Reaching new milestones

Diagnostics is moving toward preventing diseases from breaking out and maintaining and improving health levels.

The diagnostics industry in 2023 experienced a gradual recovery. While the year saw muted consolidation, over the next couple of years, as the lab chains and other players in the organized segment move to smaller cities and semi-urban areas, some disruption is expected. This is leading to better bargaining power, larger number of tests conducted and lower procurement prices.

McKinsey research shows that select digital markets, adjacent to diagnostics, including clinical decision support, remote patient monitoring, and population health management, are projected to outgrow the core diagnostics market over the next several years. Of course, this value is not only for IVD players to capture. Other players, such as health tech and data companies, are also eyeing the space.

Diagnostics is moving from its traditional back-office, pay-for-service role to a critical stakeholder role within the healthcare delivery ecosystem. Three main shifts occurring today give digital and analytics the chance to play a part in transforming the IVD industry.

Improving the diagnostic tests themselves. Health systems are anticipating two main improvements in diagnostics. The first is providing true measurement metrics for outcome-based healthcare. This means going beyond a simple result (for example, hemoglobin A1c is above the normal range) and tying it to key outcomes (X points of reduction in HbA1c means Y fewer complications for patients). The second is bringing these measurements forward to clinicians as insights rather than just as results, applying local context, trends, and patient-specific data points to help clinicians make more accurate care decisions.

Transforming care delivery. Diagnostics sits at the center of clinical decision making and, therefore, is a critical component of enabling care delivery in the future.

Expanding the remit of diagnostics within healthcare. Broader applications of diagnostic tests beyond disease identification will generate tremendous impact, both for IVD players and the society. Furthermore, diagnostics can increase the efficiency and effectiveness of drug development. This allows for more-targeted medical therapies as well as companion diagnostics to identify patients who are most likely to benefit from a specific treatment or who are at risk of an adverse event due to a therapy, enabling the selection of a more appropriate alternative.

New digital diagnostics solutions must provide value that health system leaders can easily understand – for example, clearly improving patient outcomes. So while better sensitivities and specificities are great, incremental improvements in these metrics often do not translate into better outcomes because of factors, such as inefficiencies within the patient treatment journey and the natural fluctuations of many biomarkers, which limit the diagnostic impact of a test. Instead, ensuring the appropriate use of a diagnostic test and facilitating its interpretation – and, where necessary, applying patient- and population-specific context – can lead to a greater improvement in outcomes. Therefore, exploring digital diagnostics is to define where an IVD manufacturer can provide differentiated clinical value. Potential ways to do this exist across the patient journey, including developing screening tests that use local data, providing long-term health tracking and personalized treatment suggestions, and developing algorithms for companion diagnostics.

While stand-alone use cases may be sufficient, multiple use cases across the patient journey often need to come together to deliver value. Consider cholesterol testing, which currently occurs at various points across a patient’s health journey. A physician then translates the test results into cardiac risk, based on a score (often the Framingham criteria). Digital diagnostics can use that risk to assess overall health across the longer term, tracking not just cholesterol but also other blood tests and results. Based on that profile, digital tools can provide tailored recommendations for patients and track those outcomes, resulting in better care. Delivering this end-to-end value requires multiple use cases – patient- and population-adjusted insights, long-term health tracking and personalized treatment suggestions, and at-home diagnostics and monitoring. Diagnostics players, therefore, have to think differently about how to piece together the right use cases and participate more broadly in the health journey, whether organically or through partnerships and M&A.

M&A. Some key M&A trends predicted in the IVD market in 2024:

Large IVD companies are acquiring smaller ones. This trend is likely to continue, as large IVD companies look to expand their product portfolios and geographic reach. Danaher Corporation acquired Cytiva for USD 25.4 billion in 2022. This acquisition gave Danaher a strong presence in the IVD market, as Cytiva offers a wide range of IVD products, including immunoassays, molecular diagnostics, and POC testing solutions.

Companies outside of the IVD industry are acquiring IVD companies. Companies outside the IVD industry are looking to expand their productS and gain access to new technologies. Alphabet Inc. (Google) acquired Fitbit for USD 2.1 billion in 2022. Fitbit is a leading provider of wearable fitness devices. This acquisition gives Alphabet access to Fitbit’s health data, which could be used to develop new IVD products and services.

Private equity firms are continuing to invest in the IVD market. Hellman & Friedman acquired Bio-Rad Laboratories for USD 8.2 billion in 2022.

A Nelson Advisors report has listed some companies likely to be involved in M&A activity in 2024. Abbott Diagnostics, BD, Danaher, Hologic, J&J, Qiagen, Roche, Siemens Healthineers, and Thermo Fisher Scientific, with a strong financial position, are looking to expand their product portfolios and geographic reach. Bio-rad, CoaguSense, Illumina, Myriad Genetics, NanoString Tech, PaigeAI, and QuadelOrtho are small- and medium-sized players with innovative technologies and products that are attractive to larger IVD companies. Companies outside the IVD industry that may be interested in acquiring IVD companies to expand their product portfolios or to gain access to new technologies are Alphabet, Amazon, Apple, and Microsoft.

Over the last two years, the market has seen a handful of billion-dollar mergers and acquisitions deals, which have helped expand and evolve the capabilities of larger companies. Such deals have improved diagnostic solutions in many therapeutic areas, including oncology and infectious and respiratory diseases. These have also increased the usage of leading diagnostics platforms.

Some promising innovations shaping the IVD landscape
There has been a revolutionary growth in point-of-care testing (POCT), especially following the pandemic. Some of the widely used POCT practices include home pregnancy test, cell phone-based applications, and lab-on-a-chip (LOC) platforms. Today, there is a plethora of new POCT devices in the market, such as the urinary LH kit and the urinary beta HCG kit. Fertility treatment has used POCT devices since long as there is a very fine balance between diagnosis and treatment.

POCT is rapidly developing as a quick and convenient way to test a patient outside of a laboratory – be it in a clinic, home, farmland, ambulance, or hospital. As a monitoring or screening tool, it can be used to support health screenings for those at risk of cardiovascular disease (CVD) or infections, and improve patient compliance with the recommended testing frequency.

These devices gained popularity during the Covid-19 period, because of the huge demand for diagnostic tests that are quicker, precise, affordable, and less invasive. The Covid-19 situation made people understand the value of getting results early, especially at places where the supply chain is not well established. It may not be long when there will be a convenient hybrid testing model, one that features both POCT and centralized testing.

POC testing is becoming more popular because it is convenient and affordable. POC IVDs are expected to play a major role in the early detection and diagnosis of diseases. This is driving demand for POC IVD products and services, and making the POC IVD market more attractive to potential acquirers.

The rise of precision medicine. Precision medicine is an approach to healthcare that takes into account individual variability in genes, environment, and lifestyle. IVDs are playing an increasingly important role in precision medicine by helping clinicians to identify the best treatment for each individual patient. This is driving demand for IVD products and services, and making the IVD market more attractive to potential acquirers.

The increasing use of artificial intelligence. AI is being used to develop new IVD tests and to improve the performance of existing tests. AI is also being used to develop new algorithms for data analysis, which can help clinicians to make better decisions about patient care. This is driving demand for AI-powered IVD products and services, and making the AI-powered IVD market more attractive to potential acquirers.

Overall, we can expect to see a significant amount of M&A activity in the IVD market in 2024. This activity will be driven by the factors mentioned above, as well as the increasing importance of IVD testing in healthcare.

Liquid biopsies and next-generation sequencing (NGS). Liquid biopsies are non-invasive diagnostic tests that analyze a patient’s blood for traces of cancer or other diseases. NGS plays a pivotal role in liquid biopsy technology, allowing for the detection of genetic mutations and variations associated with diseases. This innovation is particularly promising for early cancer detection and monitoring treatment responses.

Miniaturization and microfluidics technologies are enabling the development of portable and POC IVD devices. These compact devices can deliver rapid test results, making diagnostics more accessible in remote or resource-limited settings. They have the potential to revolutionize healthcare delivery, especially during pandemics or in underserved regions.

CRISPR-based diagnostics. The clustered regularly interspaced short palindromic repeats (CRISPR) technology, known for its gene-editing capabilities, is now being harnessed for diagnostic purposes. CRISPR-based diagnostics offer rapid and highly specific detection of genetic material, including viruses and bacteria. They are especially valuable for infectious disease diagnosis.

Digital pathology involves scanning and analyzing pathology slides using digital imaging technology. It allows for remote consultations, easier data sharing, and the application of AI algorithms to aid pathologists in diagnosis. This technology enhances the accuracy and speed of disease identification.

Multiplex assays enable the simultaneous detection of multiple analytes within a single sample. They are valuable for screening and diagnosing conditions with complex or overlapping symptoms, such as autoimmune diseases. Multiplexing saves time, reduces sample volume, and lowers costs.

Mass spectrometry is another method used in omics analysis and is considered the future of diagnostics. The technology offers high-throughput, femtomolar sensitivity and fast testing, taking analysis from molecular to cellular levels.

Another technology that has been gaining momentum is the electromagnetic field-based method, which measures oxidation and reduction rates of the chemical reaction, and is used for epidermal growth factor receptor (EGFR) tests. The molecular labs are increasingly using RNA sequencing technology, which helps in non-invasive diagnostics, risk assessment, early diagnosis, prognosis, and therapeutic processes for various diseases, including lung cancer and infectious diseases.

Biomarkers are driving a medical revolution with both predictive and prognostic values. An early illustration is a prostate-specific antigen (PSA) blood test, which, after becoming popular in the US in the 1990s, helped to reduce the mortality rate from prostate cancer by 40 percent. In recent years, BRCA1/2 has attracted considerable attention as a genetic biomarker for predicting cancer prognosis. For infertility treatment, the biomarker process can be started from the level of the follicular fluid, which is the egg-development level, to the development of the embryo, to the point where we decide or predict whether the embryo will be viable or not.

Microfluidics has just begun to reach its full potential, by offering diverse advantages, such as low-volume sample analysis, high-throughput analysis, automation, quick turnaround times, as well as low cost, portability, and disposability. With just a small sample of blood, microfluidics allows blood analysis to be performed for a variety of tests with a short turnaround time. LOC devices are the ideal way to get there as the industry moves toward POCT, and many medical devices companies are currently innovating in this field.

Wearable devices equipped with biosensors are making continuous health monitoring possible. These devices can track parameters like glucose levels, biomarkers, and even detect early signs of diseases. Wearable diagnostics empower individuals to take control of their health and provide healthcare professionals with real-time data.

Blockchain technology is being explored to enhance the security and privacy of patient data in IVD. By providing a tamper-proof and transparent system for managing health records, it ensures the integrity and confidentiality of sensitive diagnostic information.

Lab sustainability
The typical diagnostic laboratory uses more energy and water per unit area than the typical office building, even though they are not explicitly mentioned as a high-energy consumer within the hospital in most evaluations. There is still only a rudimentary understanding of how sustainability guidelines can apply to diagnostics laboratories and equipment. Consumer-focused regulations for sustainability are not directly applicable to lab equipment because product development processes for this type of specialized equipment require many years to ensure product integrity and reproducible, accurate results. Modifying existing products to meet sustainability requirements is rarely an option, leaving new product development as the only alternative – a long-term approach to an immediate problem.

The in vitro diagnostics industry has a significant environmental impact due to the generation of biomedical and chemical waste, the use of toxic chemicals, and the consumption of energy to produce and use diagnostic equipment. The medical diagnostics industry generates 5.4 million tons of waste each year, the majority of which is made up of plastics. In addition, chemicals used in diagnostic tests, such as organic solvents, acids, and bases can be harmful to the environment. They can lead to soil and water contamination as well as greenhouse gas emissions.

The sustainable development of the IVD industry requires diagnostic tests to have a low environmental impact. The use of recyclable materials for IVD test packaging and components continues to grow.

Eco-design technologies are not to be outdone. There are currently three main trends. First, the use of bio-based and biodegradable materials, such as corn starch, polylactic acid, cellulose, and chitosan, aims to reduce the environmental impact of plastic waste. Secondly, microfabrication processes, such as deep immersion lithography and 4D printing are used to reduce energy consumption in the production of IVD devices. Lastly, the development of portable and rechargeable diagnostic systems reduces the amount of waste generated by disposable consumables.

Smart technologies are helping sustainable development through a new “partnership model to efficiently integrate and adopt energy technologies and innovations,” said EFLM’s President Tomris Ozben. New technologies, such as AI, quantum computing, and supercomputing could help deliver safer and more sustainable chemicals and materials by design. The IVD industry can mobilize several partnership models around public-private partnerships, collaborations between companies in the same sector, and partnerships with non-governmental organizations.

The Indian market
The sector is rapidly scaling every year, primarily driven by the growth in the number of labs and hospitals’ labs expanding their presence to Tier-II and Tier-III markets through their labs for their clinics – leading to an increase in testing volumes.

POC testing, that offers several advantages over traditional laboratory-based testing is another factor which is expected to experience significant growth in the coming years. The country’s large population necessitates rapid and accurate diagnostic tests. India faces a significant burden of non-communicable diseases, such as diabetes and cardiovascular diseases, which require regular monitoring and management, approved by the government, and low cost.

The regulatory environment and the labs and hospitals voluntarily moving toward accreditation are good signs to stay invested in the Indian market.

AI and ML are increasingly used in the IVD industry to develop more accurate and efficient diagnostic tests. Diagnostic services are likely to become more personalized because of technologies like genomics and genetic testing. As technologies evolve, they have the potential to revolutionize healthcare in India and improve the lives of millions of people. The combination of technological developments, government initiatives, and rising demand is creating a very favorable environment for the growth of this industry.

With increasing awareness, diagnostic rates, and the need for accessible treatment alternatives, the Indian IVD manufacturing industry too has experienced growth. Treatments have become affordable for a larger population because of the Indian pharmaceutical companies’ ability to make them at low costs.

Every year, probably more than 1000 people are getting hired for research and development (R&D) in the IVD space across India, which is huge when compared to other segments. The government’s role will play a significant role in enhancing access to infrastructure. Budgets are also allocated every year, whether it is to the National Health Service (NHS) or state governments. Few state governments have equipped laboratories for basic tests, even in their primary health centers (PHCs).

The National Medical Devices Policy, 2023, has several existing concerns, the most significant being is the need for explicit provisions for training healthcare professionals and the end-users of these medical devices. While stressing local manufacturing, the policy needs to provide a clear roadmap for technology transfer from global manufacturers. More than 50 percent of the IVD businesses is held by the Indian companies. And this is expected to move up from 65 percent to 70 percent over the next five years. The lack of access to advanced technologies may hinder the production of high-end medical devices.

With many technological developments on the horizon that have the potential to revolutionize healthcare, the segment, at a CAGR of 5.6 percent, is projected to reach USD 85.6 billion in 2024.