Midwest holds strong position in worldwide diagnostics business

Midwest holds strong position in worldwide diagnostics business

CHICAGO — The medical device industry is becoming more and more intriguing to me. In our last two columns, we were able to explore some of these key markets and the leading players (particularly in the Midwest). Because a big hole in my research was the diagnostics market, I decided to dedicate a follow-up column to this growing field.
To put diagnostics into perspective, Steve Burrill, the premiere cheerleader and prognosticator of biotech trends, believes that the growth of the diagnostics industry in the next 10 to 20 years will by far outstrip that of its drug counterpart. He believes this for a number of reasons, which we will explore below.
In a presentation made on May 31 by Roche Diagnostics CTO Gerd Grenner, we were able to get a good glimpse of the worldwide in vitro diagnostics business (as opposed to the diagnostics imaging business).
According to Grenner, the in vitro diagnostics business had sales of $28.5 billion in 2004 and grew 6 percent. Unlike the pharmaceutical business, which has an overwhelming portion of its business in the U.S., the diagnostics business is much more internationally balanced.

According to the way Roche sees the business, the in vitro diagnostics market can be divided into the following segments:

The worldwide increase in obesity and diabetes is an interesting trend to note. This is reflected by the growth in sales of this segment, which is outstripping all other segments. Let’s take a look at the leading players in the diagnostics market:

As can be seen above, the worldwide diagnostics business is very fragmented one.
While 10 companies have 73 percent of the world market (with three companies having 32 percent of the market), there are many other companies with small market shares. There is also constant consolidation in this space with the larger companies buying smaller companies. The Midwest has a strong position in this industry with three companies that make up 37 percent of the total market.
Here are some additional interesting facts from Grenner’s presentation:
• In a weighted average of data from six countries (the U.S., Japan, the U.K., Germany, France and Spain), health-care spending was equivalent to 11 percent of total GDP.
• Of that health-care spending level, 22 percent was for health-care products and 18 percent was for other areas (including patient allowances and administrative costs).
• Of the 22 percent for health-care spending, 69 percent was spent on pharmaceuticals, 25 percent was spent on medical devices, 4 was spent on in vitro diagnostics and 2 percent was spent on in vivo diagnostics.
Grenner clearly believes that diagnostics spending will increase to better target drug therapy. At least 30 percent of drugs that are prescribed don’t work for the people receiving treatment. Currently, diagnostics are used to diagnose a disease and to monitor the progress of the disease as treatment or therapy is employed. In the future, diagnostics will play a much greater role as therapy is customized by:
• Testing for a predisposition for a disease
• Targeted monitoring of emergence of the disease
• Prevention of a disease
• Standard diagnosis of a medical condition
• Pharmacogenomics (which therapy to use on the specific patient)
• Monitoring of therapy and disease progression
There is also the increased use of biomarkers to predict the evidence of a disease or disease progression. One example of a biomarker is prostate-specific antigen (PSA), which is used to predict the progression of prostate cancer. It?s clear that the earlier a disease is detected and treated, the greater the outcome of survival for the patient (particularly for most types of cancer).
Finally, more precise monitoring of the effect of a drug on a patient’s disease will allow a physician to fine-tune therapy for a patient and increase successful treatment while minimizing side effects.
In addition to the three big diagnostics companies located in the Midwest, there’s a multitude of emerging diagnostics companies (particularly in Madison, Wis. including Third Wave Technologies, Eragen, Renovar and Genetic Testing Institute along with major branches of larger west coast diagnostics companies including Invitrogen).
The Midwest is well poised to not only maintain its historic leadership in this field but increase this leadership so long as it takes advantage of some of the newer emerging technologies and companies. See you next week!

Michael S. Rosen is president of Rosen Bioscience Management, a company that provides CEO services including financing, business and corporate development to start-up and early stage life science companies such as Renovar and Immune Cell Therapy. Rosen is also a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at rosenmichaels@aol.com.
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