[This Week's Medical Insight] i-SENS Enhances Value with Continuous Glucose Monitoring Device

CGM Listed for Health Insurance Coverage... Targeting a 10 Trillion Market
Acquisition of Agamatrix... Targeting the US, Europe, and Latin America

Editor's NoteDear individual investors dreaming of successful investments. How well do you know the stocks you buy with your own money? In the online environment flooded with unrefined information, Asia Economy aims to be your hands, feet, eyes, and ears by delivering accurate information about companies. Each week, we focus on companies ranked in the top 10 by stock inquiries on the financial information provider FnGuide, providing basic information as well as analysis of related companies such as partners, customers, and investors. We will explain companies' financial conditions, performance status, and future value in an easy-to-understand manner. We meet you every week under the name "This Week's Watchlist," highlighting stocks of interest. This week, we analyzed i-SENS, a blood glucose meter manufacturer that has attracted attention as a diabetes-related stock.

The stock price of i-SENS, a company specializing in self blood glucose meters, has recently surged. On the 18th, i-SENS hit the upper price limit, and on the 19th, it even reached an intraday historical high of 39,550 KRW. As the stock price soared, it ranked within the top 10 most searched stocks by investors last week according to financial information provider FnGuide.

The reason for i-SENS's stock price increase is that its new product, the Continuous Glucose Monitor (CGM), was listed as a reimbursable item by the National Health Insurance Service. The market expects that as CGM sales begin to increase significantly, i-SENS will be able to take a step forward.

Continuous Glucose Monitor Covered by Health Insurance... Performance Trending Upward

i-SENS develops, manufactures, and sells medical sensors and measuring instruments based on electrochemical technology and biosensor technology. Its main businesses are the 'blood glucose meter' segment, which allows both diabetic patients and healthy individuals to measure their blood glucose levels themselves, and the 'point-of-care testing (POCT)' segment, which includes diagnostic equipment for hospitals. The sales proportion is 80% from self blood glucose meters and disposable consumables such as strips that collect blood. The remainder comes from hospital POCT products and consumables like cartridges.

The performance of blood glucose meters is compared across four aspects: accuracy and precision, which relate to the reliability of measurement results, and convenience factors such as blood sample volume and measurement time. i-SENS maintains levels that surpass or are comparable to major manufacturers in accuracy and precision. This has been verified through quality certifications from various research institutions and original design manufacturer (ODM) companies.

In particular, i-SENS possesses world-class technology with low blood sample volume and fast measurement time. The self blood glucose meter 'CareSens,' first launched in 2003, features a 0.5μL (microliter) blood sample volume and a 5-second measurement speed, making it a groundbreaking product in the market.

i-SENS has recently gained attention because the National Health Insurance Service announced it would cover the cost of continuous glucose monitoring electrodes (CGM sensors) for type 1 diabetes patients who administer insulin. Accordingly, i-SENS plans to launch the CGM CareSens Air in September.

The existing self blood glucose meter (BGM) tests blood glucose by drawing blood from the fingertip. CGM, however, involves inserting a sensor directly into the skin to continuously monitor blood glucose levels. It offers greater convenience compared to BGM by reducing the pain of frequent blood draws. However, while BGM costs around 10,000 to 30,000 KRW, CGM is priced at 200,000 to 300,000 KRW per month. The National Health Insurance plans to subsidize 150,000 KRW per CGM sensor per month.

As of 2021, there are approximately 8.4 million type 1 diabetes patients worldwide, expected to increase to 17.4 million by 2040. Notably, over 60% are aged 20 to 59, indicating a rising trend among younger patients. Consequently, the CGM market is also growing. The global CGM market was estimated at 10 trillion KRW last year. Currently, the global CGM market is dominated by three companies: Abbott, Dexcom, and Medtronic.

Researcher An Joo-won of DS Investment & Securities said, "Starting domestically, sales will expand globally next year through European product approval. Although imported products are sold domestically, i-SENS has differentiation compared to existing continuous glucose monitors by improving convenience and usage duration, so market penetration is expected to rise rapidly."

Researcher Park Jong-hyun of Daol Investment & Securities said, "i-SENS originally planned product approval in Q3 this year and type 1 diabetes reimbursement registration in Q4, but reimbursement registration was completed earlier in July. The domestic CGM launch is scheduled for September, and related sales will begin in earnest next year." He added that i-SENS plans to launch CGM products in Europe next year, New Zealand in 2025, and the United States in 2026, expecting sales of 117.8 billion KRW in the CGM segment alone by 2027.

Even before 'value-up' through CGM, i-SENS has shown steady growth. On a consolidated basis, i-SENS's sales grew over 50% from 173 billion KRW in 2018 to 264.8 billion KRW last year. Sales increased annually with its core businesses BGM and POCT alone. However, operating profit declined last year due to one-time costs including 2.3 billion KRW in pilot production costs from new line expansion at the Songdo plant, 2.5 billion KRW in inventory asset provisions, and 4.7 billion KRW in year-end bonuses and stock compensation expenses.

The securities industry expects i-SENS's performance to continue growing this year. According to FnGuide, i-SENS's consolidated sales and operating profit for this year are projected at 287.6 billion KRW and 23.9 billion KRW, respectively, representing increases of 8.6% and 20.7% compared to the previous year.

Solid Financial Structure... Expanding US and European Markets through M&A

Based on steady performance growth, i-SENS maintains a sound financial structure. As of the end of Q1 this year, i-SENS's consolidated total assets amounted to 454.1 billion KRW. Total borrowings were 100.8 billion KRW, mostly long-term loans from institutions such as the Korea Development Bank for facilities and operating funds. Additionally, it holds 61.9 billion KRW in cash equivalents, resulting in net borrowings of 38.8 billion KRW, indicating low liabilities relative to assets. The debt ratio has been maintained in the 40-50% range for several years.

With this solid financial base, i-SENS is also pursuing mergers and acquisitions (M&A) to create business synergies. In May, i-SENS announced it would acquire global blood glucose meter company Agamatrix for 27 million USD (approximately 36.1 billion KRW). The acquisition will be conducted through purchasing existing shares and converting existing bonds into equity. The actual cash outlay is estimated at about 26.8 billion KRW.

Founded in 2001, Agamatrix supplies blood glucose meters to major pharmaceutical distributors such as CVS Pharmacy in the US, as well as Sanofi and Alliance Healthcare in Europe. Last year, it recorded sales of 43.85 million USD and operating profit of 3.19 million USD. Agamatrix has been a long-term customer of i-SENS since 2006, supplying its own meters and i-SENS's blood glucose test strips in the US and Europe. This acquisition is expected to raise i-SENS's market share in the UK to the 20% range.

The market is positively evaluating i-SENS's value-up through new businesses and M&A strategies. Templeton Investments, known as a global value investment firm, increased its stake in i-SENS from 6.27% to 7.32% through on-market purchases.

Researcher Kim Choong-hyun of Mirae Asset Securities analyzed, "Through this acquisition, i-SENS will secure new distribution channels in the US and Europe, benefiting not only its existing BGM business but also the CGM business. An expansion of about 40 billion KRW in sales is expected." He added that Agamatrix's operating profit is also around 4 to 5 billion KRW, which is expected to improve i-SENS's overall operating profit margin by about 1 percentage point.