Safety-assured Devices Benefit

medical equipment
Medical equipment stocks were given a big boost by the Korean government's recent deregulation initiative.

Medical equipment stocks has received a big boost from the government’s announcement that it would significantly ease regulations on medical devices and reduce the time it takes for new medical devices to enter the market. The beneficiaries of the government’s belated deregulation initiative are stocks related to advanced technologies such as in vitro diagnostic devices, robot surgery, and 3D printing medical imaging.

The KOSDAQ index fell 4.88 points (-0.61%) on July 20, but stocks related to medical devices rose including Infinite Healthcare (25.63%), Palmswell Bio (12.37%), Sewoon Medical (4.76%), I-sens (1.55%), and Inbody (0.38%). Medical device stocks attracted attention as the government announced ways to reform regulations on medical devices the previous day.

The government has decided to shift from a positive regulatory approach to a negative system, allowing producers of safety-assured medical devices to bring their products to market before undergoing a safety evaluation by authorities concerned. This made Investors pay attention to produers of in vitro diagnostic equipment that has lower risk compared to other medical devices. The new regulatory system will reduce the time for these devices to enter the market from a maximum of 390 days to 80 days.

I-sens produces a device that allows diabetic patients to measure their blood sugar level by themselves. In particular, the company is developing a continuous glucose monitoring system (CGMS), a technology that allows patients to measure their blood sugar level 24 hours a day. The patient whom President Moon Jae-in met the previous day when he announced the regulatory reform at Bundang Seoul National University Hospital, is also suffering from diabetes.

Palmswell Bio, a manufacturer of pharmaceutical raw materials, received permission to export products as its subsidiary Cube Bio developed an in vitro cancer diagnostic kit using urine.

Genomic Tree, a company listed on Konex, plans to launch a product for early diagnosis of colorectal cancer within this year using molecular diagnostic technology.

The government’s deregulation initiative is expected to allow advanced medical devices, including devices that use artificial intelligence (AI), 3D printing, and robots, to enter the market sooner.

The Korea Food and Drug Administration (FDA) plans to set up a “Rapid Permission Guideline” for companies to get permission while developing state-of-the-art medical equipment. Companies attracting attention are Curexo, which developed a robot that cuts the knee joints into artificial joints, and Infinite Healthcare, which produces medical image information software.

The domestic medical device market is continuously growing in size. According to the FDA, the domestic medical device market last year was 6.19 trillion won, exceeding 6 trillion won for the first time in history. Beyond the traditional dental medical devices, it is getting more diverse to include laser treatment, diagnostic kits, and ultrasonic devices. Unlike pharmaceutical and bio stocks, many medical equipment companies show steady earnings.

According to WISEfn, a financial information provider, the operating profits of I-sense and Seegene, manufacturers of diagnostic devices, are expected to grow by 17.5% and 8.6% this year, respectively. Choi Yoo-jun, a researcher at Shinhan Financial Investment Corporation, said, "Unlike bio companies, which do not generate profits until the clinical tests of pipeline (new drug candidates) are finished, medical devices deliver stable results through exports. Its market capitalization is smaller than bio so it won’t be able to replace bio totally, but it can be an alternative.”

Some say that the healthcare industry is a matter of people's health, and the pace of regulatory innovation will not meet the expectations of investors. Kim Chung-hyun, a researcher at Mirae Asset Daewoo, said, "The items targeted by the government’s deregulation package were medical diagnosis and medical productivity enhancement devices. These have relatively low safety concerns. One should not expect deregulation throughout the whole medical device industry.” The Presidential Office stressed, "A negative regulatory approach will be applied only to medical devices whose safety is proven."

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