LG Chem mulls shuttering in-vitro diagnostics business

LG Chem Ltd. is considering an exit from the in-vitro diagnostics market to focus more on novel drug development as it lagged its smaller local rivals in riding the COVID-19 diagnostic reagent boom. 

According to sources in the industry on Sunday, South Korea’s largest chemicals maker is in talks with a local company to sell its in-vitro diagnostics business. 

An unnamed official from LG Chem said that the sale of the diagnostics business is one of many options though it is still in review.

The latest move comes after LG Chem has lost competitiveness in the rapidly changing diagnostics market, currently crowded with smaller rivals that moved swiftly to develop COVID-19 diagnostic reagents and kits during the pandemic.

LG Chem’s COVID-19 rapid antigen test kit and polymerase chain reaction (PCR) reagent gained marketing approval at home in May 2021 and July 2022, respectively, far later than its smaller local peers Seegene Inc. and SD Biosensor Inc., which got the nod for their respective COVID-19 diagnostic kits immediately after the global outbreak of the pandemic in early 2020.

EXIT NEARLY 40 YEARS AFTER ADVANCE

LG Chem overlooked the importance of COVID-19 diagnostic kits during the pandemic despite its established manufacturing infrastructure and massive capital.

The company first entered the in-vitro diagnostics market in 1986. Its mainstay products are diagnostic reagents and PCR devices for allergy and viral respiratory infection tests.

It operates a reagent factory in Osong, North Chungcheong Province and expanded the business after it advanced into the molecular diagnostics business in 2019.

But the company has stumbled between making long-term investments in new drug development, another pillar business in its life sciences division, and keeping up with the fast-changing trends in the diagnostics market.

Blood-based liquid biopsies to diagnose cancers and Alzheimer’s disease and AI-powered cancer imaging and diagnosis have emerged as new trends in the diagnostics market but LG Chem has not made timely investments in these sectors.

After failing to seize new growth opportunities, LG Chem has lost a few distinguished staff members to novice local diagnostics companies including Sugentech Inc., PCL Inc. and ProteomeTech Inc.

MORE FOCUS ON NEW MEDICINE DEVELOPMENT

The diagnostics business posted 40 billion won ($30.7 million) in sales in 2022, accounting for a mere 4% of its total sales of 910 billion won from the Life Sciences division.

As overall sales of the Life Sciences division have been on the steady rise from 660 billion won in 2020 and 760 billion won in 2021, LG Chem is expected to focus more on developing new medicines following the closure of the diagnostic reagent business.

It recently announced a plan to spend more than 1 trillion won on the research and development of new drugs through 2025.

The Korean company in January completed its acquisition of AVEO Oncology, a US oncology-focused biopharmaceutical company developing cancer treatments. It paid $571 million in cash to buy it as part of its efforts to nurture its biopharmaceutical capabilities.

It also spent 63 billion won to build a factory to produce medicines for clinical trials in Osong, Korea.

Write to Jae-Young Han at jyhan@hankyung.com

Sookyung Seo edited this article.