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In-Vitro Diagnostics: Competitive Landscape

This report is one of a series covering trends, deals, opportunities and risks across the in-vitro diagnostics market. For access to similar reports, click here.

Due to the recent trend of consolidation and a hot M&A market, the In Vitro Diagnostics (IVD) market is the now dominated by 8-10 major companies. They contributed to a 2016 market revenue of $61B[i] that grew at a 5% CAGR[ii] from 2011-2016. That growth is expected to accelerate to 5.9%[iii] from 2016-2022 in part due to the continued globalization of the IVD industry. The market is highly competitive. Because of the lack of product differentiation among IVD producers, economies of scale are critical to competitive profit margins. The most efficient way to gain new books of sale and to create a footing in a new market is through acquisitions. Because of its advanced lifecycle stage, the IVD market has high barriers to entry. The IVD market is currently experiencing an upward trend in globalization as emerging markets are expected to gain significant market share in the next 5 years.

Market Share Concentration

The global IVD market is dominated by 8-10 key players:

  • Roche Diagnostics
  • Abbott Diagnostics (including Alere)
  • Siemens
  • Sysmex
  • Ortho-Clinical Diagnostics (Johnson & Johnson diagnostic division)
  • BioMerieux
  • Danaher
  • Thermo Fisher
  • Becton Dickinson

 

The IVD market is highly concentrated, with 9 companies generating 77% of the market revenue in 2016.[iv] The four-firm concentration ratio of the same year was 54%.[v] This number increased from 49% after Abbott’s 2017 acquisition of major competitor Alere.[vi] The market is expected to become less concentrated over the next 5 years but is still projected to have a four-firm concentration ratio of 50% in 2022.[vii] These top companies compete globally in multiple verticals within and without of the in-vitro diagnostic field. Companies that can’t compete with volume must compete with specialization.

Key Success Factors

As the IVD market enters the mature stage of its lifecycle industry consolidation increases, product differentiation becomes less effective, and specialization or diversification become more important. Smaller players tend to be highly specialized, whereas the largest players compete in multiple IVD verticals. Economies of scale are critical to effective competition due to the lack of product differentiation.[viii] As a result, an intelligent and well executed acquisition strategy is necessary for growth.

  • Smart acquisitions
  • High degree of specialization
  • Diversified revenue streams/Compete in multiple verticals
  • Global supply chains

 

Barriers to Entry

The IVD market has high barriers to entry. The IVD market is highly developed and competition is intense. Market participants must be robust enough to compete in multiple verticals across multiple regions or specialized enough to gain a competitive advantage. Additionally, the IVD market is relatively new and its technology is advancing rapidly. As a result, there are heavy regulations on new and existing products and techniques.

  • Heavy regulation
  • Intense competition
  • High degree of specialization

 

Globalization

The IVD market is highly globalized. The North American and European markets are very developed due to the established healthcare systems in developed countries, while the Asia-Pacific market is the fastest growing segment and has already gained a substantial amount of global market share. While Japan has a mature IVD market, the global IVD powers are vying for space in the rest of the Asia-Pacific market, in particular China, as there is huge market potential and an expected 13.5% CAGR from 2016-2022.[ix]

Sources

[i] Abha Thakur, IVD Market by Product Type (Reagents, Instruments and Software & Services), by Technique (Immunodiagnostics, Blood Testing, Molecular Diagnostics, Tissue Diagnostics, Clinical Chemistry, and Other IVD Techniques), by Application (Infectious Diseases, Cancer, Cardiac Diseases, Immune System Disorders, Nephrological Diseases, Gastrointestinal Diseases, and Other Indications), and by End Users (Standalone Laboratory, Hospitals, Academic and Medical Schools, Point of Care Testing, and Others) – Global Opportunity Analysis and Industry Forecast, 2017-2023 Allied Market Research, https://www.alliedmarketresearch.com/ivd-in-vitro-diagnostics-market (last visited Dec 18, 2017).

[ii] Chantal Morel, Overview of the diagnostics market Ensuring innovation in diagnostics for bacterial infection: Implications for policy [Internet]. (2016), https://www.ncbi.nlm.nih.gov/books/NBK447315/ (last visited Dec 18, 2017).

[iii] Zacks Equity Research, Global In Vitro Diagnostic Market Booms: Stocks in Focus Zacks Investment Research (2018), https://www.zacks.com/stock/news/283747/global-in-vitro-diagnostic-market-booms-stocks-in-focus (last visited Jan 8, 2018).

[iv] Evaluate, Global top 10 companies based on in vitro diagnostics market share in 2016 and 2022, Statista, https://www-statista-com.erl.lib.byu.edu/statistics/331722/top-global-medtech-companies-by-in-vitro-diagnostics-market-share/ (last visited Jan. 23, 2018).

[v] Evaluate, Global top 10 companies based on in vitro diagnostics market share in 2016 and 2022, Statista, https://www-statista-com.erl.lib.byu.edu/statistics/331722/top-global-medtech-companies-by-in-vitro-diagnostics-market-share/ (last visited Jan. 23, 2018).

[vi] Staff Reporter, Abbott Completes Alere Acquisition GenomeWeb (2017), https://www.genomeweb.com/business-news/abbott-completes-alere-acquisition (last visited Jan 21, 2018).

[vii] Evaluate, Global top 10 companies based on in vitro diagnostics market share in 2016 and 2022, Statista, https://www-statista-com.erl.lib.byu.edu/statistics/331722/top-global-medtech-companies-by-in-vitro-diagnostics-market-share/ (last visited Jan. 23, 2018).

[viii] Chantal Morel, Overview of the diagnostics market Ensuring innovation in diagnostics for bacterial infection: Implications for policy [Internet]. (2016), https://www.ncbi.nlm.nih.gov/books/NBK447315/ (last visited Dec 18, 2017).

[ix] Reportlinker, The global in vitro diagnostics (IVD) market should reach $102.4 billion by 2022 from $74.1 billion in 2017 at a compound annual growth rate (CAGR) of 6.7%, from 2017 to 2022 PR Newswire: news distribution, targeting and monitoring (2017), https://www.prnewswire.com/news-releases/the-global-in-vitro-diagnostics-ivd-market-should-reach-1024-billion-by-2022-from-741-billion-in-2017-at-a-compound-annual-growth-rate-cagr-of-67-from-2017-to-2022-300575320.html (last visited Jan 13, 2018).

William Montgomery contributed to this report.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.