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May 25, 2022

Companion Diagnostics: Macroeconomic trends

Oncology remains the largest segment for US Food and Drug Administration (FDA)-defined marketed drugs with Companion Diagnostics (CDx). The FDA has cleared or approved more than 40 CDx in the field of oncology. Although precision medicine encompasses many areas, oncology is the area that is expected to exhibit high growth.

Listed below are the key macroeconomic trends impacting the CDx theme, as identified by GlobalData.

Decreasing cost of genetic testing

The cost of sequencing is rapidly decreasing due to increasing competition and advancing technology. For example, sequencing a single genome cost $100m in 2001, but leading next-generation sequencing (NGS) platform players Illumina and Life Technologies have made claims that whole genomes can be sequenced for less than $1,000 using their platforms.

In general, the cost of DNA sequencing has steadily decreased since the introduction of NGS, regardless of the platform type or technology. Overall sequencing costs have largely stabilised, and high-throughput platforms have become widely available, resulting in a broader use of whole-genome sequencing for oncology.

The reduced costs of genetic-based CDx tests allows broader market access, which drives market growth. Not all cancer drugs are effective for all patients, and those that are ineffective most frequently tend to be the most expensive or those that exhibit a high risk. The use of CDx to better select treatments results in reduced costs, as expensive treatments are not wasted on patients who are unlikely to respond. It also helps patients avoid potential adverse events, reducing unnecessary hospitalisations and outpatient costs.

Collaboration between diagnostics and pharmaceutical companies

In most countries, delayed reimbursement and funding of diagnostics is a key barrier to identifying patients, and subsequently accessing precision medicines for those who may benefit. As a result, large diagnostic manufacturers typically have trouble investing in diagnostic equipment, so they form partnership deals with pharmaceutical companies.

The pharmaceutical company can then access the diagnostic company’s proprietary CDx platforms and utilise technical and regulatory expertise in areas such as compliance with medical device regulations. Additionally, the diagnostic company may not be well equipped to conduct large-scale clinical trials alone, but can have its CDx tested and validated in a large number of patients with the help of a larger pharmaceutical company.

However, pharmaceutical companies are only incentivised to develop companion tests if they believe their drug will not pass FDA scrutiny without it, which has an effect on the diagnostic equipment market. Some pharmaceutical companies have brought diagnostics under their own roof through mergers and acquisitions (M&As). For example, Roche acquired Ventana Medical Systems in 2008. In April 2018, Illumina announced a partnership with pharmaceutical conglomerate Bristol Myers Squibb to commercialise their in vitro diagnostics (IVD) assay in support of Bristol Myers Squibb’s oncology portfolio.

This is an edited extract from the Companion Diagnostics – Thematic Research report produced by GlobalData Thematic Research.

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