INDUSTRY PROFILE

REVIEW OF LITERATURE:
In vitro diagnostic (IVD) tests are medical devices intended to perform diagnoses from assays in a test tube, or more generally in a controlled environment outside a living organism. In vitro means in glass in Latin. Definition: An 'in vitro diagnostic medical device' is: in vitro diagnostic medical device means any medical device which is a reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment, or system, whether used alone or in combination, intended by the manufacturer to be used in vitro for the examination of specimens, including blood and tissue donations, derived from the human body, solely or principally for the purpose of providing information: concerning a physiological or pathological state, concerning a congenital abnormality, to determine the safety and compatibility with potential recipients, To monitor therapeutic measures. Specimen receptacles are considered to be In Vitro Diagnostic medical devices. Specimen receptacles are those devices, whether vacuum-type or not, specifically intended by their manufacturers for the primary containment and preservation of specimens derived from the human body for the purpose of in vitro diagnostic examination. Products for general laboratory use are not in vitro diagnostic medical devices unless such products, in view of their characteristics, are specifically intended by their manufacturer to be used for in vitro diagnostic examination DIAGNOSTICS INDUSTRY WORLDWIDE: The world market for diagnostics was valued at $22.47 billion in 2000 and was expected to grow at an annual rate of about 6 percent to $28.63 billion by 2005. Around the year 2002, Japan, Western Europe and North America, made up for 85% of the world's invitro diagnostics (IVD) market. However, this figure was expected condense to about 75

percent by 2005, due to higher market growth rates within emerging economies such as China, India, Indonesia, and Japan. The IVD products including clinical chemistry reagents and medical instruments will be in high demand and present ample growth opportunities because of epidemiological trends such as the estimated diabetes burden in the US. The total diabetes burden is forecast to be 11.5% (25.4 million) in 2011, 13.5% (32.6 million) in 2021, and 14.5% (37.7 million) in 2031. The demand will increase on account of the sale of both selfmonitoring systems as well as diabetes testing becoming essential to general health screening routines DIAGNOSTICS INDUSTRY DYNAMICS The various areas of IVD industry are: Point of care- rapid diagnostic tests which can be carried out in the physician's chamber or near the patient's bedside. Clinical Chemistry: Tests for the levels of metabolites of human biochemical pathways in the blood and other body fluids for evaluating organ function tests. Immunoassays: Tests for the detection of immunological substances like antigens and antibodies in the blood and other body fluids which may indicate presence of and stage of diseased condition for diagnosis, prognosis and monitoring of infections and diseases. Molecular assays: Detection of the genetic substance of the infectious organism in the blood. E.g. Polymerase Chain reaction (PCR). These tests facilitate early detection and diagnosis. Hematology and coagulation: Study of the blood and its components Microbiology and virology: Study of microbes or microorganism by various methods such as staining and the use of culture media, in the diagnosis of infectious disease. The study of viruses. Methods used include tissue culture. Blood Banking: It involves the transfusion of safe blood from the donor to the recipient. Safety of blood is ensured by blood grouping, cross matching and screening for various pathogens, which can be transmitted by infected blood, like HIV, HBsAg, HCV, Syphilis and Malaria. Histology and Cytology: Pathological examination of tissues and cells by microscopy, in the prognosis, diagnosis and monitoring of disease. As of now, the clinical diagnostic laboratory testing market has a projected value of $98.4 billion in revenue by 2017. The drivers for this growth are expected to be the expanding markets for genetic testing, esoteric testing, in addition to increases in consumer driven health care, and an aging population with an greater access to health care services. Although, the clinical laboratory industry has been affected due to the economic slowdown via declining drugs-of-abuse testing, the effect has been offset to some extent by a modest increase in volumes, a steady pricing environment, and a move towards high-value esoteric testing.

The point of care instrument and the medical diagnostic kit (MDK) markets too have emerged as growing segments of the diagnostic laboratory industry. The star performers of the IVD industry segment are likely to be the clinical chemistry and immune-assay systems. While clinical chemistry products will benefit from the sales of personal blood glucose monitoring systems and testing-strips, the growth of immunoassay will be driven by an increased use of value-added chemiluminescent systems into the pharmaceutical drug and infectious disease testing. With the rising volumes of blood glucose monitoring among diabetic patients, endocrine condition testing is expected to be one of the most popular IVD application till 2013 and later. The laboratory testing segment, currently representating approximately 64% of the total market, will experience a relatively slow growth of about 4% per year. Markedly, this figure includes the positive effect of the estimated 20% per year growth rate projected for its more dynamic discipline , nucleic acid diagnostics (NAD) testing. The NearPatient Testing (NPT) segment currently accounts for approximately 18% of the total market. It is estimated to grow 7% per year, driven by new developments for hospital point- of-care (POC) rather than for physician office laboratories (POL). The Self Testing Segment, which currently represents about 18% of the total market, will show the fastest growth rate of 13% per year. The segment is driven by the continuous expansion of glucose monitoring for the diabetes. During the past 5 years, companies in the IVD industry have embarked on a series of mergers and acquisitions in response to a trend of customer consolidation, most notably in the U.S. market. As a result, the top five companies controls 64% of the market (e.g. Roche ,Abbott, Johnson & Johnson, Bayer , and Beckman Coulter ) and the top 10 companies had more than 80% market share last year (e.g. Dade Behring, Becton Dickinson, Biomerieux, Bio-Rad, and Sysmex) (Figure 1). Although at a slower pace, consolidation is expected to continue in the future, and the top five companies are projected to reach a 70% market share by 2005.

Percent of Total Market

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Figure 1: Consolidation of diagnostics industry. (Source: Bayer Group Strategic Planning) HEALTHCARE ECONOMICS IMPACT ON IVD As detailed on Figure 2, increasing healthcare costs have resulted in continuous cost containment pressures on central laboratories worldwide, causing significant laboratory consolidation, both in the United States and in many European countries. At the same time, IVD manufacturers have seen their profit margins decrease, leading to a dynamic industry consolidation during 1995-1999 period. As a result, this industry has recently had less differentiation in product offerings and has had to creatively balance its portfolio management to cope trend of reduced pricing. Looking forward, the diagnostics is entering a phase with a unique level of technological innovation. When looking at this industry, two significant challenge to drive and direct innovation for the next 5-7 years.

Increased healthcare costs worldwide

Cost containment pressures

Laboratory consolidation

Some trends towards decentralization

Improved efficiency
Improved productivity through automation. Increased purchasing

Lower profit margins for IVD manufacturers

IVD manufacturers consolidate achieve

Economies scale. Breadth

to
of

of

New profit oppurtunities driven by technological innovations

Less differentiation in standard product offering among companies.

Figure 2: Healthcare economics impact on IVD

DIAGNOSTICS INDUSTRY AT A CROSSROADS:

COMMODITIZATION AND INNOVATION

Trends of commoditization and innovation are often thought to be contradictory. However, these two very different paradigms are now at work concurrently to strongly influence the dynamics of the IVD industry:

Commoditization Broad product line-horizontal integration Outsourcing of noncore elements Scale driven Focus on supply chain and cost of goods

Innovation

Genomic/proteomics New class of tests Diagnostics synergies Painless/non-invasive

The evolution of laboratory testing and laboratory medicine (i.e. automation)-including the simplification of methods- requires that the quantity and quality of staff needed to generate test results today is less demanding compared to the skills required for methods and automation 5 or 10 years ago. The outcome is that some segments of the industry (e.g. clinical laboratory testing) are more commoditized than others. In turn, commoditization has necessitated the development of close relationship, including more economically and financially beneficial partnerships, with the customers. These partners do not want to lock each other into a situation or relationship where the products and services are confining rather than helpful and enabling. This realisation changes the planning paradigm for laboratories. Industry has responded to this market by focussing its product development activities on providing flexibility and modularity. In addition, there must be long term, flexible partnerships between laboratories and the industry. Such partnerships are particularly significant in light of the challenges of maintaining

relationships given laboratory expansion, contraction, or decentralisation, due to internal changes or hospital consolidation/acquisitions. Until now, the IVD business has been relatively low risk, reasonably low reward, and fairly predictable and stable. While innovation brings higher risk, it also has the potential to earn higher rewards. In turn, management has to use different strategies to optimize resources for this business in order to enhance margins through productivity. At the same time, an intriguing new era of technological innovation is emerging. Developments over the next 5 or 6 years promise to have a substantial impact on the practice of medicine and will strongly influence the strategic planning of the individual companies. Compared to the last 15 years, some of the consolidated companies will have significantly more novel technologies and the new products emerging from their pipeline. The impact of emerging detection technologies employed in sensors and micro fabricated devices will result in lower cost by decentralization of testing, particularly outpatient testing. Increased robotization will improve laboratory productivity and compensate for decreased technical capability of laboratory staff. The growing knowledge of disease processes through genomics and proteomics will open new opportunities for high-value testing, improving patient management through a direct link to therapeutics. DRIVERS FOR INNOVATION Key drivers affecting the IVD industry are: Improved recognition of IVD based on outcomes data. Cost-containment measures. Value-added lab services. Aging population worldwide. Prevention-oriented healthcare. Innovation. Targeted therapeutics: metrics of efficacy.

First, there is challenge of obtaining increased recognition for the value of IVD and laboratory testing based on improved therapeutic outcomes. As more diagnostics are linked to specific therapeutic regimens, this driver will become even more prominent. There is still significant productivity to gain and money to save in the healthcare delivery value chain by providing more focused and proactive testing. One example is in diabetes management. With an increasing prevalence rate, one can query as to how many diabetics still remain undetected. Additionally, how many diabetic patients are not only mismanaged, but they are also accumulating significant healthcare costs later in life as a consequence of disease complications which might be alleviated with improved detection, monitoring, and treatment earlier.

Together, laboratorians and industry-as a coalition-must collaborate to be more effective than in the past to promote, explain, and advocate for this (particularly value proposition) kind of approach. Healthcare today is heavily influenced by the increasingly global industry. Now that many European countries have one common currency, this change has created a transparency of information and a basis for cost-containment measures can often be a driver for innovation. Because of the commoditization of systems and products and the drive to contain cost, laboratories will undertake services that they have not been able to offer historically due to resource constraints. Examples include the more active involvement (partners) with clinicians in defining or proposing algorithms or testing protocols and providing metrics for assessing efficacy of intervention practices. Important other drivers shaping the market are prevention-oriented healthcare, innovation, and targeted therapeutics. For example, there are needs for risk assessment of specific diseases (e.g., in cardiology, oncology, and infectious diseases) where there are proven lifestyle changes and therapeutics that can greatly affects the patients prognosis. Over the next 5-10 years, an increasing number and broader spectrum of new testing markers will be correlated with disease. Emerging tests, especially those for multifactorial diseases such as cancer and Alzheimers, will need technologies to obtain diverse data and transform into actionable information that will drive the intervention strategy and determine its effectiveness. This need will require substantial increased investments in information handling and informatics. Hence, the sophistication of patient management programs linking diagnostics and therapeutic modalities will evolve. The transition from managing costs to balancing the management of care and health will take place. PRESENT SCENARIO: During the past couple of years the in-vitro diagnostics market has grown at an annual rate of about 6 percent, and was valued at $36.5 billion in 2007, compared to just $28.7 billion in 2004. By the year, assuming a similar rate of growth, it will reach a figure of $50.0 billion in value. And despite the 2009 financial crisis, the IVD segment is expected to witness growth. Presently the global IVD market is quite consolidated with the top ten market players owning about 80 percent market share. Roche is the largest market share holder with 20 percent, followed by Siemens and Abbott holding 12 percent share each. Abbotts IVD revenues increased by 10.8% to reach $4.4bn in 2007. The global growth drivers for the IVD industry are advancements in molecular diagnostics, health care for diabetes, and emerging markets. In addition Theranostics is also a promising discipline and a number of players are trying to make headway in the field.

 A number of large in-vivo players have entered the IVD market recently, signaling the convergence of the two diagnostic fields. Siemens Healthcare is a prominent example of this trend, following their acquisition of DPC, Bayer Diagnostics and Dade Behring.

MAJOR COMPANIES:
The major global companies present in the In Vitro Diagnostics Industry are:

Leading In Vitro Diagnostic Companies (2005)

S.No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Company Roche Diagnostics Abbott Labs Bayer Diagnostics Becton Dickinson Beckman Coulter Dade-Behring Ortho Clinical Diagnostics bioMerieux Sysmex Bio-Rad Labs Arkray Diagnostic Products Corp. Olympus America Cytyc Gen-Probe TOTAL Top 15 Companies

Country of Origin Switzerland -U.S.HQ Indiana U.S. - Illinois Germany U.S. - New Jersey U.S. California U.S. - Illinois U.S. - New Jersey France Japan California Japan California Japan - U.S. HQ in Pennsylvania U.S.Massachusetts U.S. California

IVD Sales ($ Millions) 6,300 3,800 2,500 2,500 1,900 1,700 1,400 1,200 716 618 470 399 384 362 306 24,555

Total Company Sales ($ Millions) 27,000 22,300 32,000 5,400 2,400 1,700 50, 514 1,200 716 1,200 470 399 8,300 508 306 1,54,413

IVD as % of Total Business 23% 17% 8% 46% 79% 100% 3% 100% 100% 52% 100% 100% 5% 71% 100% 16%

Indian In Vitro Diagnostics Industry:

The global IVD market is growing at a rate of 7 per cent. The largest chunk of the market is held by the USA, which constitutes 37 per cent. In USA, Western Europe and Japan the market is growing at 7 per cent. The market is growing in the rest of the world at 11 per cent. In India it is growing at 15-20 per cent. As the population in India continues to prosper and migrate towards metropolitan settings where healthcare is available, a new market research study from Kalorama Information paints a picture of the high growth in vitro diagnostics (IVD) industry which has been averaging between 15% and 20% in annual growth rates. At present one major driving

force in this respect is the basic demographic change in India, the migration to urban cities, with more and more people having access to modern healthcare. The impetus is provided by the increasing investments in hospitals and clinical laboratories. But this scenario is all set for a change with the medical fraternity looking towards development of the rural sector as well.

IVD MARKET The IVD market accounts for about 38 percent of the total global medical devices and diagnostic market. The Indian IVD market is estimated to be $330 million as of 2008-09. The IVD market scenario in India has seen substantial developments in the last 4-5 years and these changes shall continue for decades to come. In a very short time, India is poised to catch up with the global IVD market. The current IVD market in India is estimated as $45 billion sector. For the coming year (2012-13), the total market size for clinical chemistry is estimated at $ 50 billion. Instruments market is estimated at $20 billion while the reagents market is at $ 30 billion. The reagent market is further divided into closed Systems ($8 billion) and the actual served open market ($22 billion). MAJOR IVD COMPANIES The leading player in this segment is Transasia Bio-medicals which is ISO 9001:2000 and ISO 13485:2003 certified, has also been rated as India's largest in vitro diagnostics company (2006) by McEvoy & Farmer, USA (International experts on IVD markets).

1. Transasia Bio-Medicals Ltd. 2. F. Hoffmann-La Roche Ltd. 3. Siemens Healthcare 4. Sysmex Corporation 5. Abbott Laboratories 6. Beckman Coulter, Inc. 7. Ortho-Clinical Diagnostics Inc. 8. OLYMPUS CORPORATION 9. Qiagen N.V. 10. Span Diagnostics Ltd. 11. Trivitron Group of Companies 12. BioMerieux S.A. 13. Bio-Rad Laboratories, Inc.

14. Phadia AB 15. DiaSorin S.p.A 16. Becton, Dickinson and Company 17. Gen-Probe Incorporated 18. Inverness Medical Innovations, Inc. 19. Tulip Group 20. Mindray Medical International Limited 21. CL Micromed Pvt. Ltd. 22. Embee Diagnostics 23. Invitro Biotech Ltd. 24. Bhat Bio-tech India (P)Ltd 25. Accurex Biomedical Pvt. Ltd. 26. Jindal Medical & Scientific Instruments Company (Pvt.) Ltd. 27. ATNT Laboratories 28. Professional Biotech Pvt. Ltd.

Growth Drivers: The Indian market growth is driven by: Increasing health awareness, demand / affordability for quality healthcare Change in demographics and prevalence of diseases Increasing path lab chains & reach of path labs in towns and rural areas Development of CROs Increased number of insured lives 70 per cent decision of doctors based on lab reports - Medico Legal implications

Routine Test Segments: IVD includes tests which are used either for the analysis of patient body fluids or tissue samples. Tests performed on samples, for example blood, tissues or urine taken from the body are a source of objective information about the body and how it functions.

This information is vitally important for clinical decision-making. IVD tests are essential to the practice of health care worldwide. An estimated 60-70 percent of medical decisions involve a diagnostic test. Routine test segments-chemistry/immunoassay, haematology, and routine microbiology-currently make up about 70 percent of the market test-wise.

Emerging technologies in the IVD industry As lab automation continues to evolve, the drive or thrust for smaller, faster, and moreaccessible devices is increasing. Emerging markets have different needs with respect to the test menus, technologies used and operating procedures. Thus, made to order solutions need to be developed for these markets. Lab automation has also taken on a new level of importance in the ability to actually get instruments interfaced to various laboratory information systems. Information technology has taken a giant leap in the IVD industry thereby reducing the dependence on a technically qualified individual to be present at all times during the analytical procedure without compromising on established levels of care. Delivering the right data in a timely and cost effective manner while improving the sensitivity and specificity of the test is the need of the hour and the industry needs to gear up for single workstations that can carry multiple workloads. Emerging business opportunity The emerging industry structure is headed towards providing healthcare services as an integrated comprehensive package rather than the traditional concept of providing healthcare infrastructure and reactive medical care. Growing health consciousness among middle and high-income families in India is heralding a new business opportunity -preventive healthcare. This has shifted focus from in-patient treatment to a regular

preventive health check. Corporate companies offer annual health check for their employees; insurance companies conduct pre-insurance policy check; and self paid health checks also give out a potential business opportunity. India as a major bio-industry and IVD manufacturer needs to invest in dedicated research and development to boost the delivery of increasingly sophisticated equipments. Giant steps need to be taken to cross the current chasm to fulfill responsibilities to doctors and patients in meeting and exceeding their needs for reliable, affordable and innovative medical diagnostic systems. Future prospects: Molecular diagnostics and pharmacogenomics are the future markets for IVD. Since these are having the fastest growth rate of 25 per cent diseases like cancer likely to be tested using molecular diagnostics and treated using pharmacogenomics. Demand for point of care tests is also on the rise, as the demand for real time results increases. The market will continue to grow at 15-20 per cent for the next 5 years in India given the presence of the current growth drivers

GROWTH PATTERN OF IVD INDUSTRY:

The worldwide In Vitro Diagnostics market (IVD) was estimated at approximately $21.0 billion in 2002. During the past several years the growth rate of the industry has been low (4%-5% per year), with very limited growth in the more routine disciplines of central laboratories, especially clinical chemistry and hematology. However, a number of fundamentals are improving (reviewed later), and the IVD industry is now projected to become an attractive market with a sustainable 6% overall growth rate per year, reaching $28.5 billion by 2007and it is estimated that by $59.2 billion by 2015.

CAGR 6.72%

Source: Kalorama information The In Vitro Diagnostics (IVD) Industry represents one of the most lucrative segments in global healthcare industry. The size of the global IVD market was in excess of US$ 38 Billion in 2007. Propelled by factors such as Increasing prevalence of several chronic and infectious diseases, Emerging technologies and Increasing patient awareness. The IVD market is particularly characterized by the emergence of various novel technologies; with Molecular diagnostics and point of care tests expected to play a very important role in driving the future growth of the industry, says Global In Vitro Diagnostic Market Analysis.

The global IVD market is forecasted to grow at a CAGR 6.72% from 2007 to 2012. Point of care diagnostics presently accounts for the largest share in the global IVD market and is expected to jump to nearly US$ 18 Billion by 2012. Molecular diagnostics with a CAGR growth of 15.4% represents the fastest growing IVD segment. North America, Europe and Japan together accounted for 90% of the global IVD market in 2007.

However IVD markets in emerging economies such as India, China and Brazil are expected to witness strong growth in the future. The top three IVD layers together account for more than one-third of the global IVD market. With over 33 Million people living with HIV, the market for HIV diagnostics is expected to undergo strong growth in the next five years. The IVD markets of BRIC economies offer immense growth opportunities due to the increasing healthcare budgets in these nations, along with the increasing number of private corporate hospitals, and the rising income levels backed by a huge, untapped population bases. Despite regulatory hurdles and other restraints such as low consumer awareness and the absence of regulations concerning patient safety, the BRIC IVD market is expected to grow from $2.9 billion in 2009 to $7.2 billion-$7.5 billion in 2014 at a CAGR of ~19%-20% from 2009 to 2014. In comparison, the growth rate of the global IVD market is pegged at only ~5%-6% in the next five years.