The life science ecosystem is a complex organism being influenced by patients, providers, payers, and regulators in the precision medicine, diagnostics, and biopharmaceutical markets. Within the ecosystem, the Precision Medicine and Diagnostics segment faces hurdles with high development costs, low reimbursement, and an ever-changing regulatory landscape. Given the growing emphasis on Precision Medicine, diagnostic companies must adapt and look for innovative ways to position their technologies and services to increase chances of success.
Similar to the Biopharmaceutical Practice at Kineticos, we view our role in the Precision Medicine and Diagnostics practice as 2-part:
- To help Precision Medicine, Diagnostic, Lab, and Tool companies bring their novel technologies and services to customers and patients by supporting them throughout the development process
- To provide life science leaders with valuable insight into industry trends and future outlook
To support our second role, Kineticos recently surveyed Precision Medicine and Diagnostic professionals and inquired about their confidence levels in several areas related to the state of the industry. Below is a summary of the research findings. For a more comprehensive report, please click here
The research indicates that overall confidence in the Diagnostic industry is fairly strong heading into the end of the year and will grow slightly over the next 18 months. Figure 1 illustrates that confidence today vs. confidence in 18 months is similar, which is a good indicator of future success.
In regard to what is driving confidence, 45% of respondents indicated their confidence was driven by the Industry Focus on Precision Medicine (28%) or the Growing Life Sciences Market (17%). This is not surprising given the FDA and CMS are making frequent recommendations to include companion or complimentary diagnostics with new drug entities. As mentioned previously, the Diagnostic landscape has many hurdles and risks, which are important to understand. The biggest risks identified by respondents are the Inability to Raise Capital (29%) and the Unfavorable Regulatory Landscape (28%). Raising capital has only gotten tougher for Diagnostics companies, especially after the Theranostics debacle, but companies are beginning to learn how to navigate this and develop technologies with a stronger clinical and analytical validation. In addition, the FDA is updating guidance documents that include requirements for validations, which puts pressure on companies to evolve. Figures 2 & 3 provides some granularity into what confidence and risk factors are.
In addition to the broad industry confidence level, we asked respondents to provide us with their confidence as it relates to 3 critical success factors for Diagnostic companies – Capital Markets, Deal Landscape, and Product Launch. Below (Figures 4) illustrates how different avenues in the Capital Market faired in the study. Diagnostic professionals indicated that the are moderately to highly confident that they will raise capital (6.7), with the confidence being through non-public sources (6.3). It is interesting to see the high confidence levels here as raising capital was identified as a key risk.
When asked about deal making, 34% of respondents indicated that transactional sales accounted for greater than 75% of revenue. This is aligned with our thinking as securing large scale partnership deals is tough in this market and getting transactional revenue is necessary to fuel product development and launch efforts. Companies looking for strategic partnerships have a plethora of options, which is normally good, but with the complexities of the different technologies, and the lack of long-term outcome data, it can make the partnership decision very challenging. Thus, organizations in the early stages of development need to ensure that their technology solves an unmet need or solves a need in a better way than predicate technologies.
Additionally, 76% of Diagnostic professionals indicated that they are dedicated to developing and launching new products and are confident (See Figure 5) that they will do so successfully in the next 18 months. This is important as innovation is vital to advancing Precision Medicine and improving patient outcomes.
Finally, we inquired about the hot topic of Precision Medicine. We kept it simple and asked for each respondent about how the Precision Medicine concept is impacting their business. Figure 6 illustrates our respondents’ sentiment but Kineticos Diagnostics expert, Bill Finger, will offer his thoughts on this topic in an upcoming article.