Seegene's operating profit down 4.3% despite market expansion efforts

Korean molecular diagnostics firm Seegene released its preliminary financial results for the first quarter of 2024 last Friday, but the figures are less than promising.

Despite efforts to diversify and expand into new markets, the company has reported a 0.1 percent and 4.3 percent decrease in sales and operating profit compared to the same period last year, totaling 89.9 billion won ($65.5 million) and 14.4 billion won. More concerning, the company turned to a net loss of 19.8 billion won in the first quarter of this year from a net profit of 20.3 billion won last year.

The transition of the Covid-19 pandemic to an endemic phase has continued to hurt Seegene's revenue from coronavirus-related products.

The sales of Covid-19 diagnostic reagents have shrunk to 6.2 billion won, which only accounted for 8.5 percent of the total reagent sales.

While non-Covid-19 diagnostics have seen an uptick, with a 24.4 percent increase year-on-year, this growth has not been sufficient to offset the overall slump in profitability.

Non-Covid diagnostic products now represent nearly 80 percent of total reagent sales, with particularly strong performance in respiratory bacterial diagnostics, but this shift has yet to translate into financial stability for the firm.

Among the non-Covid products, sales of respiratory bacterial (PB) diagnostic reagents particularly stood out, increasing by 89 percent compared to the same period last year.

Seegene explained that this was due to the spread of Mycoplasma pneumonia and an increase in demand for syndromic PCR tests. Sales of respiratory virus (RV) and gastrointestinal (GI) diagnostic reagents also increased by 36 percent each compared to last year. Products related to sexually transmitted infections (STI) and cervical cancer (HPV) also saw increases of 7 percent and 8 percent.

Seegene has been pushing forward with a global campaign to promote its syndromic testing solutions, which allow the simultaneous testing of various pathogens that cause similar symptoms.

This approach is marketed as cost-effective for healthcare facilities, aiming to streamline operations and reduce expenses.

Also, Seegene's strategic alliances and technology-sharing initiatives, including partnerships with global entities like Microsoft and Springer Nature, have not yet reversed the company's financial downturn.

The high competition ratio of 11:1 in their first open innovation program with Springer Nature highlights significant interest but does not alleviate the immediate financial pressures.

The company is also making ongoing efforts to leverage its molecular diagnostic technologies and expand its product offerings through initiatives like the development of an AI-enhanced developer automation system with Microsoft, dubbed the SGDDS.

"Until now, we have focused on expanding our customer base through the sale of reagents and equipment, but from now on, we will implement a product diversification strategy," Seegene IR Director Lee Jun-hyuk said. "The syndromic testing campaign aims to utilize Seegene's unique syndromic testing pipeline and to increase the number of product items used by customers."

In addition, Seegene will continue to make long-term investments in technology-sharing initiatives and other projects that leverage our technological capabilities and global network, Lee added.

Seegene's shares continued to slump on Monday.

As of market close., the company's shares stood at 21,850 won, down 3.32 percent from the previous trading day.