Cut Loss or Hold On... 'Diagnostic Kit Dilemma'

Excluded from the KOSPI 3000 Market
Leading Stocks Like Seegene Fall Over 30% Since November Last Year
Beneficiaries Shift to Vaccines and Therapeutics
Experts Say "Growth Trend Continues"

[Asia Economy Reporter Park Jihwan] Investors in diagnostic kits are becoming increasingly concerned. Although the domestic stock market has reached new all-time highs, with the KOSPI entering the 3000 era and the KOSDAQ approaching the 1000 era, the diagnostic kit sector has shown little sign of recovery and remains sidelined.

According to the Korea Exchange on the 6th, the stock prices of COVID-19 diagnostic kit companies have fallen by more than 30% on average since November last year.

Seegene, considered the leading stock, dropped 29.9% from November last year to the day before yesterday. During the same period, Suzen Tech (-40.8%), EDGC (-25.6%), and Labgenomics (-37.7%) showed similar trends. This contrasts with the sharp increase in new COVID-19 cases during this period. In Korea, the number of new cases was only in the hundreds in early November, rose to the 500s by the end of November, and increased to the 1000s by the end of December.

As the situation progressed, individual investors holding diagnostic kit stocks have grown increasingly worried. They are repeatedly debating whether to cut losses (selling stocks at a price lower than the purchase price to avoid further losses) or to hold on, as the stocks show no signs of rebound. One individual investor said, "Despite the ongoing spread of COVID-19 both domestically and globally, and the sustained demand, it is puzzling why diagnostic kit stocks keep falling. I believe holding on is still advantageous, but I am carefully considering whether to cut losses."

The recent weakness in diagnostic kit stocks is interpreted as a shift in COVID-19 beneficiary stocks from diagnostic kits to vaccines and therapeutics. With the start of COVID-19 vaccinations, capital has moved massively to sectors related to vaccines and therapeutics, which are essential for ending the pandemic. Investors have also turned their attention to companies expected to be contract manufacturers of vaccines for Pfizer and Moderna, such as Green Cross and Samsung Biologics. These stocks rose 24.4% and 5.4%, respectively, over the last four trading days around the year-end and New Year.

Beyond vaccines, attention is also focused on therapeutic developers. Celltrion, which completed global Phase 2 clinical trials for antibody therapeutics, and Genexine, developing a nasal spray therapeutic, are notable. Celltrion has maintained a 6% rise since announcing on the 28th of last month its conditional approval application to the Ministry of Food and Drug Safety for CT-P59, an antibody therapeutic made from neutralizing antibodies of recovered COVID-19 patients. Genexine, conducting Phase 2 clinical trials in the U.S. for a nasal spray COVID-19 preventive therapeutic, also rose 11.36% during this period, attracting investor interest.

However, experts generally do not view the outlook for the diagnostic kit market this year as bleak. They believe growth will continue, with increasing exports driven by ongoing diagnostic demand.

Regardless of the presence or absence of COVID-19 vaccines and therapeutics, demand for diagnostic kits is expected to continue expanding. Sun Minjung, a researcher at Hana Financial Investment, stated, "The development of COVID-19 vaccines does not mean the virus will be eradicated. Even for antibody diagnostic kits, usage can expand further after vaccine development."