (HPV) diagnostic reagents, a cause of cervical cancer, surged by over 30%, driving performance growth.
A representative from Seegene stated, "In the past two years, we have been shedding the deficits and inventory issues that arose in the COVID diagnostic sector while strengthening our non-COVID diagnostic sector using our global sales network," adding, "Non-COVID revenue has grown about threefold compared to before the onset of COVID-19."
The company has entered the diagnostics and analytical equipment markets in addition to reagents to secure global competitiveness. Seegene announced that it plans to unveil the automation system 'Aios' for molecular diagnostic testing along with the fully automated diagnostic system 'Cureca' for PCR testing this month.
The company has focused on expanding its market in Europe, particularly in gastrointestinal and respiratory diagnostics. Currently, about 64% of the company’s revenue comes from Europe. More than 80% of the 200 PCR testing centers in Germany, which are considered key locations in the European market, are clients of Seegene.
A representative from Seegene explained, "Gastrointestinal diseases were usually diagnosed by culturing bacteria, but we have been actively transitioning to PCR methods," and added, "As we create a new market, we have set aggressive pricing, emphasizing that while PCR may appear difficult and more costly, the total expenses are reduced."
SD BIOSENSOR acquired the U.S. in vitro diagnostic corporation Meridian and expanded its product lineup to include blood glucose diagnostic products, sexually transmitted disease diagnostic products that include simultaneous diagnostic kits for human immunodeficiency virus (HIV) and syphilis, concurrent diagnostic kits for COVID-19 and influenza, as well as malaria diagnostic kits. The company incurred an operational loss of 56 billion won last year, significantly reducing its deficit compared to the previous year (248.1 billion won). In the first quarter of this year, revenue reached 185.3 billion won, a 5.1% increase compared to the same period last year, but it recorded an operational loss of 14.6 billion won.
Academia predicts that another infectious disease pandemic will occur following COVID-19. In this regard, the in vitro diagnostics business has the potential for explosive growth at any time. An industry insider noted, "It is difficult for in vitro diagnostic corporations to proactively prepare for the next pandemic because predicting what will happen next is not easy, but only those corporations that enhance their technology and product quality and have a well-established global sales network will be able to respond quickly and seize opportunities during a pandemic."