Lunit, Did the Low IPO Price Backfire?... Aiming for Trillion-Won Sales with Global Competitiveness

[Asia Economy Reporter Hyungsoo Park] Lunit, a newcomer to KOSDAQ, has been showing strong performance since its listing. It is interpreted that the stock was attractive in price as it entered the market at a public offering price lower than the expected range.

As of 10:04 AM on the 22nd, Lunit is trading at 48,350 KRW, up 20.88%.

Lunit started trading on its first day at a slightly higher price of 30,800 KRW than the public offering price of 30,000 KRW. It closed trading at the upper price limit of 40,000 KRW that day.

The public offering price of Lunit was about 32% lower than the lower end of the expected range of 44,000 KRW. The price was lowered after institutional investors' demand forecast showed a competition rate of 7.1 to 1. Factors such as the highly volatile stock market and the fact that 44.2% of shares would be available for trading immediately after listing were considered risk factors.

Seobeomseok, CEO of Lunit, said at a press conference before the listing, "We can jointly conduct clinical trials and seek approval with big pharmaceutical companies developing immuno-oncology drugs through an AI-based biomarker companion diagnostic business model using Lunit Scope before administering anticancer drugs." He added, "We are currently applying this in clinical trials in cooperation with more than 10 pharmaceutical companies, and early research results are promising, so collaboration with many pharmaceutical companies is expected to expand in the second half of this year."

When estimating the expected range of the public offering price, it was anticipated that the company would turn profitable from 2024. Sales estimates are 20.7 billion KRW this year, 51.7 billion KRW next year, and 91.6 billion KRW in 2024. Operating losses are expected to be 47.5 billion KRW this year and 24.1 billion KRW next year, with an operating profit of 8.6 billion KRW expected in 2024, marking a turnaround to profitability.

Huh Hyemin, a researcher at Kiwoom Securities, explained, "The confirmed public offering price of 30,000 KRW is about 40% lower than the upper limit of the expected range," and added, "Concerns about the volume of shares available for trading immediately after listing and the burden of continuous operating losses were factors of concern."

Lunit, established in 2013, is a company developing AI-based medical imaging diagnostic and treatment platforms. Its main products include the AI image analysis solution for cancer diagnosis, ‘Lunit INSIGHT,’ and the AI biomarker platform for cancer treatment, ‘Lunit SCOPE.’ In the technical evaluation for KOSDAQ special technology listing, it was the first domestic healthcare company to receive AA ratings from all evaluation agencies.

Based on its AI technology, Lunit obtained AA ratings from all evaluation agencies for the technical evaluation for KOSDAQ special technology listing, becoming the first domestic healthcare company to do so. It has partnerships with global major medical device companies such as GE Healthcare, Philips, and Fujifilm, supplying products to more than 600 medical institutions worldwide.

Lee Dalmi, a researcher at SK Securities, explained, "The cancer treatment decision solution Scope is a companion diagnostic test for targeted and immuno-oncology drugs," adding, "Recently developed targeted and immuno-oncology drugs have the advantage of fewer side effects compared to conventional chemotherapy and are administered at high prices."

She continued, "Since not all cancer patients respond to drugs, classifying patients through biomarkers and providing personalized treatment increases response rates," and introduced, "Scope is a diagnostic tool that shows whether the anticancer drug will respond to the patient before administration."

She emphasized, "Using companion diagnostics has the advantage for pharmaceutical companies of increasing the approval success rate of new drugs under development and reducing clinical costs," adding, "If matched and approved together with not only currently marketed drugs but also new drugs in clinical trials, medical fees will be applied."

The researcher said, "Lunit aims to achieve sales of 150 billion KRW starting in 2025 after obtaining approval in 2024," and added, "It is expected that sales in the trillion KRW range will be possible in 10 years."

She added, "The leading global AI medical companies currently include PathAI, Heartflow, Viz.ai, and Lunit," and said, "All are collaborating with GE, Philips, Siemens, etc." Furthermore, she noted, "PathAI is collaborating on companion diagnostic tests with Roche and BMS," and analyzed, "Lunit’s Scope is also striving to secure global partnerships, and the company’s value can sufficiently increase with multiple contract signings."

Han Songhyup, a researcher at Daishin Securities, explained, "The global medical AI market size is expected to grow from 2.1 billion USD in 2018 to 36.2 billion USD in 2025, with an average annual growth rate of 50.2%," and added, "The AI medical field is an early-stage market with uncertainties in establishing revenue models."

He continued, "There is no disagreement that it is a market with great growth potential and scalability," and predicted, "Considering Lunit’s competitiveness is top-level even compared to global companies, the market size it can preempt when the market fully blooms in the future will not be small." He judged, "It is a company that can continuously grow with a solid position in the new industry from a mid- to long-term perspective rather than a short-term one."

This content was produced with the assistance of AI translation services.