Seegene, a diagnostics company that experienced rapid growth due to the global demand for Covid-19 test kits, has announced a decision to freeze its employees' wages this year as a result of declining earnings.

Market watchers say that the company's drastic increase in employees during the pandemic may have hurt the company's business performance this year.

Seegene, along with SD Biosensor, is one of the most prominent beneficiaries of Covid-19 because it quickly supplied its Covid-19 polymerase chain reaction (PCR) diagnostic kits worldwide.

The company's revenue surged 11.2 times in two years, from 122 billion won ($92.2 million) in 2019 to 1.37 trillion won in 2021. Its operating income also shot up 29.8 times, from 22.4 billion won to 666.7 billion won.

During this time, Seegene significantly expanded its workforce, saying it was part of its corporate social responsibility.

The company had previously announced that it would pay its short-term contract workers at the level of a full-time employee's wage, rather than the minimum wage.

The number of employees went up from 314 employees in 2019 to 1,070 in 2021.

In the process, the company's annual payroll expenditure more than doubled from less than 20 billion won to 132.3 billion won.

The total administrative expenses, including welfare and other benefits, surged from 45.7 billion won to 239.2 billion won.

However, the company soon faced a headwind as the demand for diagnostics started to fade.

The company stressed that its non-Covid-19 diagnostics business was growing but it was insufficient to cover the sharp increase in fixed costs.

The situation worsened after the company recorded sales and operating profit of 853.3 billion won, and 195.9 billion won in 2022, down 37.7 and 70.6 percent, respectively, compared to a year earlier.

Industry watchers said the sudden drop in sales and operating profit have affected the company's decision in freezing wages.

The company also did not provide any incentives to employees in the first half of this year as it failed to meet the sales target.

With wages frozen and the company failing to provide incentives, the total number of employees decreased for the first time in four years.

The total number of employees at Seegene dropped from 1,070 in 2021 to 1,016 in 2022, a 5 percent decline.

The company's loss of research staff was particularly notable, with a significant decrease in the number of researchers employed. As of last year, the company had 464 researchers, marking a 13.4 percent decrease from the 536 reported in 2021.

"As PCR testing continues to decline globally, Seegene's external growth drivers are weakening," an analyst told Korea Biomedical Review, asking to remain anonymous. "A negative growth is inevitable until existing non-Covid-19 businesses deliver results."