Global In Vitro Diagnostic

Market By Sudipto Karmakar

Clinical Diagnostic or In-Vitro Diagnostic (IVD)

Product

Technology

Application

Instruments, reagents, software , service

Immunoassay, Clinical Chemistry, Molecular

Diagnostics, Hematology

Diabetes, Cancer, Cardiology, Autoimmune Diseases

CLINICAL DIAGNOSTICS MARKET

The clinical diagnostics, or in-vitro diagnostics market comprises assays, instruments, and services that help in the diagnosis and treatment of diseases. The global healthcare community foresees great prospects for the clinical laboratory services market, since it offers personalized medicine and administers accurate therapies at the right time to the right patient with minimal risk of errors.

GROWTH TRAJECTORY OF CLINICAL DAIGNOSTIC SERVICES

The Global IVD Market is

predicted to witness positive growth at a CAGR of 7.1% between 2012 and 2018.

In 2011, the market stood at a valuation of US$46.0 billion and with the expected rapid growth, it is expected to reach an estimated value of US$74.2 billion by the end

of 2018.

46

74.2

0

10

20

30

40

50

60

70

80

2011 2018

GLOBAL IVD Market

CAGR=7.1

Source:http://www.transparencymarketresearch.com/article/in-vitro-diagnostic-tests.htm

In Vitro Diagnostic – Geographic Snapshot

North

America

43%

Latin America

4%

Japan

7%

Asia pacific

11%

EMEA

35%

Market Size

Source:IVD_Review_2013_Enterprise_Analysis.pdf

• In 2011, majority share of the in vitro diagnostics market was held by North America and Europe owing to the high healthcare expenditure and structured network of clinical

laboratories. • However, this scenario is changing gradually since major

market players in the in vitro diagnostics market are focusing on emerging economies to accelerate growth via capitalization of unmet opportunities available in these regions.

• The Asian region is expected to be ruled by the emerging economies such as China and India, show the highest CAGR by the year 2016. The Chinese IVD market is taking frog leap amongst the emerging nations, followed by India, Russia, and Brazil.

Note* EMEA means Europe & rest of Africa

Market Dynamics D

rive

rs

Dri

vers

Res

trai

nts

Res

trai

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Growing health care expenditure in emerging markets drive demand for IVD

Strong demand for advanced genetic testing secures long term health of the molecular diagnostics segment

Steady rate of product updating by manufacturers propels IVD growth

Growing focus on diagnostic life threatening conditions boosts POCT segment

Non traditional healthcare settings expand the opportunity for POCT

Strong demand for automation and integration of multiple processes continue to drive new product development

Augmented health care testing needs in the future positively impact IVD markets

Strained laboratory budgets and more end –users pain points diminish sales

Lower public health re-imbursement in European Countries dampens segment growth

Product commoditization and customer buying power cut into revenue

US medical device tax reduce profits for manufacturers

Less severe flu season left infectious disease orders flat

Industry consolidation intensified competition

A tougher US regulatory environment for medical devices concerns the industry

Source: Frost & Sullivan

Notable Trends in the IVD Market

• Patients would rather get tested in a doctor’s office or when they’re in a medical clinic than have to get tested in a hospital. The move of testing to the point of care is driving growth in the market Move to point of care Testing

• Medical diagnostics are getting pushed to deliver faster. This can be best seen in the explosion for raid and minimally—invasive diagnostic tools. Need for speed

• Some emerging markets are now able to pay for diagnostic devices where they weren’t weren’t able to just a few years back. Beyond other in vitro tests, in India alone, there are 100 million malaria tests per year

Emerging markets demand

• Many countries are seeing a marked aging in their populations. As this occurs, new tests and diagnostic technologies are necessary to cope with the changes Aging population

Source: Frost & Sullivan

Competetive Profiling

18.30%

10.40%

10.30%

9.50%

6.20%

Roche

Siemens

Danaher

Abott laboratories

Thermo Fisher Scientific

Market Share

Market Share

Source: http://www.statista.com/statistics/331722/top-global-medtech-companies-by-in-vitro-diagnostics-market-share/

Strategic analysis of the top players reveals that market players are adopting product launch as their key developmental strategy in the market, as the market players are innovating novel products to expand their product line.

Acquisitions and approvals are some additional strategies adopted by the companies in the market to enhance their services and expand their reach across the globe.

IVD market Overview - US

• United States is still by far the world’s largest IVD market with $24.1 billion in annual revenues, accounting for approximately 40-45% of the global IVD market.

• According to the National Diabetes Statistics Report 2014, around 9.3% of the U.S. population or 29.1 million people have diabetes and approximately 8.1 million people or 27.8% of the U.S. population suffering from diabetes

are undiagnosed.

• professional point-of-care diagnostics is the

largest IVD segment in the U.S. and generates

$3.6 billion in annual revenues.

The U.S. IVD market revenue by product, 2012-2020, (USD Million)

Source: http://www.mdtmag.com/blog/2014/05/trends-us-ivd-market-healthcare-system-utilization-and-aging-demographics http://www.grandviewresearch.com/industry-analysis/in-vitro-diagnostics-ivd-market

Notable Trends In US IVD Market

Disease & Testing venues

• Among U.S. adults who are 18 years and older, 12% have been diagnosed with heart disease, 9% diabetes, and 8% cancer.

• According to the CDC, diabetes prevalence among U.S. adults has increased during the past decade, rising from 6.6% to 8.6% between 2002 and 2012. The percentage of U.S. adults who have been diagnosed with any form of cancer also rose from 7% to 8% between 2006 and 2012

Healthcare system Utilization

• During and after the recession (2008-2011), the national inpatient admission volume fell each year from 35.76 million admissions to 34.84 million admissions.

• the hospital outpatient visit volume was static during 2010-2011 at slightly more than 2,100 visits per 1,000 persons. The Centers for Medicare & Medicaid Services (CMS) has also noted the slowing growth in hospital outpatient services.

Aging Population

• Between 2010 and 2020, the proportion of the total U.S. population aged 60 years and older is expected to increase from 18.4% to 22.2%

• Non-communicable and chronic disease incidence is significantly higher in the aged population than in the general population

Market Dynamics D

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Affordable care Act

Higher patient volumes and a greater emphasis on health screening and primary care are expected to impact U.S. IVD demand positively during the coming years and more than offset provisions in the ACA that burden

clinical testing.

Lab Fee Cuts and Molecular Diagnostics Reimbursement

Medicare’s clinical lab fee schedule (CLFS) has rarely granted labs increases in year-over-year reimbursement rates for IVD testing. According to the American Clinical Laboratory Association, from 2003 to 2013, CLFS pricing has been frozen or cut in 10 out of 11 years

Stringent regulatory Policies

Dri

vers

Restr

ain

t

Competitive profile of Top 5 US Companies

Company name

WW Sales (SM)

( 2013)

CAGR (2013-2020

WW Market Share (2013)

Danaher 4882 5% 10.30%

Abott laboratories 4545 6% 9.60%

Thermo Fisher Scientific

2993 4% 6.30%

Becton, Dickson and Company

2646 4% 5.60%

Alere 2243 3% 4.70%

10.30% 9.60%

6.30% 5.60%

4.70%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Danaher Abott

laboratories

Thermo

Fisher

Scientific

Becton,

Dickson

and

Company

Alere

WW Market Share (2013)

Source:file:///E:/Study%20materials/ivddocument-141223144406-conversion-gate02.pdf

Porter’s Five forces Analysis

Bargaining Power of Customers (Low-Moderate)

Threat of New Entrants ( Moderate-High)

Competitive Rivalry ( Medium)

Threat of Substitute products (Low)

Bargaining Power of Suppliers (Moderate- High)

Competitive Rivalry

• Increase in number of private players in the market has led to increased competition

• Acquisitions and approvals are some additional strategies adopted by the companies in the market

Threat o f New Entrants

Substitute of Products

Number of players has increased considerably in recent times

Intersegment substitution leads to lower threat of Substitute.

Bargaining power of Suppliers

Bargaining power of Customers

IVD market has moderate bargaining power of supplier due to existence of brand loyalty.

Varying product differentiation would lead to moderate buyers' bargaining

Future Outlook & Trends

• Introduction of the Patient Protection and Affordable Care Act (PPACA) in 2014

Most notably, the implementation of this Act will increase the percentage of people covered by insurance, which will drive test volumes, especially as the US population ages and the demand for IVD increases

increased centralization of IVD testing as more laboratories, hospitals and care facilities consolidate in the wake of health care reform.

manufacturers will have fewer potential sites for capital sales, these facilities will see high testing volumes and ultimately have the resources to purchase a broader array of diagnostic tests

labs will look for vendors that can offer a broad range of instrumentation and automation equipment.

Labs will prefer to purchase all of their equipment from one vendor to improve workflow

logistics and reduce costs. Majority of market share will be held by a few key multi-segment players, like:

Siemens Healthcare Roche

Abbott Laboratories

Source: http://www.fiercemedicaldevices.com/press-releases/us-vitro-diagnostics-market-grow-nearly-86-billion-2017

Future Outlook & Trends

Large multinational companies will likely continue to dominate the market through 2017—especially those players with a finger in molecular diagnostics technologies.

This market segment will grow rapidly through 2017, cannibalizing sales from more mature segments such as immunoassay and microbiology testing

IVD market difficulties may continue for the next few years. • the realignment of test price to payer-perceived test value; • CMS-initiated test reimbursement cuts; resulting cost pressures on clinical laboratories; • industry uncertainty regarding the impacts of the ACA • resolution of the problematic recoding and reimbursement adjustments for molecular pathology

and other testing areas.

Source: http://www.fiercemedicaldevices.com/press-releases/us-vitro-diagnostics-market-grow-nearly-86-billion-2017

Conclusions

• With increase in incidences of chronic and infectious diseases and rise in healthcare awareness amongst patients, the market is opportunistic in different geographies.

• As there is a shift from traditional diagnostic devices to advanced diagnostic devices, IVD would prove to be a lucrative market in future.

• As developing countries become westernized, the use of IVD testing will ensue as well. • It is vital to ensure that Asian and Pacific markets are not ignored as they are rapidly growing as

leaders in the usage of IVD tests