[This Week's Kwan.Jong.] AI Faster and More Accurate Than Eyes... Early Cancer Diagnosis by Lunit

Despite Surge in Imaging Tests, Severe Shortage of Doctors for Analysis
AI Analyzes Quickly and Accurately... Collaboration with Global Medical Device Companies

Editor's NoteDear individual investors dreaming of successful investments. How well do you know the stocks you invest in with your own money? In the online environment flooded with unrefined information, Asia Economy aims to be your hands, feet, eyes, and ears by delivering accurate information about companies. Each week, we focus on companies that rank high in stock inquiries by the financial information provider FnGuide, delivering everything from basic information to analyses of related companies such as partners, customers, and investors. We will explain companies' financial conditions, performance status, and future value in an easy-to-understand manner. We meet you every week under the name of "This Week's Watchlist," highlighting stocks of interest. This week, we analyzed Lunit, which has developed early cancer diagnosis technology using artificial intelligence (AI).

[Asia Economy Reporter Hyungsoo Park] Attempts to improve daily life using artificial intelligence (AI) technology continue. AI is particularly adept at finding anomalies among various data.

According to the Radiological Society of North America, the volume of imaging tests such as computed tomography (CT) and magnetic resonance imaging (MRI), which require long interpretation times, has increased by an average of 7% annually over the past decade. During the same period, the number of radiology specialists increased by only 2% annually. The shortage of radiology specialists is even more severe in emerging countries, with significant regional disparities. Amid this, AI technology has advanced and emerged as an alternative to address the shortage of radiology specialists.

Early Cancer Diagnosis with AI...Noted for Accurate Interpretation

Founded in 2013, first-generation medical AI company Lunit developed and commercialized interpretation assistance solutions that complement human visual limitations using AI technology. They developed imaging biomarker solutions that discover new biomarkers based on medical imaging. Their main products include 'Lunit INSIGHT,' an imaging interpretation solution related to cancer diagnosis, and 'Lunit SCOPE,' an imaging biomarker solution related to cancer treatment.

Lunit is expanding the sales network of Lunit INSIGHT by forming partnerships with global medical device manufacturers and distributors. They are increasing sales regions through regulatory approvals. Leading global medical imaging equipment companies such as GE Healthcare, Philips, Fujifilm, and Hologic have secured regional sales channels. Lunit SCOPE attracted a 30 billion KRW investment from Guardant Health, a world-renowned liquid biopsy company, confirming its potential. Research demand is increasing from pharmaceutical companies and clinical trial organizations.

Lunit has demonstrated its technological prowess by participating in numerous AI-related academic conferences. It has shown world-class technology by winning awards at global competitions.

As cancer incidence rises worldwide, the need for early diagnosis becomes more critical. Six out of ten lung cancer patients are diagnosed at stages 3 or 4. The 5-year survival rate for stage 4 lung cancer patients is only 8.9%. The earlier cancer is detected, the lower the treatment cost and the higher the survival rate. Governments aiming to reduce medical expenses are supporting cancer screening. Most countries determine cancer occurrence through imaging tests such as CT and MRI. Using Lunit INSIGHT allows for fast and accurate abnormality detection. Lunit INSIGHT is divided into 'Lunit INSIGHT CXR' for lung cancer diagnosis and 'Lunit INSIGHT MMG' for breast cancer diagnosis. It has received regulatory approval in 40 countries to date.

To persuade conservative hospitals and doctors, the accuracy was verified when AI was used alone and as an aid. The accuracy was higher than when doctors diagnosed alone. A recent study published in the international journal Radiology showed that using AI imaging analysis solutions for lung nodule screening increases detection rates. Radiology is an SCI-level international journal published by the Radiological Society of North America (RSNA).

The Health Promotion Center at Seoul National University Hospital investigated lung nodule screening rates among 10,476 patients who underwent chest X-rays from June 2020 to December 2021. The lung nodule detection rate in the AI-utilizing group was 0.59%, compared to 0.25% in the non-AI group. The AI group recorded more than twice the detection rate. Eight cases of confirmed lung cancer were detected in the AI group, while none were detected in the non-AI group.

Expecting Results After Massive Investment...Stock Price Up 40% This Year

While continuing research and development, Lunit's losses accumulated as its technology improved. Net losses were 47 billion KRW in 2019, 83.7 billion KRW in 2020, and 73.7 billion KRW in 2021. As of the third quarter of last year, the cumulative net loss was 23.7 billion KRW. In contrast, sales were only 200 million KRW in 2019, 1.4 billion KRW in 2020, and 6.6 billion KRW in 2021. Although sales are growing rapidly, they are not yet profitable. External funding has been used to cover R&D costs, reducing the major shareholders' stake. Upon listing on the KOSDAQ market in July last year, they raised 36.4 billion KRW for clinical trials and regulatory approval costs. As of the end of the third quarter last year, the major shareholders, including Chairman Baek Seung-wook and CEO Seo Beom-seok, held 22.59% of shares.

Despite large losses, the market capitalization exceeds 500 billion KRW. The stock price has risen 40% this year. Interest in AI technology has grown alongside the ChatGPT craze, and investors betting on Lunit's potential have increased.

Researcher Jaewon Jung of Shinhan Investment Corp. explained, "For AI companies, it is important to consistently prove core technological competitiveness and excellence. Mammography is interpreted doubly by two specialists, but due to the absolute shortage of specialists and the difficulty of visual interpretation, demand for AI is high in this field."

The imaging diagnostics market is dominated by 10 companies, including GE Healthcare, Philips, and Siemens, which hold over 90% of the global market. They block new entrants based on long-established brand power and economies of scale. Considering the characteristics of the imaging diagnostics market, Lunit operates by collaborating with manufacturers of X-ray imaging equipment, mammography equipment, and Picture Archiving and Communication System (PACS) that can package Lunit products. Not only global medical equipment companies such as GE Healthcare, Philips, Fujifilm, and Hologic but also medical system companies like Agfa, Sectra, and Emageon Connect have signed overseas distribution and sales contracts. These companies, which hold close to 50% market share in each market, are Lunit's partners.

Baek Seung-wook, chairman of the board and founder of Lunit, earned a Ph.D. in Electrical and Electronic Engineering from the Korea Advanced Institute of Science and Technology (KAIST). He served as CEO from the founding year until October 2018, leading the research and development of Lunit INSIGHT. He delegated the CEO position to current CEO Seo Beom-seok and has served as Chief Product Officer and Chief Innovation Officer before becoming chairman of the board this year.

CEO Seo, who leads Lunit, holds bachelor's degrees in Life Sciences from KAIST and Medicine from Seoul National University. He gained expertise and practical experience in medicine while working as a family medicine specialist at Seoul National University Hospital. He also earned master's degrees in Health Policy from Yonsei University and Healthcare Management from Kyung Hee University, enhancing his understanding of the healthcare industry.

CEO Seo said, "Lunit, celebrating its 10th anniversary this year, is preparing for a better next decade to grow to the next level." He added, "This year, we will increase profitability by launching new products in the cancer treatment field in addition to existing cancer diagnosis products." He continued, "We will grow into a global standard company in the medical AI field."

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