Korea Biomedical Review is publishing a series of articles to analyze the top 10 Korean pharmaceutical and biopharma companies with the largest market capitalizations listed on the main bourse, Kospi, and the tech-heavy Kosdaq. The series aims to reflect key industrial issues and the flow of the capital market in the Korean pharmaceutical and biopharma industry. This is the nineteenth installment. -- Ed.

Once a hallmark success story during the Covid-19 pandemic, Seegene, a leading diagnostics company in Korea, is grappling with the fading benefits of the health crisis. After a meteoric rise during the pandemic, the company's stocks are currently at a mere fraction of their peak value.

Seegene shares soared over 10-fold during the pandemic, touching a zenith of 322,000 won ($243) on Aug. 10, 2020. However, as of the latest market close on Thursday, the stock plummeted to 22,350 won, marking a staggering 93 percent dip from its pinnacle.

The company was one of the top Covid-19 beneficiaries. As its polymerase chain reaction (PCR) diagnostics business boomed amid the pandemic, the company's revenue surged 11.2 times in two years, from 122 billion won in 2019 to 1.37 trillion won in 2021. Operating income surged 29.8 times, from 22.4 billion won to 666.7 billion won, during the same period.

The decline mirrors a broader shift. Global communities, now approaching Covid-19 as an endemic virus, have reduced the demand for diagnostic kits.

For Seegene, the subsequent impact on sales and operating profit in 2022 was harsh, as sales fell 37.7 percent from 2021 to 853.6 billion won, and operating profit plummeted 70.5 percent to 196.5 billion won.

The downward spiral has been even steeper this year.

Notably, the company turned to red in the first quarter, while sales also continued to decline.

In the first half of this year, the company posted sales of 175 billion won, down 69.8 percent from the same period in 2022, and turned to an operating loss of 23.4 billion won from an operating profit of 212.7 billion won.

Seegene tightens budget as Covid-19 benefits start to fade

During its 2020-2021 earnings surge, Seegene made headlines by giving its employees extraordinary performance bonuses.

During the first three quarters of 2020, the company paid 25 to 50 percent of the employee's annual salary every quarter in the form of a performance bonus, and in the fourth quarter, the company gave two years of annual salary.

In response to the tight labor market, the diagnostic kit company also expanded its workforce significantly on top of the unconventional performance pay system to further its commitment to supplying Covid-19 diagnostic kits.

During this time, the number of employees went up from 314 employees in 2019 to 1,070 in 2021 and the total administrative expenses, including welfare and other benefits, surged from 45.7 billion won to 239.2 billion won.

However, as demand waned and sales declined, the salaries of the new hires began to affect the company's performance.

As the company's performance stagnated from last year, salaries were frozen, and performance pay was suspended. As a result, the average annual salary of employees, which reached 123.6 million won at the end of 2021, dropped to 85 million won last year.

As a result, the workforce, which had been growing steadily since 2019, shrank for the first time in 2022.

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.

Despite growing employee dissatisfaction, Seegene also faces woes due to its high cash dividends.

Seegene's high-dividend policy, which the company had repeatedly stressed had been decided to enhance shareholder value, has recently been receiving criticism from shareholders as a way to fill the pockets of the owner's family.

After paying 40.5 billion won in cash dividends last year, the company paid another 9.5 billion won in cash dividends of 200 won per common share in the first quarter of this year.

Of the total dividend of 9.5 billion won, the owner's family took 2.9 billion won, including 1.8 billion won from CEO Chun Jong-yoon, who holds an 18.21 percent stake in the company.

This year's outlook isn't much brighter

The industry believes Seegene's decline this year will be even more pronounced than last year's.

One of the first challenges for the company is dealing with inventory assets it accumulated during the pandemic. At the end of last year, the company's inventory assets stood at about 160 billion won, which is about 50 billion won less than the 210 billion won expected in 2021.

The company also faces the challenge of making up for Covid-19-related sales loss.

However, experts note that it will take some time before the company realizes the promise of non-Covid-19 product sales to drive its growth.

As the company pivots to diversify its revenue streams, there is cautious optimism about Seegene's foray into non-Covid-19 diagnostics. The second quarter sales for non-Covid-19 diagnostic reagents touched 49.9 billion won, an 8 percent quarter-on-quarter growth. Yet, the numbers still trail far behind their pandemic-era peak.

To boost performance, Seegene is also currently aiming to tap into the global market by leveraging its strengths as a global molecular diagnostics company.

The company plans to contribute to the popularization of PCR testing and the early prevention of future infectious diseases through its technology-sharing business.

The idea of the business is that partner companies will develop standardized products based on Seegene's technology, and the company will distribute and sell these products to the global market, while the partner company will take care of local licensing and import.

The company has already embarked on its goal and will establish local joint ventures with Israeli diagnostic company Hylabs, which signed a partnership in March, and Spanish diagnostic company Werfen, which became a partner in June.

It will also collaborate with Springer Nature, with whom it signed a strategic partnership agreement in June, to open challenges to collaborators around the world to develop more than 15 new products.

The joint ventures will be responsible for platform business, including local sales, product development, and production.

In the second half of this year, the company aims to sign contracts with representative companies in each country and plans to cooperate with companies in 100 countries by 2028.