Loss of Trust After 'Overhyped IPO' and Five Years of Losses... Uncertain Outlook for Turnaround [At the Crossroads: Listed Companies] VUNO②

Rosy Projections Made at IPO Fall Short... Five Years of Deficits Continue
Market Cap Plunges 90%... Flagship Product Faces Hurdles in Evaluation, Patents, and FDA Approval

KOSDAQ-listed company VUNO has failed to escape the grip of losses for the fifth consecutive year, leaving behind the rosy performance outlook it presented at the time of its IPO. Although VUNO had assured a turnaround to profitability after going public, the company ultimately resorted to a rights offering for funding, and its stock price has plummeted by nearly 90% from its peak.

Furthermore, a series of uncertainties—including the New Health Technology Assessment of its flagship product, DeepCARS, ongoing patent litigation, and the process of obtaining approval from the U.S. Food and Drug Administration (FDA)—has made it difficult to expect a rebound in earnings going forward.

The medical AI startup, VUNO, was listed on the KOSDAQ in February 2021 through a technology-based special listing program. This type of listing permits companies with ongoing losses to be listed if they obtain an 'A' grade in technical assessment. Since these companies are loss-making, the IPO price is determined based on projected future earnings.

At the time, VUNO forecast in its securities registration statement that it would turn to profit beginning in 2022, a year after listing, with sales of KRW 20.4 billion and net income of KRW 6.4 billion. For 2023, it projected sales of KRW 37.5 billion and net income of KRW 20.7 billion, suggesting that its net profit margin would exceed 55%.

The foundation for these optimistic projections included the company's product line-up, the establishment of external distribution channels, and overseas partnership agreements. All of these were VUNO's own projections, lacking third-party credibility.

Using these figures, VUNO set its IPO price at KRW 21,000 per share, with a market capitalization of approximately KRW 227.5 billion. On the first day of trading, the stock surged by more than 50%, and the market capitalization increased to KRW 348 billion. Riding the momentum of the medical AI theme in 2023, the company's market cap approached KRW 750 billion at one point.

However, VUNO failed to achieve the results it promised at the time of its IPO. Instead, the company has recorded substantial losses for five consecutive years. The disparity between its projected and actual sales reached 70.3% in 2021, 59.4% in 2022, and 64.6% in 2023. Whereas it had stated it would achieve a net profit of over KRW 20 billion in 2023, the company in fact posted a loss of around KRW 16 billion.

In this situation, VUNO conducted a rights offering to pay down its debt, which led to a sharp decline in its stock price. As of the previous day, VUNO's shares traded around KRW 5,100, with a market capitalization of about KRW 70 billion—a drop of about 90% from its peak.

The outlook for a recovery in performance remains uncertain. In the first half of this year, VUNO's sales were KRW 12.2 billion, representing a 28% decrease year-on-year. In particular, sales of its flagship product, DeepCARS—which accounts for 86% of total revenue—fell by nearly 20%. Cumulative net losses also increased by 128% year-on-year to KRW 9.4 billion.

This was because the grace period for the New Health Technology Assessment for DeepCARS ended in March, resulting in fewer new contracts with medical institutions. The grace period system allows early market entry for medical devices and postpones the New Health Technology Assessment for two years.

VUNO expects the main results of the New Health Technology Assessment to be announced in the fourth quarter of this year, but the review timeline is not yet confirmed. If the company fails to pass, as much as 85% of its domestic revenue could disappear. Even if approved, should the reimbursement rate be set below the current rate charged to patients (KRW 7,000 per day), there are concerns about deteriorating profitability.

DeepCARS is also exposed to patent-related risks. VUNO is currently in a patent dispute with its direct competitor, AITRICS. In the patent infringement suit filed by VUNO in July, the company lost in its entirety and is now appealing. If VUNO ultimately loses, the value of its intellectual property may be undermined.

The company's plans for expansion into the United States—a new growth driver—also appear distant. In April, VUNO was notified by the U.S. FDA that DeepCARS’ 510(k) submission had failed to demonstrate substantial equivalence to already approved products.

VUNO has announced that it has started strategic discussions with a local consulting firm experienced in FDA 510(k) approvals, after redefining the intended use of DeepCARS. However, it has not disclosed which markets it will target or how its goal markets, as previously presented to investors, will be altered.

A company spokesperson stated, "VUNO remains committed to its global business, starting with entry into the U.S. market, and plans to reapply to the FDA within this year. The New Health Technology Assessment decision is also expected to be released in the fourth quarter, and we are hopeful for positive results considering our efforts to build clinical evidence."

This content was produced with the assistance of AI translation services.