In-Vitro Diagnostics – Device Companies Target Emerging Markets

29 May

By Max Klietmann, VP of Research, LSN

The life sciences arena has been aware of the substantial market opportunity that the developing world represents when it comes to delivering diagnosis and therapy. This segment of the population suffers largely from preventable and/or easily treated diseases that could represent massive opportunity for pharmaceutical and device companies to improve outcomes and increase revenue streams. However, the challenge has been – and continues to be – getting treatment to patients in remote, impoverished, and underdeveloped areas. However, recent developments in the diagnostic device space are beginning to address these logistical issues, and delivering product to patients in these markets is becoming a reality. This is being driven by rapidly decreasing costs of disgnostic technologies, investor demand for larger addressable patient populations, and lower regulatory thresholds for diagnostics.

One of the biggest problems facing emerging markets is an inability to effectively diagnose patients. Considering that most disease-related deaths in the third world stem from preventable and easily-treated conditions, diagnostics are one of the easiest ways to address public health issues. Governments in China and Russia, for example, have been actively supporting initiatives to bring affordable diagnostics and treatments to remote and/or underserved regions for exactly this reason.

Hand-held and portable low-cost diagnostic devices, genomic sequencing and proteomic profiling are all being developed by a number of companies for developing nations. These are designed to be simple, robust, and user-friendly. Historically, this technology was enormously expensive, and cost prohibitive, even in developed markets. However, as the cost of genomic sequencing and proteomics has declined, new opportunities have made themselves apparent. However, delivering this technology to, for example, remote villages in Africa, presents its own challenges (e.g. harsh climate, high temperatures, contamination risk). Thus, much of the technology being proliferated for this purpose is technology initially designed for battlefield use that can now be scaled for larger markets with similar requirements to field-deployed medical units. Combine this opportunity with the fact that regulatory requirements to enter many developing countries have a much lower threshold than developed markets, and you have a very attractive investment prospect.

Investors are increasingly becoming aware of this as well. As pressure from investors has pushed many companies to seek larger addressable populations, emerging markets present a compelling opportunity to find these patients. Medical technology companies developing in vitro diagnostic devices are in a unique position to easily target this opportunity (relative to therapeutic companies, who in most cases have higher regulatory thresholds and a significantly more costly R&D process).

In-vitro diagnostic device companies should consider the option of using this type of market approach when courting investors. The opportunity to rapidly proliferate product to a market with a serious need and low regulatory barriers is a compelling target for a strategic buyer down the road. “Grooming for exit” in a market that offers a buyer a turnkey market entry option is one way to stay ahead of the curve and take advantage of macro trends in the life sciences arena.

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