Shares of i-SENS, a domestic continuous glucose monitor (CGM) corporations, are surging on the back of improving earnings, global supply contracts, and the start of U.S. clinical trials for a next-generation product. However, there is still concern about a potential threat to management control due to the possibility that Arkray, a Japanese diagnostics device company that has steadily increased its equity since last year to become the No. 2 shareholder after CEO Cha Geun-sik, could further expand its equity and due to the overhang from convertible bonds (CBs).
On the 22nd, according to the industry, i-SENS recently saw a sharp rise in its share price as the prospect of entering the European market with a next-generation CGM beyond personal CGMs became visible, coupled with news that the U.S. Food and Drug Administration (FDA) had started clinical trials. In fact, on the 12th the share price jumped more than 21% from the previous day and continued its upward trend through the 20th.
Expectations for global business expansion are cited as a driver of the share price rise. i-SENS recently signed a CGM private-label supply contract with LifeScan, a U.S. diabetes management corporations. When i-SENS supplies the product, LifeScan plans to roll it out sequentially in Europe under its OneTouch brand. The company plans to enter four European countries—Germany, Portugal, Belgium, and Ireland—early next year.
LifeScan has distribution networks across tens of thousands of pharmacies and clinics and hospitals throughout Europe, and it maintains a leading position in major countries' blood glucose meter (BGM) markets, which is expected to speed up i-SENS' European expansion.
Earnings are also showing an improving trend. On the 11th, i-SENS said last year's revenue was 315.7 billion won and operating profit was 8.3 billion won. Revenue rose 8.4% from a year earlier and operating profit increased more than 200%. Last year's CGM revenue was 17.6 billion won, exceeding the goal (15 billion won) set at the start of the year.
In addition, the first patient has been enrolled in the FDA investigational clinical trial for the next-generation product CareSens Air 2. This is a required step for entering the U.S. CGM market, and the company plans to review whether to enter pivotal trials in the fourth quarter of this year based on the results. The product has also completed pivotal trials for approval from the Ministery of Food and Drug Safety and European CE certification and is currently undergoing the approval process, while conducting parallel trials in children and adolescents.
However, variables surrounding the governance structure remain. Arkray, a Japanese diagnostics device company that has collaborated with i-SENS for more than 10 years, bought 10.40% equity in i-SENS last year, rising to the No. 2 shareholder after CEO Cha Geun-sik (11.06%).
Among major shareholders with 5% or more are, in addition to CEO Cha and Arkray, co-CEO Nam Hak-hyeon (7.25%) and Cha Gyeong-ha (5.17%), the eldest son of CEO Cha and Head of Team of the management support team.
The market is also focused on recent exercises of conversion rights. On the 19th, i-SENS disclosed that 610,201 new shares, worth 10 billion won, will be issued due to the exercise of conversion rights by CB investors. This is 2.21% of total outstanding shares, meaning about one-fifth of the 50 billion won CB issued in 2024 has already been converted into stock.
In the securities market, there is an interpretation that the conversion decision coincides with the recent share price strength. As the share price far exceeded the conversion price, it became more favorable for CB holders to convert into stock rather than keep the bonds.
However, there are concerns in the market that if Arkray secures the remaining CB volume, its equity ratio could rise above 20%. In the past as well, the possibility of Arkray further increasing its equity has been cited as a key risk factor for the company, and even the possibility of a hostile merger and acquisition (M&A) by Arkray has been raised.
If all conversion rights on the 50 billion won CB issued by i-SENS are exercised, the maximum number of additional new shares that could be issued would reach 10.43%. Theoretically, if Arkray secures all remaining CBs and converts them into shares, it could secure more than 20% equity, well above CEO Cha Geun-sik's equity, raising the possibility of a management control dispute.
The remaining CB volume is also cited as a potential risk. If further conversions follow, the equity structure could be shaken. An industry official said, "The CGM growth momentum is clear, but it is necessary to check both the possibility of Arkray increasing its equity and the CB overhang (potential sell volume)."