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By Kim Yoo-chul
Last year, the country's benchmark KOSPI rose more than 30 percent, which was the second-largest jump among global benchmarks following Nigeria. A whopping increase in stock purchases by retail investors joined by foreign investors late last year propelled the KOSPI's total market cap to almost $2 trillion.
Medical device makers were among the country's top gainers last year because of the COVID-19 pandemic as investors displayed a voracious appetite for small-cap, health-focused stocks. Seegene Inc., for example, saw its share price rise more than 500 percent thanks to strong global demand for coronavirus test kits.
But this year, investors are worrying over the growth momentum of test kit makers as the planned distribution of COVID-19 vaccines will possibly threaten the bottom lines of major test kit makers.
A key rationale is that investors are widely expected to continue digesting the implications of a recent series of COVID-19 vaccine results, while continuing to question their efficacy data. It remains to be seen whether such concerns could possibly lead to the renewed popularity of test kit makers' shares.
But the growth momentum of COVID-19 test kit makers is set to rise again with some investors saying the market is overreacting to concerns over the sustainability of test kit makers.
It seems quite fair to say some institutional investors would bet on the prospects of a continued increase in coronavirus infections. Nevertheless, screening will continue even as confirmed cases of infection decline.
COVID testing will decrease as inoculations progress. But Ashlee Shin, a spokeswoman for Seegene said, "We believe the market for COVID testing kits will continue to remain large. PCR testing is going to continue to be very relevant to Seegene's customers, because it gives them the most accurate information."
Seegene's COVID-19 test kit, Allplex 2019-nCoV Assay, has accounted for 80 percent of the country's coronavirus testing and Seegene Medical Foundation has processed 220,000 tests. Its test kits are available in almost all countries from the United States to Europe.
Since the beginning of the pandemic, the testing kit boom has widely covered a period in which the contagious virus quickly spread in major markets including the United States and Europe. That drove up the number of confirmed cases and the need for tests. The development of vaccines could slow the spread of the virus, which will eventually cut the number of infections and limit urgent demand for COVID-19 testing.
But analysts say demand for test kits won't fade any time soon.
"The accuracy of vaccine data is in doubt. Before starting massive vaccine campaigns, the top criteria is that there should be a lot of testing. Recent drops in major test kit stocks could be seen as excessive," a senior manager at a European investment bank in Seoul said last week. "There are chances other variants will emerge. Plus, it will be a lengthy and time-consuming job for governments to complete immunization of their publics."
Another fund manager contacted by The Korea Times who asked not to be named said, "I have to say there would be pressure on test kit makers' stocks because of the development of vaccines. But I can also say the development of vaccines couldn't eliminate the need for any COVID-19 testing by trusted test-kit makers."
Additionally, while vaccine availability could cut demand for certain COVID-19 diagnostics, it could also help consumers feel comfortable and safe in terms of returning to "routine testing," they added. Large pharmaceutical companies are still on track to collect safety data before obtaining Emergency Use Authorization (EUA) by the USFDA.
Plus, a United Nations-led initiative to secure suppliers of key medical equipment, including test kits for poorer countries, is expected to provide test kit makers with opportunities for sustainable growth momentum as the United States is set to strengthen its "COVID-19 Supply Portal" initiative.
Seegene, for example, reached a long-term agreement deal with an affiliate of UNICEF under which the Korean company will supply various test kit products to countries deemed to be most vulnerable.
"It is crucial to have a control tower giving clear guidelines and get the government sectors, health care workers and private sectors to work together," Seegene CEO Chun Jong-yoon was quoted as saying in an earlier interview with ABC.
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