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In-Vitro Diagnostics — Industry Performance

The following is part of a series covering in-vitro diagnostics and institutional healthcare investments.

The In Vitro Diagnostics (IVD) market is the largest segment of the Medical Technology industry, comprising a 12.8% market share in 2016, and an estimated 13.3% share by 2022.[i]  The  market revenue in 2016 was $61B[ii] and grew at a 5% CAGR[iii] from 2011-2016, and that growth is expected to accelerate to 5.9%[iv] from 2016-2022.

Key Drivers

Growing Geriatric Population

The Global Health and Aging report presented by the World Health Organization (WHO) said, “The number of people aged 65 or older is projected to grow from an estimated 524 million in 2010 to nearly 1.5 billion in 2050, with most of the increase in developing countries.”[5] The Office of Disease Prevention and Health Promotion projected that by 2030, more than 60% of the “baby boomer” generation will be managing at least one chronic illness or condition.[6] As the world’ population ages, there will be greater pressure on the healthcare system for inexpensive and accurate diagnostics.

Increase in Healthcare Expenditures Per Capita

The latest estimates of global healthcare spending statistics show global healthcare expenditure per capita at all-time high levels of $1,058 in 2014.[vii] In fact, healthcare spending per capita has increased YoY every year since 1998, and that trend is expected to continue, driving consumption of IVD products.

Increase in Incidence of Chronic and Infectious Disease

Chronic and infectious diseases have seen rapid rates of growth in recent years, and that growth is expected to continue. The number of cancer cases is expected to rise from 17 million in 2020 to 27 million by 2030.[viii] The AHA recently reported that the number of Americans with diabetes is projected to increase from 30 million in 2016 to 46 million by 2030.[ix] HIV/AIDS, obesity, Alzheimer’s and dementia, among others, will experience accelerated incidence rates in the next 10 years. In addition, there is a substantial rise in the number of patients suffering from infectious diseases such as gastrointestinal, respiratory, and sexually transmitted diseases (STDs).[x] This will drive demand for cheaper and more accessible diagnostic tests.

Technological Advancements

In the past, functions performed by in-vitro diagnostics used to be exclusively performed in labs or clinics. As technology has developed, these functions have been made accessible in smaller, easier, cheaper and more portable versions, such as take-home pregnancy tests or blood glucose testing devices. This development has driven demand and use of IVD products.

Key Restraints

Regulation

As much of the technology that is driving the growth in the IVD market is new and part of the healthcare sphere, there is a high degree of regulation on the approval and marketing of IVD products, especially in North America and Europe. This may represent a restraint on the market as growth accelerates.

Lack of Infrastructure

Emerging nations and regions that are experiencing high growth rates in healthcare spending lack the facilities and infrastructure necessary to support this growth. Therefore, their continued growth will in large part be dependent on the continued investment in the necessary infrastructure.

Industry Lifecycle Stage

The IVD industry is currently entering the mature stage of its lifecycle. Industry growth rates are stabilizing around 5%, although some analysts argue those rates are closer to 4.5%. Industry competition is fierce, and massive consolidation has already taken place, with a relatively small amount of multi-national companies holding a lion’s share of the market. Profits are not based on product differentiation, but on economies of scale, and therefore companies must either hyper-specialize in a niche segment or acquire other companies to grow. However, there are both product and geographical segments experiencing high growth rates, such as molecular diagnostics and the Asia-Pacific region, respectively. From 2017-2022, expect the trend of consolidation to continue and growth rates to remain stable around 4.5-5.5% CAGR.

Sources
[i] Evaluate, Top global medical technology segments by market share in 2016 and 2022, Statista, https://www.statista.com/statistics/309273/top-sehments-in-medical-technology-by-market-share/ (last visited Jan. 8, 2018).

[ii] 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).

[iii] 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).

[iv] 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).

[5] The Aging Population: The Increasing Effects on Health Care, Pharmacy Times (2016), http://www.pharmacytimes.com/publications/issue/2016/january2016/the-aging-population-the-increasing-effects-on-health-care (last visited Jan 8, 2018).

[6] The Aging Population: The Increasing Effects on Health Care, Pharmacy Times (2016), http://www.pharmacytimes.com/publications/issue/2016/january2016/the-aging-population-the-increasing-effects-on-health-care (last visited Jan 8, 2018).

[vii] Health expenditure per capita (current US$), Health expenditure per capita (current US$) | Data, https://data.worldbank.org/indicator/SH.XPD.PCAP?end=2014&start=1995&view=chart (last visited Jan 8, 2018).

[viii] The Aging Population: The Increasing Effects on Health Care, Pharmacy Times (2016), http://www.pharmacytimes.com/publications/issue/2016/january2016/the-aging-population-the-increasing-effects-on-health-care (last visited Jan 8, 2018).

[ix] The Aging Population: The Increasing Effects on Health Care, Pharmacy Times (2016), http://www.pharmacytimes.com/publications/issue/2016/january2016/the-aging-population-the-increasing-effects-on-health-care (last visited Jan 8, 2018).

[x] 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).

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.