April 1, 2011 (Vol. 31, No. 7)

Despite Posting Healthy Growth, Sector Falls Short of Ambitious Predictions Made in Past

Molecular diagnostics is one of those areas of healthcare where such bold predictions have been made that the resulting performance of test products and companies, which on their own could be considered revolutionary, have not always equaled the market’s imagination. Truth is, molecular products have met expectations and become dominant in some areas of medicine. In other areas, adoption is sluggish.

There are myriad challenges presented to companies operating in this market, as seen by the market share. While over 350 companies compete in the market, only a handful are dominant. The names that dominate molecular diagnostics in 2010 are not upstarts but familiar names: Roche, Abbott, Gen-Probe, Qiagen, BD, Siemens, and Cepheid.

Almost every day the discovery of new molecular markers for cancer, cardiac disease, diabetes, arthritis, neurological diseases, and psychiatric conditions are announced. More and more laboratories offer complex panels of tests that help physicians evaluate disease risk and make therapeutic decisions. Government and private healthcare payers have recognized the value of new molecular tools and have agreed to pay for them.

This renewed interest in IVDs in general and more particularly in molecular diagnostics has lead to the commercialization of a number of technological tools that make more sensitive and specific tests possible. Some of these technological innovations include: cost-effective, multiplexed testing platforms coupled with high-powered software capabilities. In addition analyses using saliva, urine, and blood instead of biopsied tissue make for more patient-friendly test systems.

Molecular diagnostics is becoming the dominant platform in clinical medicine and represents one of the fastest growing segments of the diagnostics market. It has emerged fully from research into clinical practice. Instrumentation now automates many of the sample-preparation and assay steps that were formerly labor intensive. New tests are being launched all the time.

Many molecular tests are CE Marked and FDA-cleared and many more are in development. The result is that molecular testing is indicated in many areas of healthcare including: cardiology, oncology, infectious diseases, inherited diseases, and disorders. Molecular assays have made rapid and timely information about infectious diseases and bacterial infections a reality.

On the business environment side, healthcare delivery trends and novel therapeutics help refocus the role of laboratory medicine in disease management to the patient by helping individualize diagnoses and treatments.

The primary growth drivers in the molecular diagnostics market overall, are the continued discovery of genetic markers with proven clinical utility, the increasing adoption of genetic based diagnostic tests, and the expansion of reimbursement programs to include a greater number of approved diagnostic tests. The most attractive growth areas are molecular tests for women’s health, infectious diseases, organ transplant testing, and oncology.

Molecular diagnostics is on an upswing. For the past five years the number of assays introduced has been growing at a remarkable clip. The track record for molecular testing is outstanding and a testament to the spirit of innovation in the IVD industry. In 1995 the world market for molecular tests was estimated at $360 million (2% of the market); this had grown to $940 million by 2000, $2,700 million by 2005, and $3,650 million in 2009 (10% of the market).

Kalorama Information estimates that the 2010 market for molecular (DNA) assays worldwide is estimated at $4,765 million. The market will grow 11% annually and will reach $8,085 million in 2015. That kind of growth is healthy and much faster than most of IVD. Yet, a few years ago there were predictions of twenty-something percent growth.

Actual Growth

Why this growth, but not the imagined growth? The expanding menu of molecular assays can be attributed in part to the publication of the human genome project and advances in functional genomics, bioinformatics, miniaturization, and microelectronics. At the same time there has been an increase in cancer patients, a proliferation of infectious diseases, and a growing interest in parental gene carrier analysis. This has contributed to growth in many IVD areas but especially in nucleic acid tests.

Many of these complex tests have been commercialized as lab-developed tests offered by reference labs and company-sponsored lab services. This has stalled growth in the commercialization of test kits and reagents used in hospital laboratories. This means that the market for clinical molecular diagnostics, outside of those for infectious diseases and histology, has stalled somewhat. However, with the increased market penetration of molecular assays, demand will decrease the cost of commercialized kits and the need for standardization will make commercial kits more attractive, especially for small labs. Key issues that impact on their market success include:

• Significant changes in healthcare delivery herald a new era in diagnostic testing needs. This new era requires on one hand very sophisticated, sensitive assays for infectious disease management, disease detection, and drug treatment decisions. On the other hand, these tests should be user friendly and cost effective. This bodes well for miniaturized molecular test platforms.

• There is a demand for faster test turnaround time from sample collection to results availability.

• There is a demand for a large menu of tests available on a single platform since molecular tests must account for variability in test targets. These tests must have high sensitivity for analytes in very small concentration, be quantitative, and must use small whole blood, urine, saliva, and CSF samples.

• There is a demand for test systems that are easy to use by nonlaboratory and laboratory personnel. This is especially crucial for the growing use of diagnostic assays in the physicians’ office setting, multidisciplinary medical clinics, and small to mid-sized hospitals.

The ensemble of these elements create a market for multiplexed, rapid, user-friendly test platforms such as microarrays, liquid bead arrays, and other user-friendly technologies such as Cepheid’s cartridge and Hologic’s Invader tests.

One of the major challenges facing molecular testing is getting stakeholders including payers, physicians, researchers, and regulators to work together to close the gap between research and clinical applicability. Physician education is another area that could advance the use of molecular assays. However, the contribution that these tests can make to patient outcome faces significant barriers including reimbursement issues, lack of standardization across test platforms, limited quality control products and programs, and the inability to fully interpret test data.

Emerging Markets

While in many in vitro diagnostic markets, growth is expected from emerging market sales, this is not the case in molecular testing. Overall, clinical molecular testing remains a phenomenon of the developed world. Some more industrialized second-tier countries such as Australia, Israel, Brazil, China, and India have strong molecular test industries. The U.S. market dominates the world market for IVDs in general and molecular tests in particular. Increased testing for infectious diseases in the EU and histological analysis of biopsied tissue fuels growth

In 2010, the U.S. and EU accounted for 79% of the world market for molecular tests. The healthy adoption of molecular tests for infectious diseases and investment in cancer tests fuel growth in this market. The expected continued growth of molecular tests will depend on their ability to perform in effectiveness testing that all developed nation healthcare systems are implementing.

There is hope for the future in emerging market molecular diagnostics. By 2015, it is anticipated that more affluent emerging nations (primarily Latin America and the Pacific Rim) will begin to participate somewhat in this market. This is because these countries have few options in routine DNA assays. So when they decide to catch up with more developed countries, they will jump the technology gap. They will be starting from scratch, with few legacy techniques in use. Therefore, they will start with the more sophisticated user-friendly and cost-effective systems that will be on the market at that time. This, in turn, will encourage the use of molecular tests in patient care.

Bruce Carlson ([email protected]) is publisher at Kalorama Information.

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