PwC report predicts companion diagnostic surge, more M&A in IVD market

An uptick in companion diagnostics partnerships will increase investor interest in the global IVD market over the next couple of years, according to a new PwC report. The report also predicts a surge in M&A deal values and new prospects for early detection testing.

Even though the era of the mass-market blockbusters may be over, analysts foresee billion-dollar revenues for some of the new meds linked to a companion diagnostic, according to the report. Indeed, the number of deals with pharma companies jumped to 25 in 2010, up from 19 in 2009 and 7 in 2008. If these deals become commonplace, the report predicts that by 2020, Big Pharma companies will be expected to alter their business models to allow for in-house diagnostics capabilities.

Medium-sized or niche diagnostics players will continue to drive the IVD-pharma partnerships. However, bigger players, such as Roche and Abbott ($ABT) will also become more active. Qiagen ($QGEN), Almac, Dako, and MDxHealth drove 15 of the 35 deals announced by medium-sized and niche players during 2009-2010.

Although cancer was the predominant disease focus for companion diagnostic partnerships, accounting for 34 of the 44 deals in 2009-2010, neurological and infectious diseases also are rising as areas of promise, according to the report.

Through 2015, the report predicts there will be new entrants in the IVD business. Newer entrants, including GE Healthcare, "may pursue additional acquisitions to maintain the momentum required to achieve critical mass quickly," the report states. Current industry leaders, which include Roche, Abbott and Siemens, will have to follow suit or risk losing market share in key segments.

In addition, there could be an increased number of Big Pharma companies seeking companion diagnostics to complement their drug development programs. These companies may engage in M&A to build up their diagnostic expertise.

Finally, tests for early detection of disease are also rising in prominence. Several new in vitro diagnostics for early detection of cancer have reached the market, and more await commercial launch. However, challenges remain, and not many big players have entered this area.

- see the PwC release

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