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Vital Signs - Strategies beyond BRIC: An Update on the African In Vitro Diagnostics Market

  • November 2013
  • 7 pages
  • Frost & Sullivan
Report ID: 1902013


Table of Contents

This issue of Vital Signs, released on November 22, 2013, provides overview of global IVD market dynamics, discuss growth strategy, and explore early opportunities in the African IVD market. Additionally, a company spotlight is provided for Global BioDiagnostics based in Temple, Texas. The company is focused on developing affordable diagnostic tests with the mission to improve global health and have developed a point-of-care diagnostic for tuberculosis.

Strategies Beyond BRIC: An Update on the African In Vitro Diagnostics Market

The in vitro diagnostics (IVD) market is transitioning from one that is cost-sensitive to one that is fully cost-constrained. It used to be that diagnostic tests received the fewest healthcare dollars amongst care providers, but with healthcare reforms in the United States and Europe causing restraints on procedural reimbursements, providers across the board are seeing fewer dollars. The IVD industry in established markets is also facing reduced laboratory budgets due to the sluggish economy and customer consolidation as a result of hospital and laboratory mergers. Essentially, the IVD industry needs to accustom to a much lower baseline of healthcare spending in the United States and other established markets. To successfully compete in challenging market dynamics, a critical strategy will be to identify and capture underpenetrated markets such as the emerging markets of Brazil, Russia, India, China (BRIC) and beyond. This article will provide an overview of global IVD market dynamics, discuss growth strategy, and explore early opportunities in the African IVD market.

Global IVD Overview: CEO Version

IVD will be a $51 billion market worldwide in 2013 and is forecast to grow at least 7% annually through 2017. IVD tests are performed on specimens like blood, tissue or urine, and testing is conducted in clinical settings. In the United States, for example, hospitals are the largest consumer of IVD products, or about 60% of IVD sales. The next largest customer segment is independent laboratories, with 34%, followed by physician office laboratories at only 7% of IVD sales. Customer segments will vary considerably by region.

Relative to other healthcare industries like medical device and pharmaceuticals, IVD market revenues are small. To compare, the medical device industry generated $364 billion this year, or about seven times that of IVD. The pharmaceutical industry generated about $1 trillion this year, or almost 20 times that of IVD, but is growing only 3-4%. IVD growth is keeping pace with that of the medical device industry. The large sizes of the medical device and pharmaceutical industries also represent large cost burdens to the healthcare system. Not only is IVD a smaller cost burden, it also has significant potential in reducing healthcare costs and, therefore, will have an important role in the future of healthcare.

Diagnostic test volumes are the guiding principles in assessing IVD market segments. Test volume is driven by test utilization, which is greatly impacted by healthcare access. IVD has a bright market outlook since the valuation of diagnostic tests is improving, such as in the case of companion diagnostics, which are essential to appropriate use of targeted therapies. Furthermore, there is growing demand for advanced technologies, as evidenced by the success of molecular diagnostics and the rapid uptake of clinical next-generation sequencing.

Global IVD includes immunochemistry, point-of-care testing (POCT), self-monitoring of blood glucose (SMBG), molecular diagnostics, clinical microbiology, coagulation, hematology, and tissue diagnostics segments. Market segmentation is largely driven by platform or functional space in the laboratory rather than disease or specimen type. Two segments, immunoassay and molecular diagnostics, exhibit unique market trends. The immunoassay segment includes product revenues of immunoassay and clinical chemistry, and is notable due to its large segment size of more than $18 billion globally and impressive growth trajectory. In previous years, immunochemistry had been driven by the sheer volume of immunoassay and clinical chemistry tests that were performed in established markets—these are routine tests in a highly automated area of the laboratory. New Frost & Sullivan research finds that presently and in the future, the immunoassay segment is more and more driven by growing demand for automated analyzers in China and other emerging markets. Molecular diagnostics is also remarkable because it is the fastest growing segment, at more than 12% annually. Nucleic acid analysis in diagnostic testing has only entered patient health relatively recently. According to Frost & Sullivan forecasts, the molecular diagnostics segment will be comparable to the size of the POCT segment within three years.

The top competitors by market share, or Tier I companies, include Roche Diagnostics, Siemens Healthcare, Abbott Laboratories, Ortho Clinical Diagnostics (J&J), and Beckman Coulter-Danaher. Tier II companies include Alere, a market leader in POCT; Bayer Diabetes Care, a player in the very large SMBG segment; bioMerieux, the leader in clinical microbiology; and others. While Tier I companies are global conglomerates, Tier II companies compete through laboratory specialization. When comparing market share breakout from 2009 to 2012, we see the industry consolidating in just a three-year time span. It is becoming more challenging for a company to survive if it is not a Tier I or II player. Frost & Sullivan expects continuing consolidation with future M&A guided by gaining access to new regions and customer segments.

Business models in IVD are also shifting to reflect the changing approach to health. As a nation, the United States has determined that sick patients are very expensive to care for. One aspect of controlling escalating healthcare costs is a new care model that includes sickness prevention and wellness goals. Consequently, the size of impacted populations and thus the addressable market expands as we increase touch points across the continuum of care, which is sure to appeal to IVD competitors.

Global Growth Strategies in the Tissue Diagnostics Segment

The tissue diagnostics segment has faced daunting market challenges for many years. The tissue diagnostics segment is $2.5 billion worldwide and is growing at 7.2% annually. There are five primary market participants that control 87% of the market. The top three have been acquired by very large companies: Ventana by Roche, Leica by Danaher, and Dako by Agilent. Tissue diagnostics is a mature market with a high degree of consolidation. Demand for automation has reached market saturation and there has been little technological change in platforms and products.

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