[IPO Spotlight] SD Biosensor, Key Factor in Corporate Value is 'M&A'

World's First Emergency Use Authorization for COVID-19 Antigen Test Kit
Sales of 1.18 Trillion KRW Last Year... 23 Times Increase from Previous Year
Pursuing KOSPI Listing... Estimated Minimum Corporate Value of 6.8 Trillion KRW

[Asia Economy Reporter Hyungsoo Park] SD Biosensor, which last year became the first in the world to obtain the World Health Organization (WHO) Emergency Use Listing (EUL) for a COVID-19 antigen diagnostic kit, is entering the domestic KOSPI market. The expected market capitalization is at least 6.8 trillion KRW. With vaccine distribution leading to a decrease in new COVID-19 cases in the United States and the European Union (EU), there are forecasts that demand for COVID-19 diagnostic kits will decline. SD Biosensor is also pursuing large-scale mergers and acquisitions (M&A) to establish a foundation for sustained growth after its listing.

According to the Financial Supervisory Service’s electronic disclosure system on the 3rd, SD Biosensor has begun the public offering process for its initial public offering (IPO). The proposed price range is 66,000 to 85,000 KRW per share. The company plans to issue 10,368,600 new shares and add 5,184,300 existing shares, making the total offering size 15,552,900 shares.

Well known for selling COVID-19 self-test kits, SD Biosensor is a leading company in the COVID-19 diagnostic market. The Standard Q, developed by SD Biosensor, uses the principle of antigen and antibody reactions to diagnose the presence or absence of disease within 10 to 30 minutes using a very small sample. This enables rapid response when new infectious diseases emerge. SD Biosensor received emergency use approval in South Korea in February last year. It has also been approved by the WHO and the EU, allowing for exports. Last year, overseas sales accounted for a significant portion, with Europe making up 41% and India 32% of regional sales.

Last year, SD Biosensor recorded sales of 1.6861 trillion KRW, operating profit of 738.3 billion KRW, and net profit of 621.6 billion KRW. The sales scale grew 23 times compared to 73 billion KRW in 2019. The export of COVID-19 diagnostic kits drove this external growth. In the first quarter of this year, SD Biosensor posted sales of 1.1791 trillion KRW, operating profit of 576.3 billion KRW, and net profit of 437.5 billion KRW. The company continued its growth based on technological competitiveness that allows testing for variant viruses as well.

Joint lead managers NH Investment & Securities and Korea Investment & Securities selected KOSDAQ-listed Seegene, and New York Stock Exchange-listed Thermo Fisher Scientific and PerkinElmer as comparable companies to determine the proposed price range. They applied a discount rate of 24.2% to 41.1% to the average price-to-earnings ratio (PER) of 14.5 times from these three companies.

Although SD Biosensor has shown remarkable growth since last year, investors are concerned about whether the company can maintain its sales and profit scale going forward. Almi Lee, a researcher at SK Securities, explained, "Since COVID-19 vaccinations are underway, maintaining the scale of performance is the biggest issue. Sales are expected to occur based on home-use diagnostic kits that can quickly diagnose after vaccine release and diagnostic kits ordered from the WHO for support to underdeveloped countries."

SD Biosensor is also planning M&A to secure growth engines. Of the funds raised through the IPO, 436.6 billion KRW will be used to acquire stakes in companies with outstanding technology or those possessing distribution networks in advanced markets. Through companies with advanced market distribution networks, SD Biosensor is expected to grow into a company that covers the entire business from diagnostic device production to distribution.

SD Biosensor will accept public subscription for shares from general investors over two days, from the 15th to the 16th.