|Graphic by Cho Sang-won|
By Nam Hyun-woo
As global pharmaceuticals and biotechs expedite their development of COVID-19 vaccines, anticipation is growing that makers of testing kits may no longer enjoy the soaring demand that lasted throughout this year, with investors dumping their shares in major diagnostics firms here.
Analysts and industry officials say, however, the demand for COVID-19 kits will remain intact, because of the risks of multiple waves still weighing on major countries due to the virus' high contagiousness, providing a slim chance of putting an immediate end to the COVID-19 pandemic with vaccines alone.
They also point out COVID-19 tests are capable of detecting feared variants of the viruses, thus kits will remain as one of the weapons in the world's battle against the coronavirus by playing a complementary role to vaccines and treatments.
According to Seegene, which became one of the world's leading diagnostics firms this year with its COVID-19 testing kits, its aggregated sales from January to September this year stood at 683.48 billion won ($617.36 million), up 675 percent from a year earlier. Operating profit during the same period grew 23.2 times to 418.68 billion won from 17.3 billion won.
In a breakdown of year-on-year quarterly earnings growth, the company's sales grew 200 percent in the first quarter, 837 percent in the second and 941 percent in the third quarter.
But the question now arises over whether or not this momentum will be sustained after vaccines are distributed.
In recent months, global pharmaceutical firms including Pfizer and Moderna announced promising interim results on their COVID-19 vaccine clinical studies, and this resulted in fluctuations in the share prices of Seegene and other Korean testing kit makers, based on investors' belief that vaccines may bring an end to the high demand for COVID-19 testing.
However, analysts say testing kits and vaccines are not exclusive of each other, but stand as complementary.
"Vaccine development does not necessarily mean the end of the COVID-19 pandemic," Hana Financial Investment analyst Sun Min-jeong said. "Given the case of China and other countries, one of the best ways to deter COVID-19's spread could be a large-scale diagnosis. Unfortunately, the COVID-19 pandemic is anticipated to continue its impact next year, and this generates stable demand for testing kits."
According to data from Seegene, the company now has a weekly production capacity of 5 million testing kits, up from 100,000 in March. Following the expansion, the company estimates it has produced more than 100 million COVID-19 diagnostic reagent kits so far. Reportedly, the company is keeping inventories at a stable level despite the rapid expansion.
"Generally, a long period of time is required to develop a certain vaccine to control a virus, and that is especially so in terms of highly contagious viruses such as the coronavirus," Sun said.
"Though the U.S. is seeing more than 200,000 new patients a day and European cities are entering lockdown, the number of fatalities is relatively under control," she said. "This appears to be attributable to the expanded distribution of test kits, because more patients are diagnosed in the early stages of the disease and get proper treatment promptly."
Market researchers are providing similar growth anticipation on the COVID-19 diagnostics market. According to an August report by BBC Research, the global COVID-19 diagnostics market will be valued at $35 billion this year and will grow an average 14.8 percent annually to reach $112 billion in 2027.
Test kit makers also say vaccines will not eat up the demand for testing, because proper diagnosis is a precondition for proper treatment or prevention.
"Historically, influenza and other virus-related diseases have been recurring in a regular pattern, though there are vaccines and treatments to them," an official at a local diagnostics firm said. "Despite pharmaceuticals and biotechs developing new vaccines, the global diagnostics market is growing at the same time, because precise diagnosis comes prior to proper treatment. Even if you have treatment for a certain disease, you also need diagnostics in order to monitor the efficacy of the treatment."
Seegene rises as game changer
Seegene is also anticipating solid demand for COVID-19 testing in the near future, adding it will focus on developing advanced test kits.
"For a year or two, Seegene will concentrate on test kits capable of simultaneous screening," an official at Seegene said. "Currently, we have kits that simultaneously screen COVID-19, Flu A, Flu B and respiratory syncytial virus, and plan to roll out COVID-19 test kits simultaneously screening a broad scope of other diseases. Seegene will do its utmost to develop various products meeting the growing demand for precise diagnosis."
Seegene's simultaneous detection kits have been exported to Europe since October. It is under U.S. Food and Drug Administration (FDA) review for approval.
Analysts expected Korean detection kit makers will likely capitalize on their improved position in the global market after the pandemic, allowing them to invest more in new products.
"Drawing the greatest expectation next year are the expanded opportunities in non-COVID-19 products, following Seegene's enhanced reputation," SK Securities analyst Lee Tal-mi said.
"Though Seegene is leading overseas diagnostics firms in technological capabilities, we are following them in terms of networking and business infrastructure," the Seegene official said. "Weathering the COVID-19 pandemic, Seegene will make investments in setting up business infrastructure to solidify its presence in the global market."