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| Seegene CEO Chun Jong-yoon / Courtesy of Seegene |
COVID-19 test kit maker sees end of heyday
By Baek Byung-yeul
Seegene, which had enjoyed the soaring popularity of its COVID-19 PCR test kits, has been struggling to stay afloat as the pandemic has been ebbing, according to industry analysts, Monday. They said the time has passed for Seegene to enjoy high growth as the number of COVID-19 infections has gradually declined globally and much of the world is shifting to endemic mode.
"There needs to be consideration that hospitals are using rapid antigen test kits to confirm COVID-19 infection. As the requirement to use PCR tests was lifted in October, a conservative approach is needed when forecasting future demand for PCT tests," said Won Jae-hee, an analyst at Shinhan Investment & Securities.
"It will be difficult to raise the target stock in a short period of time, as there is still no solid growth momentum for Seegene's non-COVID-19 products," the analyst added, suggesting a 34,000-won target stock price for Seegene.
Seegene recently announced an estimation of its third-quarter earnings, saying that it generated 150.8 billion won ($113.3 million) in sales and an operating loss of 32.2 billion won. Sales decreased by 50.56 percent compared to the same period in 2021, and operating profit turned into a deficit.
The current situation is very different from the company's performance in 2020 when the COVID-19 pandemic began and last year when people around the world were still undergoing substantial difficulties due to the pandemic's severity and spread. In 2020, sales of Seegene's diagnostic kits exploded, increasing the company's revenue from 121.9 billion won in 2019 to 1.125 trillion won.
The poor performance led to a fall in the company's stock price as well. It was at 61,500 won on Jan. 3 this year, but decreased by over 40 percent to end at 34,650 won on Monday.
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The company attributed the operating loss to the easing of COVID-19 quarantine policies around the world, which eventually led to decreased demand for the test kits.
Another market analyst added that the company will continue to suffer worsening profitability down the road as its main test kit business shrinks.
"Seegene saw an operating loss of 68.1 billion won in inventory provisions related to unused test kits," said Han Song-hyup, an analyst at Daishin Securities. "It will be difficult for the company to recover its sales recorded during the pandemic period, but it is expected that the company will see a slight growth in non-COVID diagnosis sectors in the fourth quarter."
However, a company spokesman blamed the third-quarter operating loss mainly on the company setting provisions for unused test kits.
"To resolve inventory risks accumulated during the pandemic period, we set a provision only for this quarter. The operating loss in the third quarter is only a short-term factor caused by the provisions and the growth momentum of the company is still valid," the spokesman said.
He added the company is diversifying its disease diagnosis products to seek a breakthrough. The company actually saw increased revenue in non-COVID products as test kits for digestive infection, human papillomavirus (HPV) and sex-mediated infection rose 27 percent in the first three quarters this year to 112 billion won compared to the same period in 2021.
"We are also expanding the global sales of our fully automated PCR test equipment. The All in One System (AIOS) was released in July and it is a system that completely automates the entire PCR process," the official added.
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