Innovations In Diagnostics

Next generation molecular and point-of-care diagnostics driving personalized healthcare

Executive Summary

Introduction to diagnostics

• The global market for in vitro diagnostics (IVDs) was worth $28.5bn in 2004 and is estimated to have exceeded $30bn in 2005. The marketplace is complex, with tests ranging from simple home use kits to automated centralized laboratories, and users ranging from hospitals to consumers.
• Routine clinical chemistry/immunochemistry testing accounts for around a third of the global IVD market, while glucose monitoring represents over 20% of sales. The fastest growing segment is molecular diagnostics, driven by advances emanating from the human genome project.
• The development of miniaturization and microfabrication processes will drive new point-of-care tests to provide rapid analyses at the patient's bedside and in the doctor's office.
• Consolidation of the IVD industry is highlighted by the dominance of the leading 15 companies, which account for almost 90% of the global IVD market. Roche is the major player with a 20% market share.
• The acquisition of the 11th largest IVD company, DPC, by Siemens Medical Solutions heralds a trend towards the emergence of new players in the market as in vivo and in vitro diagnostic technologies converge.
• Innovative technologies are expanding the capabilities of diagnostics, particularly molecular diagnostics which enable earlier and more precise diagnosis of disease. Molecular diagnostic tools are enabling personalized healthcare through patient selection for specific treatment and monitoring of disease progression.
• Although realizing the potential of new technologies will depend on overcoming challenges such as regulatory and reimbursement hurdles, new diagnostic opportunities will expand the IVD market to over $40bn by 2010.

Challenges and opportunities in diagnostic innovation

• The changing healthcare environment is influencing the development of new diagnostic products. The shift from hospital-based care to community care is driving demand for tests which can be used at the point-of-care. Integration of patient information within healthcare systems demands better diagnostic data management and connectivity. The cost pressures on healthcare budgets negatively impacts reimbursement decisions.
• The cost and time involved in overcoming the regulatory hurdles will impede market entry of innovations from smaller companies in particular. The major challenge will be to convince payers to pay for new, expensive tests.
• Demand for new diagnostics that improve clinical decisions, contributing to improved patient outcomes and saving overall health costs will drive uptake of innovation.
• A key challenge for IVD companies will be to balance the development of new technologies which improve turnaround times, specificity and sensitivity with the need to produce cost-effective systems.
• A premium will be placed on communication – with payers, providers and consumers. Dissemination of information to educate different audiences about the value of new diagnostic tools will be critical in gaining acceptance in the marketplace.
• Better communication between diagnostic companies and the pharmaceutical industry will foster development of pharmacogenomics. The trend towards personalized medicine will lead to the blurring of boundaries between in vitro and in vivo diagnostics, pharmaceuticals and information technology. Medical maging companies are in the vanguard of convergence of technologies.

Molecular technology innovations

• Development of new technologies will enable molecular diagnostics to fulfill their clinical potential. Infectious disease testing has led the molecular diagnostics market but new opportunities in the molecular oncology and pharmacogenomics fields are emerging as new molecular and immunological targets are identified.
• PCR is the dominant technology in molecular diagnostics. Small companies in particular will benefit from the expiration of the first patents held by Roche for PCR amplification.
• Alternative technologies to PCR utilizing nanotechnology hold promise for new tests. The first panel from Nanosphere for detecting hypercoagulation is pending US approval. Electrochemical DNA biosensors under development may also be alternative to PCR and could be a cost-effective replacement for standard clinical microbiology.
• Technologies such as FISH could provide advantages over immunochemistry, such as increased accuracy.
• DNA methylation technologies offer a different approach to DNA First Code methods, with potential for early disease diagnosis, molecular classification, and predicting treatment response.
• Advances in pharmacogenetics will demand multiplexing technology that is capable of complex detections for several samples. Microarray technology is currently in clinical use. The challenge for manufacturers is to get more information on small arrays and to reduce the cost.

Innovation in infectious disease diagnostics

• Infectious disease diagnostics account for 75% of the molecular diagnostics market. Their main use has been to identify sexually transmitted diseases but new technologies offer advantages over conventional methods for a broad range of infectious diseases that are responsible for 25% of deaths each year.
• Sensitive rapid tests have been developed to detect the avian influenza virus H5N1 and SARS that will contribute to early identification of these emerging diseases, enabling rapid preventive measures and treatment. Accurate, early detection of the causative agents will be vital in the event of a pandemic.
• Molecular technologies are being developed to meet the challenge of differential diagnosis of respiratory disease.
• Future challenges include the need to improve the diagnostic tools for infections, such as gonorrhea and sepsis in neonates, and for hospital-acquired infections. Addressing unmet diagnostic needs will focus on developing tests for previously unknown or difficult to culture organisms.
• Research in the biodefense field is yielding technologies which have potential application in the healthcare field, offering the prospect of a test that will identify any infection present in a sample without the need for culturing or using a specific organism test.

Personalized medicine

• Pharmacogenomics – the combination of genomic information and pharmacology will play a crucial role in the healthcare model of the 21st century in which personalized medicine will radically change medical practice. Pharmacogenomics promises to help identify long-term health risks in individuals, select appropriate therapies and dosing regimens, and reduce the risks of adverse drug effects.
• Incorporation of pharmacogenomics in the drug development process offers potential savings in time and expense to drug companies by helping to stratify patients for clinical trials. The use of genotyping to evaluate drug-metabolizing enzymes will yield new information, modifying labeling of existing drugs and guiding development of targeted therapies.
• Pharmacogenetic tests will provide the key link in personalized medicine, identifying patients most likely to respond to a particular drug (such as the Invader UGT1A1 and irinotecan), develop resistance to treatment (such as the Trugene HIV-1 Genotyping kit and antiretrovirals) or require modifications to dosage in a range of drugs (such as the AmpliChip CYP450). Regulatory guidance encourages co-development of companion DNA diagnostics and drugs.
• The process involved in identifying and validating biomarkers – integral tools in the development of personalized healthcare – and developing a commercial diagnostic test is lengthy with a low success rate. Among promising candidates being studied are biomarkers for diabetes, heart disease and cancer.
• Still in their infancy, molecular biomarkers are likely to have most immediate impact in the oncology area where markers are established in clinical practice. Demand for new cancer assays, which are likely to include multiple markers, will be heightened by the introduction of new targeted cancer drugs.
• Technological advances in developing pharmacogenetic tests and new drugs using pharmacogenomic data will need to overcome several hurdles, such as regulation, reimbursement, physician education and societal concerns, before being adopted into mainstream medicine.

Point-of-care testing

• Accounting for around a third of the global IVD market, rapid tests performed at the point-of-care by healthcare professionals or by patients in their own home are revolutionizing the diagnostics sector. Driven by the need for earlier, accurate diagnostic information to guide critical clinical decisions, technology advances including miniaturization are enhancing diagnostics' role in healthcare systems.
• Products used in diabetes care account for the largest segment of the PoC market. New technology for diabetes screening could obviate the need for fasting prior to testing, while improvements to glucose monitors promise more convenient products to help patients manage their diabetes.
• Improved tests for rapid detection of infections offer the prospect of PoC tests for Strep B, urinary tract infections and tuberculosis.
• Management of patients with heart failure and suspected stroke will be improved with new marker panels. A simpler test for detecting high cholesterol levels will facilitate therapy-decisions, especially where statins are available from harmacies without a prescription.
• An inexpensive urine test for bladder cancer offers advantages over conventional cytology testing, including ease of use and improved accuracy, with potential for saving costs as well as lives.
• The challenges faced by home-use tests for HIV underline the need for quality control assurances and clear instructions to avoid misuse by patients. To facilitate the adoption of PoC tests by healthcare professionals and patients, devices must be convenient and simple to use, while also meeting the connectivity requirements of healthcare systems. The cost of meeting design criteria while producing affordable tests will pose a challenge for manufacturers.

Competitive landscape

• The global IVD market is dominated by a handful of large players with several hundred smaller players competing for market share. Further consolidation within the sector can be expected as pharmaceutical companies seek acquisitions in the diagnostic field to complement their drug development programs in the emerging personalized medicine era.
• Indicative of the driving force of innovation, US companies invest some 35% of revenues in R&D activities. Small innovative companies are providing new technologies which feed into the development of products by leading players. Such companies also represent potential acquisition targets for corporations seeking to access new market opportunities.
• Leading IVD companies Roche and Abbott illustrate the synergies between diagnostics and pharmaceuticals. Both companies have development projects for new biomarkers in the fields of oncology and infectious diseases.
• Underlining the growing significance of molecular technologies, leading medical technology company Becton Dickinson has increased its participation in the molecular diagnostics sector with the acquisition of GeneOhm, which specializes in healthcare-associated infections, such as MRSA. Becton Dickinson's diagnostics revenues are on course to match those of its medical device sales in 2006.
• Companies specializing in diagnostics, such as Gen-Probe, Inverness Medical Innovations and Tm Bioscience, are targeting niche markets. While small companies remain vulnerable to competition from larger players, they have established their market presence through differentiated technology.
• Innovative technology companies represent a valuable source for larger companies and laboratories. Affymetrix' GeneChip technology is licensed to several top players, including Roche and Johnson & Johnson. Nanogen's NanoChip electronic microarray platform and PCR reagents enable laboratories to develop multiple assays with universal parameters.

Jeanette Marchant is principal of JM Communications which provides consultancy services to market intelligence organizations, specialist healthcare publishers, regulatory agencies and healthcare companies. She has almost 30 years' experience in writing on international healthcare business, including four years as editor of Clinica World Medical Device & Diagnostic News. She is the author of numerous market reports for the pharmaceutical and medical technology industries.

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*Report Published: September 2006

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