Transcript Market Perspective on the POC Diagnostics Industry

Market Perspectives
on the POC
Diagnostics Industry
Bruce Cranna
Leerink Swann LLC
Senior Analyst and Managing Director
Presentation for MassMEDIC
Wednesday, September 12, 2007
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POC Industry Snapshot
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Total In Vitro Diagnostic (IVD) Market of approximately $32B
We estimate Point of Care (POC) to be roughly $3B, excluding nonIVD applications and Whole Blood Glucose testing
What is it? We include other patient self test (PST), physician office
lab (POL), and hospital based POC
Overall IVD market growth is at 6%-7% annually
POC category growth better, at 10%-12%
Hospital Labs
48%
Commercial
Labs
29%
Self Testing
16%
POC
7%
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Wall Street’s Take
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IVDs historically not seen as
glamorous as other medical
device categories- less IP, less
R&D
IVD growth rates were lower
than other Med Tech categories
Consolidation in the central lab
meant less pricing leverage for
IVD vendors
IVD companies were often
viewed as cash cows without
the capital needs that typically
attract Wall Street attention
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A New Point of View?
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Sector now being viewed much differently
IVD companies are uber defensive plays - in turbulent markets
providing even greater cash flow and earnings visibility than their
more volatile Device/Biotech counterparts
The Razor/Razor Blade business model provides the same
demographic attractiveness as other health care groups, but with
far lower volatility
Perception: IVD companies have far less exposure to
reimbursement risk. We agree
Recent “game changers” have made the IVD sector more visible:
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High growth single markers i.e. BNP and HPV
Molecular diagnostics – sensitivity and pricing advantages
Tailored therapies using companion diagnostics
Lastly – M&A. There is nothing more attention-getting than a lot of
acquisition activity in a sector.
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Recent M&A Activity
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Pace of M&A activity has accelerated
Robust premiums being paid
Consolidation could drive more rational pricing
Recent
Transactions
DIGE
CTEC*
VMSI*
CYTC
DADE
HEM*
BSTE
Average
Previous Transaction
Share
Estimated
Cash/Stock
Close
Size
Premium CY08 Sales
55%/45%
$38.58
$1.6B
37%
$247MM
0%/100%
$15.76
$326MM
25%
$100MM
100%/0%
$51.74
$3.0B
44%
$348MM
$16.50/.52HOLX
$31.13
$6.2B
33%
$856MM
100%/0%
$55.91
$7.0B
38%
$2.0B
0%/100%--0.27 IMA shares
$9.27
$169MM
38%
$45MM
100%/0%
$55.38
$1.6B
67%
$349MM
$2.8B
40%
Forward
Sales
Multiple
6.5
3.3
8.6
7.2
3.5
3.8
4.6
5.3
Source: Leerink Swann & Co. Estimates and press releases
*Pending transactions
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POC mind share leaders – what
has Wall Street’s attention?
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Infectious disease Rapids,
especially HIV
PST: New and more
accurate meters (WBG
and Coagulation)
Rapid hospital acquired
infection (HAI) testing seen
as potentially explosive –
in hospital POC and POL
POC Pharmacogenomics?
Warfarin metabolism
testing could be the poster
child. FDA is clearly
supportive.
Rapid Testing
Rapid HIV
POC BNP
POC MRSA
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Rapidly growing US HIV opportunity
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In September 2006, the Centers for Disease Control (CDC)
issued new guidelines regarding routine HIV screening for adults
in all health-care settings.
We expect guidelines will drive higher rapid HIV test usage,
although timing and strength of uptake is unclear.
We believe the US rapid HIV market could triple over the next 4
years.
Millions
Testing Volumes
Estim ated Testing Volum es: Rapid Elisa vs. Elisa Volum es
30
25
20
Rapid Elisa
15
Elisa
10
5
0
2006
2007
2008
2009
2010
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PST Coagulation
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Coagulation monitoring is a sizeable market. 3MM patients on
some form of anti-coagulation therapy in the US alone - 34MM
tests annually.
We believe WW sales of coagulation testing equipment and
reagents exceed $1B annually. PST component of this market is
8-10% today, and could grow to 20% by 2010.
Additional indications (especially A Fib) could be the driver, with
data available in 2009
Addressable patients
Mechanical heart valve
Atrial fibrilation
DVT
Other CV
Prophylaxis and post surgery
Total tested patients
Total patient opportunity
2005
2008
969,000
4,781,700
1,786,400
501,600
1,537,500
7,290,840
9,576,200
1,028,311
5,301,556
1,868,000
572,409
1,779,848
8,609,080
10,550,124
Coagulation Meter
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POC MRSA
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MRSA infections are ubiquitous, dangerous, and costly. The incidence
of MRSA (Methicillin Resistant Staph Aureus) infections is rising in
both hospitals and long term care facilities.
In the ICU, infection rates approach 60% with 90K patients dying
annually as a result of hospital-acquired infections, including those
caused by MRSA.
Both POL and hospital STAT applications
Estimated 2008 US Inpatient
Volume
ICU Admissions ,
4,873,755
Non-critical
Admissions ,
38,641,912
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POC Pharmacogenomics?
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These terms usually not seen
together
Warfarin metabolism testing could
be first salvo – FDA has signaled
their support
Current turnaround time is generally
described as not quick enough
Rapid, easy to use testing formats
are coming to market
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Challenges
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POC formats still tend to cost more than central lab tests
Reimbursement, reimbursement, reimbursement – a mixed bag.
POC coagulation a poster child for challenges
POL – getting beyond the 30,000 or so larger POLs – will smaller
practices ever really want to get into the blood handling/billing
business?
Getting CLIA waived tests can take time, money
Hospital POC: turf issues between central lab and POC advocates
Technical – especially in the more esoteric segments – making rapid
POC more accessible. Will there ever be a user friendly molecular
format?
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Summary
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Attitude improvement on Wall Street towards IVDs in general and
POC in particular.
Closer to the patient has its advantages. Wall Street wonders if the
past consolidation of lab testing is being unwound – will hospitals
and docs claw more testing back into the POL and hospital lab?
If you can take cost out, you win. Rapid HAI could save substantial
spending downstream. POC coagulation: if shown to be cheaper
than central lab testing via a office visit (and data expands
indications), it could be catalytic
POC – in it’s various manifestations, a good place to be
Thank you
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