In Vitro Diagnostic Companies 'Wobble' Amid Realized Endemic... Escape Routes Vary

The earnings outlook for in vitro diagnostic companies facing the endemic phase (periodic outbreaks of infectious diseases) has turned red. The 'earning surprise' achieved last year with COVID-19 diagnostic kits has shifted to an 'earning shock' in the first quarter. A new breakthrough is urgently needed.

[Image source=Yonhap News]

On the 18th, Asia Economy compiled the first-quarter earnings of five major domestic in vitro diagnostic companies this year. The sales of companies such as SD Biosensor, Seegene, Humasis, Sugentech, and LabGenomics all dropped by more than 80% compared to the same period last year. Their average sales decline rate was 89%, with all five companies recording sales figures that did not even reach the operating profits of the first quarter of last year. Humasis and Sugentech recorded sales decreases of 99% and 97.8%, respectively, compared to the same period last year. This means their sales shrank to one-hundredth of the previous amount.

Operating profits also turned to losses except for one company. SD Biosensor, Seegene, Humasis, and Sugentech all switched to losses compared to the same period last year. LabGenomics was the only company to post an operating profit of 1.117 billion KRW, but even this figure plunged 97.8% compared to the same period last year.

The sharp decline in performance was influenced by the significant decrease in demand for diagnostic kits as the COVID-19 endemic officially began. The first quarter of last year, which serves as the comparison period, was when the Omicron variant virus surged, causing a rapid increase in daily confirmed cases, acting as a base effect. At that time, the health authorities increased the use of self-diagnostic kits, leading to a shortage due to high demand. The government's official declaration of the endemic phase by lowering the COVID-19 crisis alert from 'serious' to 'caution' and lifting the mandatory self-isolation for confirmed cases starting next month is also expected to accelerate the decline in demand for COVID-19 diagnostic kits.

However, since these companies achieved unprecedented earnings due to the surge in diagnostic kit demand during the COVID-19 pandemic, it is also evaluated that they have the capacity to pursue mergers and acquisitions (M&A) or new businesses with the cash they have accumulated. SD Biosensor announced in July last year that it would acquire the U.S. diagnostic company Meridian Bioscience for about 2 trillion KRW and completed the acquisition in early February.

The solution proposed by in vitro diagnostic companies is diversification of diagnostic sectors and new technologies such as molecular diagnostics. SD Biosensor is positioning its rapid molecular diagnostic platform, 'Standard M10,' as a future growth engine. The company explains that Standard M10 combines the high accuracy of polymerase chain reaction (PCR) testing with the speed and convenience of rapid antigen testing by utilizing rapid molecular diagnostic technology. SD Biosensor obtained formal approval from the Ministry of Food and Drug Safety for the Standard M10 cartridge capable of simultaneously diagnosing influenza, respiratory syncytial virus (RSV), and COVID-19 in the first quarter of this year.

Seegene is also seeking growth engines by increasing sales in non-COVID-19 sectors. The proportion of COVID-19 diagnostic reagent sales in Seegene's first-quarter sales this year dropped sharply to 20%. In contrast, sales in areas excluding COVID-19 reached 46.3 billion KRW, accounting for 68% of total sales. This was influenced by a 119% increase in sales of diagnostic reagents for respiratory viruses such as influenza and respiratory syncytial virus (RSV) compared to the same period last year due to the easing of quarantine measures. Seegene plans to promote continuous growth of non-COVID-19 diagnostic reagents based on the infrastructure, including molecular diagnostic equipment, that increased during the pandemic.

Some companies are seeking new opportunities by entering new fields. Sugentech launched a femtech service utilizing a female hormone diagnostic platform. Femtech is a portmanteau of 'female' and 'technology,' referring to technologies and services focused on women's health management and quality of life improvement. Sugentech's female healthcare platform 'Surely Smart,' released in November last year, allows users to measure pregnancy, ovulation, and miscarriage risk using urine with a test device at home. The accompanying smartphone application also provides a function to link the smartphone and test device via Bluetooth. The smartphone app enables users to check menstrual cycles and manage irregular menstruation and premenstrual dysphoric disorder. SD Biosensor also plans to launch continuous glucose monitoring systems (CGMS) in major markets such as Korea, the U.S., and Europe starting in 2024.

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