Molecular Diagnostics: Market Segmentation and Opportunities October 2010 This market report is published by DeciBio, LLC. All rights reserved. Reproduction or redistribution of this report in any form is prohibited without the prior consent of DeciBio, LLC. While this report is believed to be accurate at the time of publication, DeciBio accepts no liability for the accuracy or completeness of the information herein. DeciBio, LLC 1428 Kelton Ave #201 Los Angeles, CA 90024 Phone: 213-915-8283 Email: info@decibio.com www.decibio.com
Table of contents Abstract 2 Highlights 3 Introduction 4 Context 4 In vitro diagnostics market overview 4 Molecular diagnostics market overview 6 Introduction 6 Impact of the 2008-09 recession 7 MDx technologies 8 Market segmentation: Therapeutic areas 10 Segment assessment 10 Growth drivers 12 Market segmentation: Analytes tested 13 Segment assessment 13 Growth drivers 14 Market segmentation: Test rationale 15 Segment assessment 15 Growth drivers 16 Market segmentation: Test location 17 Segment assessment 17 Growth drivers 17 Market segmentation: Geography 18 Segment assessment 18 Growth drivers 19 Major competitors 20 Large pharmaceutical companies 20 IVD and MDx pure-play companies 21 Life science and research tools companies 23 Other companies 25 Coverage and reimbursement 29 Current situation 29 Impact of the 2010 Healthcare reform 31 MDx opportunities and challenges 32 MDx opportunity 32 MDx challenges 36 Appendix 39 Abbreviations 39 Table of exhibits 40 List of key MDx players 41 1
Abstract Molecular diagnostics (MDx) is a class of diagnostic tests that identify nucleic acids such as DNA. These nucleic acids can be genetic material of foreign organisms (e.g., HIV infection) or genetic markers of individual patients (e.g., Her-2 overexpression in breast cancer). In recent years, MDx has experienced fast growth, given these tests high sensitivity, fast turnaround times and relatively low-cost compared to culturebased or immune-based techniques. MDx involves platforms and assays that leverage multiple technologies to identify genetic variations in individual patients. These technologies include qpcr, TMA, hybrid capture, sequencing microarrays. From a market perspective, MDx is the fastest growing segment of the in vitro diagnostics industry (IVD). With an estimated market size of ~$4.8B in 2010, and a double digit growth rate, this attractive segment continues to be a major contributor in the evolution of the healthcare landscape. The major factors driving growth include increased availability of various tests, increased incidence of chronic diseases due to an aging population and Pharmacogenomics/personalized medicine. This report reviews the market size, growth, segments and trends of the MDx industry from 2007 to 2013. The market is segmented to provide insights on specific growth opportunities by therapeutic areas, analytes tested (i.e., plex level), test rationale, test location and geography. Factors driving growth in each of the segments are reviewed. Competitors shaping the industry include BioPharma (e.g., Abbott, Roche), IVD/MDx pure-play companies (e.g., BioMerieux, Cepheid, Gen-probe) or research tool companies (e.g., Illumina, Life Technologies). Major competitors are reviewed along with their key platforms. MDx is a highly regulated space. IVD instruments/assays are treated as medical devices and often require 510(k)/IVD clearance to gain full adoption in the marketplace. Finally, this report explores eleven opportunities and challenges in the MDx industry. 2
Molecular diagnostics market overview The ~$4.8B MDx market is expected to grow to ~$X.XB in 2013 Introduction More than 1,900 MDx tests are available today. While 55-60 million of these tests were performed in 2009, MDx tests and platforms are still in early stages of adoption in many medical segments. Despite the completion of the sequencing of multiple human genomes, the clinical potential of this technology remains to be fully realized. Today, the majority of MDx activity focuses on infectious diseases and oncology tests (Exhibit 3, 4). CAGR $B (07-10E) (10E-13F) Data available upon purchase 2007 2008 2009 2010 2011 2012 2013 Exhibit 3: WW MDx market by therapeutic area (2007-13F) Drivers Moderators Exhibit 4: MDx market drivers and moderators 6
for multiple infections and subtypes at once. Luminex s respiratory infection panel is one example of this trend 3. HIV, Hepatitis and GC/CT testing represent of the infectious diseases MDx market segment Disease area 2010E ($M) CAGR (2010E-13F) HIV ~xx Hepatitis B/C ~xx GC / CT ~xx Organism identification and resistance ~xx MRSA ~xx Respiratory virus ~xx West Nile Virus ~xx Other ~xx Total ~xx Exhibit 7: Infectious disease market segment size and growth Oncology MDx tests represent ~ of the market. Oncology has been an early adopter of MDx, given: Targeted therapy: Many cancer drugs are targeted antibody therapies (e.g., Herceptin) against a single molecule, hence facilitating the development of Dx tests High drug price: Oncology drugs are expensive, motivating third-party development of tests, as they can clearly articulate reimbursement benefits to payers Disease aggressiveness: Given the aggressiveness of most cancers, physicians need to find the right treatment quickly. Trials and error is not an option as in other chronic diseases (e.g., depression, high blood pressure) The main targets of these tests include: Her-2, K-RAS, EGFR, Bcr-Abl, BRCA. Many tests are available as ISH/FISH tests 4, in all tissue biopsies. More recently, panels that screen for multiple mutations have become available (e.g., MammaPrint). HPV tests represent ~ of the market. While the HPV market is currently ~$xxm, HPV products are quickly penetrating a 3 http://www.luminexcorp.com/rvp/ 4 ISH/FISH 2010E market size: ~$xxm, 2010E-2013F CAGR: ~ 11
MDx pure-play Gen-probe offer platforms and assays primarily to diagnose human diseases and screen donated blood. The company typically places these systems via a reagent rental program, in which the client agree to purchase a certain number of assays over a limited time period. Blood screening products include HIV, HCV, West Nile Virus, HBV; sexually transmitted disease (STD) products include similar assays as well as PCA3 (prostate cancer) HPV and CT/GC assays. The company markets its Procleix blood screening tests through a partnership with Novartis (Chiron). In addition, Gen-probe obtained rights of qpcr assays for Influenza A/B and RSV (multiplex), A-H1/A- H3/H1N1 seasonal influenza (multiplex) Metapneumovirus and C.difficile through its acquisition of Prodesse (~$60-85M based on milestone achievements). Gen-probe, already a leading MDx pure-play leader, expects further gain in market share following approval of its latest instrument Panther, a fully automated platform for low- mid- throughput labs in 2010/2012 17. Genomic Health develops and distributes Oncotype DX, a gene expression test for patients with breast cancer. In 2009, this product generated almost $150M. This assay analyzes the expression level of 21 genes from tumor samples to predict a patient s likelihood to benefit from chemotherapy as well as risks of experiencing a disease recurrence. The company s pipeline focuses on oncology. Of note, Oncotype DX was one of the first tests to be reimbursed based on its added value, not actual test cost. Cepheid develops, manufactures, and markets fully-integrated systems and assays for genetic analysis for the MDx, industrial and biosafety markets. The company is a leader for MRSA testing products. The GeneXpert and SmartCycler enable rapid, genetic testing for organisms and genetic-based diseases by automating otherwise complex manual laboratory procedures (including sample preparation) in proprietary test cartridges. This instrument and associated assays has the privilege to be accepted in 20K moderately complex CLIA-certified labs in addition to the 7K highly complex labs that exist in the U.S. These tests cover the areas of HAI (Cepheid is a unequivocal leader in MRSA testing), critical infectious diseases and women s health. Cepheid is expected to drive growth by GeneXpert Infinity sales, continued HAI market penetration and new test introduction. 17 Launch schedule: late 2010 (Europe), 2012 (U.S.) 22
Pharmacogenomics benefits may offset the decrease in the addressable patient population While incorporation of pharmacogenomics in the drug development process significantly reduces the addressable population eligible to receive a certain drug (up to reduction), it offers some significant advantages both during drug development and commercialization: x x x x x Further, pharmacogenomics may help drug companies resurrect some compounds whose toxic side-effects may be limited only to a fragment of the population. Pharmacogenomics has gained traction in oncology Pharmacogenomics has gained significant adoption in oncology, given the high drug price and disease aggressiveness. Key pharmacogenomics tests are detailed in Exhibit 17. Disease area Drug Test / Marker Oncology Herceptin Tarceva / Iressa Gleevec Erbitux / Vectibix Camptosar Her-2 EGFR c-kit, Bcr-Abl EGFR, K-ras UGT1A1 Infectious diseases Selzentry R-5 tropic HIV virus Ziagen HLA B*5701 Other Warfarin CYP2C9 / VKORC1 Exhibit 17: Example companion diagnostic tests In the last 3 years alone, large Pharma companies have made >xx deals with diagnostic companies to develop companion diagnostic tests. XXX An increasing proportion of care is driven out of large hospitals and reference labs to specialized centers/clinic (e.g., cancer 33
Table of exhibits Exhibit 1: WW IVD market size (2006-12)... 4 Exhibit 2: WW IVD market by test type (2009)... 5 Exhibit 3: WW MDx market by therapeutic area (2006-12)... 6 Exhibit 4: MDx market drivers and moderators... 6 Exhibit 5: Multiplex ability and sample throughput of current genomic technologies... 8 Exhibit 6: WW MDx market by therapeutic area (2009)... 10 Exhibit 7: Infectious disease market segment size and growth... 11 Exhibit 8: WW MDx market by number of analytes (2009)... 13 Exhibit 9: WW MDx market by test rationale (2009)... 15 Exhibit 10: MDx test rationales and examples... 16 Exhibit 11: WW MDx market by test location (2009)... 17 Exhibit 12: WW MDx market by geography (2009)... 18 Exhibit 13: Advantages and disadvantages of partnerships... 24 Exhibit 14: Selected MDx players... 27 Exhibit 15: Selected MDx platform workflow capabilities... 28 Exhibit 16: Example companion diagnostic tests... 33 40