Frost & Sullivan recently released a report entitled, “Western European Companion Diagnostics Market.” This study provides a global outlook of the companion diagnostics market, specifically focusing on Western Europe. The report discusses the oncology segments in companion diagnostics including breast, lung, and colorectal cancers as well as non-oncology areas such as infectious diseases, central nervous system, and cardiovascular. The study also discusses the reimbursement and regulatory approval pathways for companion diagnostics in Germany, the United Kingdom, France, Italy, Spain, Scandinavia, and Benelux. In this week’s blog, I present some of the analysis and information from the report’s executive summary.

According to the report, the companion diagnostics market in Western Europe generated revenues of $457 million in 2013 and is estimated to reach $1.3 billion in 2018. The market is expected to grow at a compound annual growth rate of 23.2% from 2013 to 2018.

“Limited regulatory barriers for drug and diagnostic combination products, which the current IVD directive classifies under the low-risk category, are easing market access,” said Divyaa Ravishankar, a senior healthcare industry analyst at Frost & Sullivan and the report’s author. “As nearly all IVD tests in Europe belong to the low-risk category, they are exempt from premarket evaluation. Consequently, manufacturers tend to self-assess conformity, self-certify companion diagnostics products, and CE mark them before selling them in the European market. This laid back process has resulted in a higher rate of approval of new companion diagnostics tests and products.”

However, intense competition from laboratory-developed test (LDT) manufacturers, which offer LDTs through reference labs across Europe and the rest of the world, is hampering market growth in companion diagnostics. The entry of foreign LDT companies into the market through partnerships with local companies and the inclination of such companies in Western Europe to promote the use of LDTs over approved companion diagnostics tests are contributing to this situation.

Furthermore, the variations in reimbursement policies across Western Europe are creating an unpredictable environment and adversely affecting the adoption of new companion diagnostics test technologies. In addition to the lack of a robust coverage and payment process, such reimbursement issues are harming the prospects of companion diagnostics manufacturers in the region.

“Companion diagnostics manufacturers should partner with regulatory bodies from the early stages of solution development to gain an advantage over drug companies,” said Ravishankar. “Diagnostics companies should also devise effective business models that rest on shortening the drug development time and earning royalties for future sales.”

Some of the report’s other key findings include the following:

  • The molecular diagnostics and tissue diagnostics sectors form the basis of the companion diagnostics market. Most partnerships are triggered by growth and innovation in these sectors.
  • Approximately 95.4% of the companion diagnostics market is focused on oncology-based testing products, while 4.6% is non-oncology areas. By 2016 and 2017, Frost & Sullivan predicts that the non-oncology sector will gradually increase because many IVD companies (e.g., Qiagen and Roche) have strong product pipelines in the infectious disease and central nervous system areas.
  • Within oncology testing, breast, lung, and colorectal cancers represent a major portion of the companion diagnostics market, with a significant number of CE-marked testing products for these cancers in the European market. These three cancers account for 89.1% of the revenues in the market.
  • Among the various companion diagnostics products, breast cancer testing has matured and established a market space with a moderate growth rate.
  • With the recent approvals for many combination products, lung cancer testing is the most attractive growth market area in companion diagnostics.
  • Among other companion diagnostics tests for cancer, melanoma, prostate, and ovarian cancers will experience growth in the coming years.
  • Starting in 2014, the European Commission will introduce new revised IVD regulations and clinical trial regulations. These new rules are expected to address challenges pertaining to LDTs. Frost & Sullivan believes the new regulations will have both positive and negative effects on companion diagnostics manufacturers.

The report also includes the following perspectives on companion diagnostics from CEOs who are involved in this area:

  • The revision of the European IVD Directive is expected to cause difficulties for companion diagnostics products in the pipeline and may prolong the launch of tests in Europe.
  • Because of the substantial disruption to companion diagnostics caused by LDTs, the regulation of LDTs requires close attention in Europe.
  • Pharmaceutical companies seek external companion diagnostics partners to ease access to new and appropriate technologies through licenses or fee-for-service models.
  • The next market growth area in companion diagnostics exists in the non-oncology sector, which includes infectious disease, central nervous system, and cardiovascular disease.

In addition, the report identifies the following key companies to watch for in companion diagnostics:

  • Diagenics - As a part of its business strategy, the company’s goal is to focus on blood-based diagnostics for certain central nervous system disorders (e.g., Alzheimer’s and Parkinson’s). The firm intends to increase its pharmaceutical partnering revenue stream in companion diagnostics for research and development collaboration. The company’s core strengths include intellectual property protection for blood-based Alzheimer’s disease tests, ownership of a biobank with the help of collaboration with U.S. and European universities, and a track record for receiving public grants in addition to an extensive distributor network in Europe.
  • MDx Health - The company has a history of launching molecular diagnostic tests. Since 2011, the firm has focused on companion diagnostics products for brain and prostate cancers. The company also recently partnered with Teva Pharmaceuticals to commercialize its prostate cancer and glioblastoma tests in Israel, thereby increasing its presence in Europe. The firm has already partnered with Pfizer and Merck.
  • Invivoscribe - The company has various CE-marked assays that are being sold outside the U.S. In 2011, the company partnered with Novartis to develop a companion diagnostics test to treat acute myeloid leukemia.
  • Foundation Medicine - Sanofi chose Foundation Medicine as a partner because of its focus on companion diagnostics with next-generation sequencing technologies. Foundation Medicine remains interesting because its tests are focused on core cancer diagnostic capabilities. Foundation Medicine has had five alliances so far that have centered on molecular information capabilities.

The report makes the following predictions about the companion diagnostics market in Western Europe:

  • With advancements being made in next-generation sequencing, digital pathology, and quantitative immunohistochemistry, there will be more assays based on these technologies for companion diagnostics by 2016.
  • Other areas such as infectious diseases (e.g., human papillomavirus), central nervous system, and cardiovascular will experience an influx of new markets and companion diagnostic products.
  • Efforts are being made toward reimbursement reform and a more transparent, consistent system for coverage and payment processes in companion diagnostics.