***This article has been updated as of August 17, 2010. Updates appear at the end of the story.***
Two key trends will shape the genomic market over the coming decade, both of which are tightly linked to the advancement and application of technology. The first is the rapid advance of sequencer technology, which is resulting in declining costs for nucleotide sequencing and rapid technology democratization. The second is the push for technology application, which is leading to a shift in the center of gravity of genomics, from basic research to applied (i.e., translational) research, bringing high-value commercial and clinical applications in sight.
These key trends create two strategic imperatives—suppliers must add value to next-generation sequencing workflows in order to maintain healthy growth in the core genomic research business; they must also take the lead in developing existing product lines and capabilities into commercial and clinical solutions.
Genomic products comprise instruments and consumables, as well as associated hardware, software, and services directly involved in the study of DNA and RNA. In the near to medium term, the market is attractive, both from a size and growth perspective. Scientia Advisors’ research shows genomic revenue of $5.8 billion in 2009, projected to grow to about $9 billion by 2014.
At the highest level, the genomic market is driven by increasing government research funding in the U.S. and abroad. Genomic products capture a large share of these funds thanks to a steady stream of high-profile projects such as the 1000 Genomes Project, the Cancer Genome Project, the Human Microbiome Project, an anticipated wave of genome-wide association studies, and the potential for large-scale de novo sequencing projects.
Technological advances in sequencing are fundamentally changing the genomic landscape. Since their launch in 2005, next-generation sequencers (NGS) have quickly captured the high end of the sequencing market.
Genome centers and genomic service providers across the globe were first to jettison fleets of traditional sequencing instruments in favor of NGS’ low cost per data point. Core academic labs followed suit, tempted by the broad utility of the platforms, which can be used for variant discovery, gene expression, and gene-regulation studies. Scientia estimates that the installed base of next-generation sequencers reached about 1,000 instruments worldwide by the end of 2009, with annual sales approaching $600 million.
Moving forward, three factors may influence the growth prospects for NGS:
- The continued penetration of the traditional sequencer market, specifically the installed base of about 13,000 low-throughput capillary electrophoresis instruments.
- The increasing breadth of applications that can be performed on a sequencer, which will capture share from adjacent products such as gene-expression arrays.
- The product cycles in the NGS market.
Scientia estimates that these powerful factors could trigger up to $1.8 billion in NGS sales in 2014 with continued, albeit slower, growth through 2020.
The shift toward applied research is resulting in a rapid expansion of commercial and clinical opportunities for genomic tools. Over the past decade, the NIH has provided hundreds of billions of dollars in biomedical research, yet the benefits are debatable.
In genomics specifically, the completion of the Human Genome Project, the HapMap project, and hundreds of genome-wide association studies have not directly resulted in new FDA-approved tests or therapies. In the future, politicians are more likely to support research that will have a visible impact in the near to medium term.
Updates As Of August 17, 2010
Scientia Advisors has applied a new market segmentation model; it now divides the market for DNA/RNA analysis tools to include human genomics research, ag biotech, molecular diagnostics, and other applied markets. This segmentation reflects the growing significance of the agbio tools segment, which includes sales to academia, service providers, crop companies, livestock companies, biofuel companies, and other institutions for the analysis of plant and animal genomes as well as associated microorganisms, parasites, and any other pest.
Scientia’s research estimates:
- Human genomics research will grow from $4.6 billion in 2009 to $7.3 billion in 2014
- Agbio from $0.6 billion in 2009 to $2.4 billion in 2014
- Molecular diagnostics from $4.6 billion in 2009 to $8.9 billion in 2014
- Other applied markets from $ 0.5 billion in 2009 to $0.8 billion in 2014
With regards to the sequencing market, Scientia estimates that next-generation sequencing products from NGS companies had sales approaching $600 million for 2009 with an installed base in the neighborhood of 1,300–1,500 instruments. Moving forward, the firm expects these suppliers to generate more than $1.5 billion in sales in 2014. Looking at the sequencing market more broadly, Scientia forecasts sequencing technology overall could have sales of up to $3.6 billion in 2014 (including Sanger sequencing, next-generation sequencing, third-generation sequencing, and any other).
Brian Clancy is senior analyst and Harry Glorikian is managing partner at Scientia Advisors.