Companion Diagnostics Services: Future of Outsourcing

In the recent years, service industry has become a fast-growing segment in the overall healthcare domain – thanks to the steady increase in demand for contract research organizations (CROs) and contract manufacturing organizations. The need to focus on developing more efficient interventions, within stipulated timelines and budget constrains is the key driver for outsourcing operations to third-parties and the diagnostics development space is no exception. Specifically, the bench-to-bedside development of a companion diagnostic with an under-development / commercialized drug is fraught with several challenges; as a result, drug developers, which lack the in-house expertise, are partnering with large diagnostic developers or contract development organizations (CDOs) that possess multi-disciplinary expertise to mitigate several technical, logistical and financial challenges under one roof, and harmonize the Rx and Dx development. During our research, we identified around 150 players (CROs / CDOs / diagnostics developers) that offer companion diagnostics services. In this article, we will evaluate the overall landscape of companion diagnostics services providers, as well the as the key trends shaping up this segment of the market.

Companion Diagnostics Services Providers – Current Market Landscape

The growing focus of several pharmaceutical companies to develop biomarker targeting drugs and the subsequent need for diagnostic tests to support evaluation of the growing clinical pipeline of therapeutic candidates has triggered both, the establishment of new players as well as expansion of portfolios of already established players to offer a comprehensive set of services related to precision medicine.

Currently, the companion diagnostics services market is dominated by the presence of mid-sized players, which capture 40% share of the overall market. Notable examples of such players include (in alphabetical order, no specific selection criteria) Cenetron Diagnostics, Creative Biolabs, Geneuity Clinical Research Services and Shuwen Biotech. This is followed by large firms, constituting around 30% share of the overall market; examples of players with more than 10,000 employee count, include (in alphabetical order, no specific selection criteria) Agilent Technologies, ICON Specialty Laboratories, Labcorp and Quest Diagnostics. 

Key Partnership Trends

During our research, we were able to identify over 280 partnership / collaboration agreements inked by around 90 players engaged in companion diagnostics services domain. It is interesting to note that mergers and acquisitions, product development agreements and product development and commercialization agreements account for more than 60% of the total number of deals inked during the given time period. Further, the maximum number (87) of partnerships have been inked for companion diagnostics developed / being developed through the next-generation sequencing (NGS) technology, followed by tests based on polymerase chain reaction.

Mergers & Acquisitions Trends in Companion Diagnostics Services Providers

In terms of company size, majority (68%) of the acquirer companies are large while 47% of the acquired companies are small. Further, large players have been involved in the acquisitions of 32% small and 25% mid-sized companies. On the other hand, cases wherein a large firm acquired another well-established company, represent 11% of the total instances; examples include the acquisition of GRAIL by Illumina (2021), QIAGEN by Thermo Fisher Scientific (2020) and Foundation Medicine by Roche (2018).

Roadmaps vs Roadblocks: Analysing Future Opportunities and Existing Challenges for Companion Diagnostics Services Providers

With the advent of artificial intelligence (AI) and machine learning, there has been a significant improvement in the research focused on precision medicine. The excessive amount of data, generated by the burgeoning research, can now be stored, shared and further processed by the research community to generate useful insights to help the development of companion drugs and diagnostics. At present, several software applications integrate clinical and diagnostic data, along with financial data, offering deeper and precise insights to healthcare providers, as well as helping them improve patient outcomes. As per a recent market report by Roots Analysis, over 115 companies are engaged in the development of precision medicine software applications. Most of the precision medicine software applications (90%) are based on cloud technology, followed by those operating on-premises technology (6%).

Despite the introduction of novel technologies and the growth trend in outsourcing, there are certain constraints, in terms of return on investments, that are required to be taken care of. Diagnostics rarely enjoy the same level of intellectual property protection as drugs. For instance, within 10 years of the launch of Herceptin, six companion diagnostic assays, based on different analytical techniques, were launched in the market. As a result, drug developers, that structure their payments, as fee-for-service or royalty payments, are little interested to pay the initial developers of a test premium amounts, as many similar analytical techniques would enter the market. Despite the challenges, several service providers have served as resourceful partners and successfully led the development and commercial launch of multiple companion diagnostic devices; for instance, Labcorp has supported the development of 19 FDA-cleared companion diagnostic devices. As stakeholders continue to navigate the existing roadblocks, we anticipate many similar success stories that would shape the future roadmap of this domain!

For detailed insights about this domain, check out our report on CDx services market report