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State of Biotech 2022: How COVID-19 Forever Changed the In Vitro Diagnostics Marketplace
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State of Biotech 2022: How COVID-19 Forever Changed the In Vitro Diagnostics Marketplace
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Segment:1 Introduction to GEN Edge.
KEVIN DAVIES: GEN Edge is the premium content channel of genetic engineering and biotechnology news, the magazine that's been covering the twists and turns of the biotech industry for decades. GEN Edge offers exclusive in-depth reports from the front lines of biotech delivered right to your inbox, focusing on business trends and opportunities and spotlighting the most exciting startups and funding rounds shaping the industry. GEN Edge features the brilliant reporting and journalism of the GEN editorial team led by Alex Philippidis, Senior Business Editor in New York, and Jonathan Grinstein in San Diego.
ALEX PHILIPPIDIS: We deliver a lively, authoritative, curated set of stories each week profiling dynamic new biotech companies, sitting down with founding CEOs and other key executives, researchers, and analysts from the leading edge of biotech.
KEVIN DAVIES: Subscribers to GEN Edge also enjoy exciting exclusive video content. Close to the Edge features 60-minute interviews with outstanding biotech CEOs. And our Front Row series offers a deep dive into subjects, such as Alzheimer's therapies and AI in drug development.
ALEX PHILIPPIDIS: If you sign up, you'll have instant access to two years of this exclusive material. And GEN Edge will be home to full-length versions of the interviews and panels featured here in the State of Biotech forum.
KEVIN DAVIES: GEN Edge offers personal subscriptions and various options for group subscriptions for organizations and companies. Stay on the bleeding edge of biotech with GEN Edge. [MUSIC PLAYING]
Segment:2 How COVID-19 Forever Changed the In Vitro Diagnostics Marketplace.
KEVIN DAVIES:
DAMIAN DOHERTY: Good afternoon, and welcome to this special segment of the State of Biotech made available for GEN Edge subscribers. My name is Damian Doherty. I'm the editor-in-chief of Inside Precision Medicine. And this afternoon, I have the pleasure of introducing Larry Worden. Larry is the principal and founder of IVD Logix, a full service marketing research and consulting business for in vitro diagnostics.
DAMIAN DOHERTY: He also co-founded Market Diagnostics International where he developed the IVD insights and IVD lab file syndicated databases on in vitro diagnostic testing. Prior to that, he was a senior consultant and co-founder at Case Bauer and Associates, an international business development and research firm exclusively focused on in vitro diagnostics. And he has held senior legislative regulatory affairs and market research positions with Becton Dickinson and Company, AdvaMed, and IQVIA.
DAMIAN DOHERTY: Last but not least, Larry is also an editorial board member of Inside Precision Medicine. Now, welcome, Larry. Larry will now give a presentation entitled, How COVID-19 Forever Changed the In Vitro Diagnostics Marketplace. So without any further ado, Larry, the floor is yours.
LAWRENCE WORDEN: Thank you, Damian. I appreciate that, and it's a pleasure to be here. Just to start, I mean it's not possible, I think, to present an IVD market update without addressing the role that COVID testing has played over the past few years. COVID has certainly put a spotlight on clinical lab testing and the IVD industry in general. For instance, I never thought that I'd be explaining the difference between a PCR and an amino acid test to friends over dinner or the difference between an antigen and an antibody test.
LAWRENCE WORDEN: But probably, a lot of us in this industry have now had that experience. My talk today will focus on two topics. First, we'll look at the global market for in vitro diagnostics overall and the COVID-19 diagnostics, in particular, and then look at the astounding effect that COVID had in both 2020 and 2021. And finally, we'll look a little more closely at a few of the changes caused by the pandemic that are likely to be with us moving forward.
LAWRENCE WORDEN: And there are many, but we'll review just a few. By now, I think it's well recognized that the pandemic amplified and accelerated many changes that were already underway in society in general. And the same is certainly true in the IVD industry. It drove a 28% increase in global revenue in 2020, pushing the market from $65 billion in 2019 to $86 billion in 2020, and a 48% growth in '21 to $127 billion, approximately doubling the market revenue in three years.
LAWRENCE WORDEN: That's truly unprecedented, I think, for any industry but particularly, for an industry like IVD that for years had grown at a traditional healthy but much lower 4% to 6% per year. The pandemic created demand for COVID testing primarily for central laboratory and rapid molecular tests in 2020. And for at-home immunoassay tests in 2021, while creating a decline in routine testing volumes outside of COVID in 2020 that occurred across most segments and in all geographies.
LAWRENCE WORDEN: Many of the traditional markets began to recover in 2021 and are now growing at significantly higher rates than the traditional 4% to 6% as they make up for lost time. The growth for COVID testing was strongest in North America and Europe. But even the more price-sensitive emerging markets in Latin America and Asia-Pacific experienced strong double-digit growth as well. And now in 2022, we're just now beginning to see some decline in revenue from COVID-19 testing.
LAWRENCE WORDEN: While the top 10 companies increased their revenues an extraordinary 33% in 2021, the total market grew by 48%, thus reducing the overall share of these global top 10 from 63% share in 2020 to 56% in 2021. That was mostly due to the multitude of smaller companies that over the past two years have jumped into the market. A market fueled by rapid regulatory approval of the new testing kits and ready access to large government contracts and generous testing environment, all making it a much easier market to enter and a less competitive environment to operate in.
LAWRENCE WORDEN: For instance, by 2021, the FDA's website listed 267 molecular diagnostic EUAs, 38 antigen diagnostic EUAs, and 90 serology diagnostic EUAs. All of these were developed and approved in less than two years. The 48% growth resulted in a $55 billion in incremental revenue in 2021. And if you look at the biggest companies here, you see that they accounted for about 1/3 of this incremental revenue.
LAWRENCE WORDEN: And while COVID-19 growth in 2020 was concentrated, as I said, in PCR molecular testing, companies that offered rapid lateral flow and at-home testing kits generated the most incremental revenue in 2021. Abbott, again, led the pack in 2021 as they had in 2020. And in 2021, you see here a $4.3 billion in incremental revenue primarily from their rapid immunoassay kits.
LAWRENCE WORDEN: Another company Innova Medical is worth mentioning because they didn't exist before 2020. They entered the list of top 10 companies in 2021 with $5.2 billion in rapid COVID-19 tests. Really phenomenal. As previously noted, the growth was strongest in North America and Europe that accounted for about $7 out of every $10 in incremental revenue. But nevertheless, even the more price-sensitive and resource-constrained markets in Asia and Latin America experienced double-digit growth.
LAWRENCE WORDEN: Europe in 2021 showed the strongest growth. And this was primarily due to government purchases and distribution of at-home COVID tests. Point-of-care diagnostic revenue grew at an astounding 171% in 2021, reflecting those rapid at-home kits, increasing from $18.7 billion in 2020 to $50.7 billion in 2021.
LAWRENCE WORDEN: This move point-of-care diagnostics from the second highest revenue segment to the first highest, surpassing both immunoassay and molecular revenue. And other segments, more traditional segments, like clinical chemistry, hematology, coagulation, histology, cytology, immunohematology, and flow cytometry all began to grow in 2021 after the previous year's decrease. And a few tests, though, other than COVID diagnostics did benefit from the pandemic.
LAWRENCE WORDEN: These included coagulation assays, such as D-dimer for pulmonary embolisms and blood gases to monitor COVID patients and microbiology, overall, as the market continued to grow, primarily due to an increase in blood cultures related to the hospitalization of COVID patients. With the unanticipated COVID variants playing such an influential role over the past few years, forecasting has been pretty risky in this market.
LAWRENCE WORDEN: But taking all of this into consideration, how do we expect this incredible growth in the IVD market to play out over the next few years? As I said, COVID-19 testing volumes begin to decrease in the near term. But we see molecular testing, overall, will decline but at a slower rate than the rapid immunoassay testing as the need for urgent test results diminishes, and COVID testing becomes more routine as SARS-CoV-2 becomes more of an endemic infection than a pandemic.
LAWRENCE WORDEN: We believe that the effect of COVID-19 testing will rapidly recede after 2022. And by 2025, we'll see the more traditional growth drivers dominate this market, and the market begin to grow without the influence of the COVID-19 testing. So while there are many lasting market changes due to COVID, I've chosen to look at four of the most immediate ones.
LAWRENCE WORDEN: And these include the emergence of Asia-Pacific companies, IVD company investments that will essentially broaden their product portfolio based on revenues from the COVID pandemic and expansion of the molecular analyzer installed base and an accelerated trend to at-home testing and other distributed testing locations. In part due to supply chain issues, several Asia-Pacific companies emerged as significant competitors in 2020.
LAWRENCE WORDEN: Typical global IVD companies such as Roche, Abbott, Danaher or Becton-Dickinson were often, contractually, obligated to fulfill government orders within their home countries or home region first before distributing these products internationally. That created an opportunity for the secondary regional players to compete, not just in their local region but in other places as well. And as noted previously, we saw a number of these companies make significant gains in 2020.
LAWRENCE WORDEN: They had been growing in competence prior to 2020 but really began to come up to speed in response to the pandemic. They were among the first companies to launch COVID tests and began shipping them across the world. And because of their low cost had an especially big impact in filling demand in middle-income and low-resource countries. Now, when you think about APAC companies, of course, Chinese companies come to mind.
LAWRENCE WORDEN: And they were significant players in this. But in this case, there were a couple of South Korean companies that really stood out and were very much in the spotlight. SD Biosensor and Seegene, as you can see on this slide, generated significant incremental revenue gains, for the most part, in APAC, Europe, and in Latin America. You see that Seegene went from $96 million to $1.4 billion and SD Biosensor from $61 million to $2.6 billion in the three-year period.
LAWRENCE WORDEN: SD Biosensor received one of the first FDA EUAs in April 2020 for its molecular assay and later entered into a worldwide distribution agreement with Roche for its point-of-care assays. And these companies now have a presence in hundreds of labs around the world, making it easier to maintain their growth post-pandemic. And in fact, as you see in the bottom line here, that both of these companies have now stepped up their efforts and investments to penetrate the US market as well.
LAWRENCE WORDEN: So we're seeing a realignment of the global competitive picture. The incredible pandemic windfalls that you've seen here for the IVD companies, of course, are not sitting idle. They're being put to use in expanding product portfolios of some of the major companies with major acquisitions and partnerships. So you see Thermo Fisher acquired Mesa Biotech in their Accula dock point-of-care platform.
LAWRENCE WORDEN: Roche acquired GenMark, a company very active in syndromic molecular testing. Hologic acquired Mobidiag to supplement their assay development for their platforms, DiaSorin and Luminex. Quidel acquired Ortho Clinical Diagnostics, a key player in chemistry immunoassay and immunohematology markets. And of course, SD Biosensor acquired or announced the acquisition in 2022 of Viridian Bioscience, a company that develops molecular solutions, primarily aimed at point-of-care locations.
LAWRENCE WORDEN: And the partnerships include Roche and SD Biosensor, Biotime and Innova, Siemens and Healgen, Seegene and Bio-Rad. As I mentioned, Seegene is developing or providing assays for the Bio-Rad OpenPCR platforms. In addition, there are emerging players circling the market and with a focus on establishing more consumer-centric health care delivery and diagnostic testing models as a future opportunity. Walgreens, CVS, in case in point, developing their on-site clinics for pharmacies and potentially expanding their vaccination business to the delivery of point-of-care testing within minute clinics and other rapid or urgent care types of offerings.
LAWRENCE WORDEN: Then this is an expansion of the installled base of analyzers due to the pandemic. In order to handle demand for SARS-CoV-2 testing, laboratory testing capacity had to be rapidly expanded in 2020. This resulted in a major expansion in the number of laboratories, both performing molecular tests and a major expansion of the installed base in current laboratories. And this was influenced by four factors that you see here.
LAWRENCE WORDEN: First and most fundamentally, all these laboratories had to increase their daily testing capacity beyond the excess capacity of their original installed base. Some of the need they were able to accommodate by simply the decreased demand in other assays. There's a change in operations from testing on demand to batch processing for some of the non-COVID tests. And some of these non-COVID tests were actually then referred out to reference labs to increase, at least, the availability of personnel within these laboratories.
LAWRENCE WORDEN: And they repurposed some of their OpenPCR platforms from research applications and genetic applications to infectious disease. But most of the need really required the acquisition of additional testing platforms. So second, there were instrument and supply chain issues to be dealt with. Getting another copy of a system that was already in the lab was often not possible due to limited supply.
LAWRENCE WORDEN: In fact, some manufacturers simply would not take on new customers that were not already using one of their systems. And even if you could increase the testing capacity with additional platforms, utilizing that capacity was constrained by limits on the availability of testing kits and the allocation programs that were required by the manufacturers of those kits. So you might get this-- you might only have kits for a certain number of tests on each analyzer, so you had to have more analyzers to cover your capacity needs.
LAWRENCE WORDEN: And the type of platforms that were placed were influenced by other factors. The first was test turnaround, which was related to test reimbursement. This influenced the demand for certain platforms because it favored tests performed on high-volume platforms that can be turned around in under two days. And second, there was a shortage of skilled technologists who could perform testing on OpenPCR platforms that require a separate sample prep and extraction step.
LAWRENCE WORDEN: This meant that some labs, even if they had the necessary CLIA certification, had more limited choices in the platforms they could actually employ. And oftentimes, because instruments were on backorder, labs were placing orders with multiple vendors and by the end of the year, may have ended up with instruments from four or five different companies. In the end, there are a lot more platforms in the market now and a question on how they will be used.
LAWRENCE WORDEN: The situation that was quantified by the Association for Molecular Pathology in two surveys in 2020 ended up where 80% of hospitals and health systems and 29% of commercial reference labs were using three or more different testing methodologies both to meet overall demand and address the factors we noted in the previous slide, such as test turnaround time, automation, and supply chain issues. Some of the laboratories we talked to during the height of the pandemic actually were using as many as 8 to 10 different platforms to meet their testing capacity needs.
LAWRENCE WORDEN: So the question then becomes, what becomes of all of these extra platforms in the market and all this excess capacity? What will the labs do with these instruments? And for one thing, space is critical in these labs. So they're not likely to want to keep all of them around. It also portends a bit of a dogfight in the coming years from a competitive standpoint, as labs decide which instruments to keep and how to utilize them.
LAWRENCE WORDEN: What happens to each system will be heavily influenced by the type of system as noted on the slide here. And of the four options listed for these systems, expanding the menu may be the preferred option, but it's not an option for all systems. So the expand menu option-- if it's a broad menu sample-to-answer molecular platform, that's easy to use. It has a more likely chance of finding an ongoing role in the laboratory.
LAWRENCE WORDEN: There are going to be some deferred backlog of deferred menu additions to those platforms that were deferred because of pandemic requirements. And that will cover some of the excess capacity. And also, with the capital purchase already made for these systems, it may be more economically feasible to use them in different ways. And for instance, you could adopt new tests that you couldn't economically justify in the past, or you could bring certain tests in from reference labs because it's more economically feasible to do a lower testing volume on a platform that's already been paid for.
LAWRENCE WORDEN: You could repurpose these analyzers. Some of these systems that may also be easy to use sample-to-answer platforms but with more limited menu options may find a role elsewhere in the health care network. If it's a CLIA-waived single assay test, like the Abbott ID Now or the Roche Liat, it may be ceded to the affiliated physician groups or clinics.
LAWRENCE WORDEN: And this provides an incentive for these companies that create, that manufacture these analyzers to expand their approved venues beyond just respiratory pathogens to cover sexually transmitted infections or other point-of-care testing priorities. And in fact, thousands of these point-of-care platforms that perform one test at a time were acquired by health care system and networks and distributed around those systems to physicians' offices and clinics.
LAWRENCE WORDEN: So they're out there. And the challenge to the manufacturers of those platforms now is to continue their application and utilization and possibly expand in utilization to new assays. If the platform is moderately complex, it may find a role in a rapid response lab and an affiliated hospital, where there's a need for this test but where this test was not economically feasible beforehand.
LAWRENCE WORDEN: So there might be some decentralization of testing from health care system central labs to remote and rapid response laboratories in outlying hospitals. Third, I think they could sell some of these instruments. It's an option, but it may be a crowded market with depressed prices. It's possible, though, that if the pandemic lasts a bit longer in middle- and low-income countries that this demand can be propped up a bit by the continued need for laboratory equipment and testing in these countries.
LAWRENCE WORDEN: And finally, they could mothball these analyzers. It's an interesting possibility, and it could help in future pandemic responses if these platforms are still available in these laboratories. But maintaining them is expensive because you can't just sit them on a bench and not use them. You have to put some test volume through them, to keep them operational.
LAWRENCE WORDEN: And so doing this would require some financial support probably from the government, if that would be forthcoming. Next, the accelerated trend to at-home testing. This is a trend that began well before the pandemic but has been significantly accelerated by it. As in-vitro diagnostic technologies advanced over the past two decades, these advancements reduced the size of these tests, reduced the cost of these tests.
LAWRENCE WORDEN: It made point-of-care and neo-patient testing much more feasible. The next frontier, as you see in the diagram here of home testing, was already well underway but accelerated due to the COVID-19 pandemic. And companies such as Lucira, Cue Health, and Visby Medical were already developing at-home hand-held PCR tests for respiratory and sexually-transmitted infections, with the necessary infrastructure to connect patients to care via telemedicine and home delivery prescriptions.
LAWRENCE WORDEN: Prior to the pandemic, FDA had only approved one over-the-counter, self-administered tests for an infectious disease, the oral HIV test from OraSure. It was approved in 2012, and it was developed primarily to address the stigma of HIV testing and provide anonymity for the patients who decided to self-test. Because of this, though, there were no public health or epidemiological connections for this test, no connectivity solutions to connect that patient with care.
LAWRENCE WORDEN: And of course, ideally, any at-home test, especially for a communicable disease, should first of all, link that patient to care, to a care provider should there be a positive result and also enable the tracking of the results for public health purposes. Now, the OraSure test remained the only FDA-approved at-home collection or at-home infectious disease test until December of 2020 when FDA issued an EUA for the Ellume COVID home test, an antigen immunoassay.
LAWRENCE WORDEN: Since then, the FDA has cleared another 18 SARS-CoV-2 antigen assays and two more SARS-CoV-2 PCR assays for at-home use. However, only four of these assays require the use of a smartphone with a potential to link the patient to care and test result notification and tracking for public health authorities. Prior to the pandemic, the real driver in home testing development was to improve antiviral prescribing and infection control for the flu.
LAWRENCE WORDEN: This was an effort described here by Rick Bright, director of BARDA, in 2019. It was readily adopted or adapted by BARDA to expedite the development of at-home SARS-CoV-2 testing when the pandemic occurred. Prior to that, in July of 2018, they had awarded $21.9 million to Diassess, the predecessor of Lucira Health, and awarded $30 million to Cue Health for the development of at-home flu tests.
LAWRENCE WORDEN: The thinking here was that a rapid at-home test could help ensure that flu patients could get an antiviral prescription within the preferred 48 hours after onset of symptoms and could avoid exposing others to the infection by staying at home. Accomplishing this, however, does require that the test result be linked through smartphones, to a telemedicine provider, or to the patient's primary care provider.
LAWRENCE WORDEN: A future use of at-home infectious disease testing, whether for respiratory pathogens, STIs, or other infections, will depend, I think, on the kind of linkage described here. That involves one, uploading the test result to a smartphone, automatically sending that result to a provider, scheduling a telemedicine review of the results where a prescription can be authorized, sending that prescription to be filled by a pharmacy, and having that pharmacy deliver the prescription the same day to the patient's home.
LAWRENCE WORDEN: The good news is that COVID accelerated the work that was already underway by BARDA and these companies and increased both the acceptance and infrastructure for telemedicine and these kinds of connectivity solutions. But we're not there yet. I think moving forward, it's important to keep in mind the four key recommendations from a team from the Johns Hopkins Center for Health Security for the development of at-home COVID-19 and influenza test, specifically, where they recommended that COVID-19 or flu tests performed at in-home settings should have strong linkages to public health authorities, that the collection of symptoms and exposures need to be formalized to gauge severity and determine the need for an antiviral or other treatments.
LAWRENCE WORDEN: They should be part of any companion technological application, like a smartphone connection to a testing device or a smartphone reading of a lateral flow assay. Devices with the ability to test for additional respiratory viruses in the home settings should be pursued as the pandemic preparedness activity and as a countermeasure against future pandemics. And during the COVID pandemic, they said and recommended that it was essential that BARDA, the FDA, and Congress prioritize funding development and review of at-home diagnostic test, which I think was proven to be the case in 2021.
LAWRENCE WORDEN: In closing, just let me sum up the key points. First, COVID-19 testing certainly expanded the global IVD market in the near term. But as we said, it will start to decline this year as the pandemic recedes and underlying traditional market dynamics reemerge. Second, the market focus on COVID-19 and the reallocation of patient care resources had a detrimental impact on routine testing, the non-COVID testing.
LAWRENCE WORDEN: In 2020 we saw those markets decline, but they began to recover in 2021. And they're continuing that recovery in 2022 as they kind of make up for lost time. So we're seeing a resurgence in testing volume outside of COVID. Several Asia-Pacific players capitalize on the COVID-19 opportunity and leverage their ability to compete on price and enter the global market.
LAWRENCE WORDEN: And we now see that some of them are even beginning to enter the US market with the resources garnered from that opportunity. Declining COVID testing over the next few years will likely result in a surplus of testing capacity that will significantly alter the competitive landscape for a new platform adoption and menu utilization. And we'll see some losers and winners in that contest. The pandemic preparedness and response by governmental agencies and wider acceptance of telemedicine certainly accelerated a nascent trend in the development of at-home infectious disease diagnostics and in general, the acceptance of more distributed consumer-centric health care delivery, that we'll see evident in the continued increase of clinics within pharmacies, testing availability in schools and workplaces, and other locations, where the testing will be brought to the patient rather than the patient having to go to the testing.
LAWRENCE WORDEN: Connecting patients' at-home test results, though, to epidemiological databases and the patients themselves, to care providers, remains an issue. And while confidentiality and stigma concerns for HIV testing overrode this need and simply the need for COVID screening overrode many of the cases during the pandemic. Other tests are looking now to models that leverage the testing device to mobile phone connectivity and the growing acceptance of telemedicine to accommodate this better connection of self testing to more traditional informatics and database surveillance.
LAWRENCE WORDEN: So with that, I will turn this back to Damian and welcome any questions.
DAMIAN DOHERTY: Larry, thank you very much indeed for that very comprehensive analysis. And there were some fascinating insights there in terms of the impact COVID has had on the diagnostic landscape. So quite mind boggling, actually, some of those statistics and some of those revenues, certainly, and then some of the other unintended consequences of that. But on the whole, a very positive impact in many ways for an industry that's been fighting to justify its value, if you will, certainly within the industry.
DAMIAN DOHERTY: So there's just a few things I wanted to perhaps ask you based on some of the takeaways there. And maybe, the first question, you quite rightly stated that COVID has put a spotlight on clinical lab testing and the IVD industry, in general. I mean, do you see this as a catalyst that will have long-term impacts? Or do you fear maybe, when we look back in the passage of time, we'll see this very comprehensive blip albeit, but it was just something that happened?
DAMIAN DOHERTY: Or do you think now we are-- it is a catalyst for future change for a lot of these diagnostic companies? Do you think enough has happened, enough change in the landscape has happened for that to now set the pace for a completely new and renewed industry out there?
LAWRENCE WORDEN: I think there are several changes that will endure. And I think maybe fundamentally, the emergence of diagnostics as more important in the health care continuum will endure. That's kind of the truism that everybody accepts, is about 70% of medical decision making is based on clinical laboratory test results, yet it only accounts for maybe 2% to 3% of total health care expenditures. This pandemic has brought diagnostic to the forefront and even within health care.
LAWRENCE WORDEN: C-suites, prior to the pandemic, if you talk to anybody in the C-suite of a hospital about the laboratory, they would kind of say, well, it's not on our radar. We don't know anything about it. But because these laboratories were able to reorganize and boost their capacity and meet these testing demands so incredibly fast and well, they have a whole new position within their own health care administrations.
LAWRENCE WORDEN: And when you talk to C-suites now, these labs tend to be the heroes of their institutions. And they're very proud of what they're able to do. So their position within the health care structure has improved as have the position of the diagnostics companies. And just the general public awareness of diagnostics, I think, will endure. But other things that are more specific to the industry, I think, this realignment of the global competitive environment will be sustained.
LAWRENCE WORDEN: There are companies now, as you noted in the presentation, that are looking to enter the US market that would not necessarily have had the resources to do what they're doing before this. And I think another aspect is the proof that the emergency regulatory approval channels that were implemented can work, that the risks of a rapid response and streamlining our regulatory pathways, the risk were outweighed by the public health benefit, I think.
LAWRENCE WORDEN: And that may have some downstream benefit in maybe making those processes a bit more efficient.
DAMIAN DOHERTY: Yeah, absolutely. I would agree. I mean that sort of plays into the next question. You sort of answered that in part about the democratization of a lot of these diagnostic companies, certainly in an industry that was dominated by the top 10 or 12. But now, clearly, a great example in your presentation of companies that really came out of nowhere and reached stratospheric revenues and logistic capabilities.
DAMIAN DOHERTY: But this expansion of all these other companies surely has to do a good thing for the landscape, I'm assuming, geographically as well, of course. But I mean you mentioned in the talk that a lot of these companies, US-based companies, obviously, were having to fulfill government contracts. Had any of those companies that they have a manufacturing footprint in APAC? Or are they now looking rather through mergers and acquisitions?
DAMIAN DOHERTY: Are they looking to potentially create manufacturing spots in APAC? Or do you think they'll just continue to partner?
LAWRENCE WORDEN: There has been some expansion of global manufacturing capacity in these markets since then. But in many cases, that demand and need was met by partnerships, particularly now, like SD Biosensor and Roche. Roche acquired a rapid COVID test through that partnership. And as a result, SD Biosensor, as you see in the numbers, benefited significantly and is now expanding into the US market.
LAWRENCE WORDEN: So I think a lot of the companies that emerged, though, may not survive because they emerged into an environment with ready regulatory approval, easy regulatory approval, government contracts available, looking for anything to fill the demand and ready reimbursement, generous reimbursement to cover these costs. So it was kind of all the barriers to entry were lowered.
LAWRENCE WORDEN: And these companies now are in a market, where they're looking to diversify their offering. But they don't have the skills and the expertise necessary to meet the regulatory environment or the competitive environment, and particularly, the reimbursement environment that they're now going to have to engage with in order to succeed in other areas.
DAMIAN DOHERTY: Yeah. No, I hear you. And that sort of leads onto the next question, in sense of the analyzer base. It was interesting-- it's an interesting area, as you rightly said, as much remains to be seen in terms of the ongoing role of some of these systems. But clearly, those systems that have the built-in flexibility and a more of a multimodal approach seemingly would be the companies, I think, will be the winners here, I'm assuming.
DAMIAN DOHERTY: And those that are less flexible, as you put in your presentation, will probably fall by the wayside or be mothballed. But hopefully, some sort of a repurposing strategy would be very useful to certainly for limited resource settings because I suppose that's still an area that needs to be thought through, doesn't it? Lower-income countries that really just don't have the diagnostic capabilities, places that are in very remote parts of the Earth that is very hard to get testing, remote testing to those areas.
DAMIAN DOHERTY: But certainly, yeah, I'm assuming the key now will be manufacturers looking at what they've got and looking how they can repurpose, how they can expand. And as you say, with the labs, with 8 to 10 different-- I mean it's crazy to even think that because that takes an education too, right? The people in the labs have to be educated about how to use all these different systems. They've gone from being very, very au fait with using one system, and all of a sudden, you're throwing another eight systems or have completely different protocols, different ways of working.
DAMIAN DOHERTY: It's complex, isn't it?
LAWRENCE WORDEN: Very complex, yeah. But I think when you look at the excess capacity, you can look at it in three different types of analyzes. There are the low-volume, rapid point-of-care analyzers, like the Abbott ID Now, the Roche Liat, the Thermo Fisher, the Accula. They do one test at a time. And as I mentioned, in some cases, health care systems acquired thousands of these that they then distributed within their network.
LAWRENCE WORDEN: And the manufacturers don't know where they are necessarily. They just know they're out there. And they already do have a menu beyond COVID. They do flu, they do RSV, they do Strep-A in some cases. But in order to find a role where they're located now, they may need to do other assays. They may need to add some sexually-transmitted disease assays or other assays that could fit the clinical demand in these locations.
LAWRENCE WORDEN: I think that's a challenge. But the companies that produce these analyzers are working on menu expansion now. As you mentioned, the mid- to high-volume analyzers that have broad menus, like the Hologic Panther, the Abbott Alinity, the Roche 6800/8800, these are the platforms that are going to really win in this contest because they have broad menu. They can be repurposed.
LAWRENCE WORDEN: They can replace other instruments or consolidate assays that may have been done on multiple different platforms in these labs. They're going to find a role. They are definitely in the best position here. But then you have this multitude of OpenPCR platforms that require one, they can only be used in a highly complex lab. They required skilled staff to perform them.
LAWRENCE WORDEN: And they have this extra extraction step, so they're more labor intensive. And thousands of these were placed around the world to meet demand. They faced a more challenging environment because of the labor component and the skill component. But also, they're up against regulatory environments that are not favorable currently to doing laboratory-developed testing.
LAWRENCE WORDEN: In Europe, in particular, everything has to be CE-IVD and now, IVDR. And so maintaining these platforms in that environment, where only skilled academic laboratories who may really have the resources to use these platforms, is going to be difficult. And in a lot of cases, particularly in Europe, these instruments were placed with a reagent rental model or volume contract model.
LAWRENCE WORDEN: And when they're done with the COVID testing, they'll go back to the distributor or the manufacturer. And even in the US, the use of these platforms is going to be challenged with the Ballot Act, which is now going through Congress, which will limit the laboratory-developed testing market. So as you said, the sample-to-answer platforms that are FDA-cleared and particularly, moderately complex and be performed with less skilled staff will be the winners.
DAMIAN DOHERTY: Right, OK. Good stuff. And finally, obviously, you touched upon telemedicine, again, an area that's been scrambling to get out of the blocks for many years and obviously, was making some progress. But certainly COVID turbo-boosted at-home testing. There's no question about that. I mean, are you confident we can sustain this shift? Clearly, I mean you made a good point there about the infrastructure, perhaps, just isn't there yet in terms of the data capture, the linkage to public health systems.
DAMIAN DOHERTY: Do you see that as being, at the moment, probably the biggest stumbling block in terms of confidentiality, data capture, and having the systems utilizing what most people have, which is a mobile phone, but trying to find some way of coordinating that and getting that information back where it's needed, not only-- probably more importantly for a pandemic, of course. Real-time information is key, isn't it, so that we can predict behavior, predict patterns in real time.
DAMIAN DOHERTY: But is that probably you'd argue that probably the biggest stumbling block with getting telemedicine to a point where we can feel confident that the testing isn't an issue because we know the technology? That's the part, that last mile, if you will. Is that going to be the biggest hurdle, do you think?
LAWRENCE WORDEN: I think so. But I do think home testing is here to stay, and it will expand over time. It's part of an overall trend to more consumer-centric testing. It's part and parcel with the rise of these internet-testing services, like Everlywell and other services, where you can order a test kit to collect the specimen at home and send it into a lab. It gives you control over your testing.
LAWRENCE WORDEN: And I think more of that testing menu will be focused on clinical applications rather than what some people call recreational applications, like food allergy testing and other things that may have questionable clinical value. And you have the major reference labs, like Quest and LabCorp, now offering concierge services for home collection of samples. And the two major pharmacy chains and Walmart and others looking at these in-pharmacy care clinics that would offer clinical lab testing.
LAWRENCE WORDEN: So there's just-- you used the word "democratization." I think that's maybe appropriate here as well as decentralization of testing access and patient control of testing that is emerging and will continue to grow.
DAMIAN DOHERTY: That's great. And probably, just in closing, do you feel, personally, we're in a much better state now? I mean, I know there's lots of things to be resolved from a pandemic preparedness perspective. Clearly, there are going to be new technologies. We're going to need to track in real time what's happening when inevitably, the next outbreak comes, whether it's some form of zoonotic disease or some other pathogen. But certainly, do you feel when the next pandemic comes, god forbid it doesn't, we're in a much better state now, we're ready in a way that we weren't ready before?
LAWRENCE WORDEN: In some ways, yes. I think one of the most discouraging things, though, is the overregulation of laboratory-developed testing. It was a significant barrier to the rapid development of COVID testing at the beginning of the pandemic. And with these regulatory barriers to laboratory-developed testing and the use of OpenPCR platforms that can accommodate these test developments in a decentralized way rapidly, if we lose that capacity, then we definitely will lose the ability to react quickly to the next pandemic.
LAWRENCE WORDEN: It's taken two years for the other systems to become available, the sample-to-answer FDA-cleared platforms to really replace a lot of that OpenPCR testing that was originally done. So you can't wait two years during the next pandemic. So I think that's the real risk we run right now, is overregulation of laboratory-developed tests.
DAMIAN DOHERTY: OK. Good stuff. Well, listen, I think that closes a really, really interesting session, Larry. I just want to thank you, again, for taking the time to present a very thought-provoking, stimulating perspective on the effects of COVID and what it's had on the diagnostic landscape. Any of you out there, our audience, who are keen to speak to Larry or want to make contact, certainly, we can facilitate that.
DAMIAN DOHERTY: And we hope you've all enjoyed this special segment as part of the State of Biotech. So I'm thanking you all for your time and dialing in today. And again, a huge thanks to Larry as well for joining us today. Thank you very much.
LAWRENCE WORDEN: Thank you. [MUSIC PLAYING]
Segment:1 Introduction to GEN Edge.
KEVIN DAVIES: GEN Edge is the premium content channel of genetic engineering and biotechnology news, the magazine that's been covering the twists and turns of the biotech industry for decades. GEN Edge offers exclusive in-depth reports from the front lines of biotech delivered right to your inbox, focusing on business trends and opportunities and spotlighting the most exciting startups and funding rounds shaping the industry. GEN Edge features the brilliant reporting and journalism of the GEN editorial team led by Alex Philippidis, Senior Business Editor in New York, and Jonathan Grinstein in San Diego.
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Segment:2 How COVID-19 Forever Changed the In Vitro Diagnostics Marketplace.
KEVIN DAVIES:
DAMIAN DOHERTY: Good afternoon, and welcome to this special segment of the State of Biotech made available for GEN Edge subscribers. My name is Damian Doherty. I'm the editor-in-chief of Inside Precision Medicine. And this afternoon, I have the pleasure of introducing Larry Worden. Larry is the principal and founder of IVD Logix, a full service marketing research and consulting business for in vitro diagnostics.
DAMIAN DOHERTY: He also co-founded Market Diagnostics International where he developed the IVD insights and IVD lab file syndicated databases on in vitro diagnostic testing. Prior to that, he was a senior consultant and co-founder at Case Bauer and Associates, an international business development and research firm exclusively focused on in vitro diagnostics. And he has held senior legislative regulatory affairs and market research positions with Becton Dickinson and Company, AdvaMed, and IQVIA.
DAMIAN DOHERTY: Last but not least, Larry is also an editorial board member of Inside Precision Medicine. Now, welcome, Larry. Larry will now give a presentation entitled, How COVID-19 Forever Changed the In Vitro Diagnostics Marketplace. So without any further ado, Larry, the floor is yours.
LAWRENCE WORDEN: Thank you, Damian. I appreciate that, and it's a pleasure to be here. Just to start, I mean it's not possible, I think, to present an IVD market update without addressing the role that COVID testing has played over the past few years. COVID has certainly put a spotlight on clinical lab testing and the IVD industry in general. For instance, I never thought that I'd be explaining the difference between a PCR and an amino acid test to friends over dinner or the difference between an antigen and an antibody test.
LAWRENCE WORDEN: But probably, a lot of us in this industry have now had that experience. My talk today will focus on two topics. First, we'll look at the global market for in vitro diagnostics overall and the COVID-19 diagnostics, in particular, and then look at the astounding effect that COVID had in both 2020 and 2021. And finally, we'll look a little more closely at a few of the changes caused by the pandemic that are likely to be with us moving forward.
LAWRENCE WORDEN: And there are many, but we'll review just a few. By now, I think it's well recognized that the pandemic amplified and accelerated many changes that were already underway in society in general. And the same is certainly true in the IVD industry. It drove a 28% increase in global revenue in 2020, pushing the market from $65 billion in 2019 to $86 billion in 2020, and a 48% growth in '21 to $127 billion, approximately doubling the market revenue in three years.
LAWRENCE WORDEN: That's truly unprecedented, I think, for any industry but particularly, for an industry like IVD that for years had grown at a traditional healthy but much lower 4% to 6% per year. The pandemic created demand for COVID testing primarily for central laboratory and rapid molecular tests in 2020. And for at-home immunoassay tests in 2021, while creating a decline in routine testing volumes outside of COVID in 2020 that occurred across most segments and in all geographies.
LAWRENCE WORDEN: Many of the traditional markets began to recover in 2021 and are now growing at significantly higher rates than the traditional 4% to 6% as they make up for lost time. The growth for COVID testing was strongest in North America and Europe. But even the more price-sensitive emerging markets in Latin America and Asia-Pacific experienced strong double-digit growth as well. And now in 2022, we're just now beginning to see some decline in revenue from COVID-19 testing.
LAWRENCE WORDEN: While the top 10 companies increased their revenues an extraordinary 33% in 2021, the total market grew by 48%, thus reducing the overall share of these global top 10 from 63% share in 2020 to 56% in 2021. That was mostly due to the multitude of smaller companies that over the past two years have jumped into the market. A market fueled by rapid regulatory approval of the new testing kits and ready access to large government contracts and generous testing environment, all making it a much easier market to enter and a less competitive environment to operate in.
LAWRENCE WORDEN: For instance, by 2021, the FDA's website listed 267 molecular diagnostic EUAs, 38 antigen diagnostic EUAs, and 90 serology diagnostic EUAs. All of these were developed and approved in less than two years. The 48% growth resulted in a $55 billion in incremental revenue in 2021. And if you look at the biggest companies here, you see that they accounted for about 1/3 of this incremental revenue.
LAWRENCE WORDEN: And while COVID-19 growth in 2020 was concentrated, as I said, in PCR molecular testing, companies that offered rapid lateral flow and at-home testing kits generated the most incremental revenue in 2021. Abbott, again, led the pack in 2021 as they had in 2020. And in 2021, you see here a $4.3 billion in incremental revenue primarily from their rapid immunoassay kits.
LAWRENCE WORDEN: Another company Innova Medical is worth mentioning because they didn't exist before 2020. They entered the list of top 10 companies in 2021 with $5.2 billion in rapid COVID-19 tests. Really phenomenal. As previously noted, the growth was strongest in North America and Europe that accounted for about $7 out of every $10 in incremental revenue. But nevertheless, even the more price-sensitive and resource-constrained markets in Asia and Latin America experienced double-digit growth.
LAWRENCE WORDEN: Europe in 2021 showed the strongest growth. And this was primarily due to government purchases and distribution of at-home COVID tests. Point-of-care diagnostic revenue grew at an astounding 171% in 2021, reflecting those rapid at-home kits, increasing from $18.7 billion in 2020 to $50.7 billion in 2021.
LAWRENCE WORDEN: This move point-of-care diagnostics from the second highest revenue segment to the first highest, surpassing both immunoassay and molecular revenue. And other segments, more traditional segments, like clinical chemistry, hematology, coagulation, histology, cytology, immunohematology, and flow cytometry all began to grow in 2021 after the previous year's decrease. And a few tests, though, other than COVID diagnostics did benefit from the pandemic.
LAWRENCE WORDEN: These included coagulation assays, such as D-dimer for pulmonary embolisms and blood gases to monitor COVID patients and microbiology, overall, as the market continued to grow, primarily due to an increase in blood cultures related to the hospitalization of COVID patients. With the unanticipated COVID variants playing such an influential role over the past few years, forecasting has been pretty risky in this market.
LAWRENCE WORDEN: But taking all of this into consideration, how do we expect this incredible growth in the IVD market to play out over the next few years? As I said, COVID-19 testing volumes begin to decrease in the near term. But we see molecular testing, overall, will decline but at a slower rate than the rapid immunoassay testing as the need for urgent test results diminishes, and COVID testing becomes more routine as SARS-CoV-2 becomes more of an endemic infection than a pandemic.
LAWRENCE WORDEN: We believe that the effect of COVID-19 testing will rapidly recede after 2022. And by 2025, we'll see the more traditional growth drivers dominate this market, and the market begin to grow without the influence of the COVID-19 testing. So while there are many lasting market changes due to COVID, I've chosen to look at four of the most immediate ones.
LAWRENCE WORDEN: And these include the emergence of Asia-Pacific companies, IVD company investments that will essentially broaden their product portfolio based on revenues from the COVID pandemic and expansion of the molecular analyzer installed base and an accelerated trend to at-home testing and other distributed testing locations. In part due to supply chain issues, several Asia-Pacific companies emerged as significant competitors in 2020.
LAWRENCE WORDEN: Typical global IVD companies such as Roche, Abbott, Danaher or Becton-Dickinson were often, contractually, obligated to fulfill government orders within their home countries or home region first before distributing these products internationally. That created an opportunity for the secondary regional players to compete, not just in their local region but in other places as well. And as noted previously, we saw a number of these companies make significant gains in 2020.
LAWRENCE WORDEN: They had been growing in competence prior to 2020 but really began to come up to speed in response to the pandemic. They were among the first companies to launch COVID tests and began shipping them across the world. And because of their low cost had an especially big impact in filling demand in middle-income and low-resource countries. Now, when you think about APAC companies, of course, Chinese companies come to mind.
LAWRENCE WORDEN: And they were significant players in this. But in this case, there were a couple of South Korean companies that really stood out and were very much in the spotlight. SD Biosensor and Seegene, as you can see on this slide, generated significant incremental revenue gains, for the most part, in APAC, Europe, and in Latin America. You see that Seegene went from $96 million to $1.4 billion and SD Biosensor from $61 million to $2.6 billion in the three-year period.
LAWRENCE WORDEN: SD Biosensor received one of the first FDA EUAs in April 2020 for its molecular assay and later entered into a worldwide distribution agreement with Roche for its point-of-care assays. And these companies now have a presence in hundreds of labs around the world, making it easier to maintain their growth post-pandemic. And in fact, as you see in the bottom line here, that both of these companies have now stepped up their efforts and investments to penetrate the US market as well.
LAWRENCE WORDEN: So we're seeing a realignment of the global competitive picture. The incredible pandemic windfalls that you've seen here for the IVD companies, of course, are not sitting idle. They're being put to use in expanding product portfolios of some of the major companies with major acquisitions and partnerships. So you see Thermo Fisher acquired Mesa Biotech in their Accula dock point-of-care platform.
LAWRENCE WORDEN: Roche acquired GenMark, a company very active in syndromic molecular testing. Hologic acquired Mobidiag to supplement their assay development for their platforms, DiaSorin and Luminex. Quidel acquired Ortho Clinical Diagnostics, a key player in chemistry immunoassay and immunohematology markets. And of course, SD Biosensor acquired or announced the acquisition in 2022 of Viridian Bioscience, a company that develops molecular solutions, primarily aimed at point-of-care locations.
LAWRENCE WORDEN: And the partnerships include Roche and SD Biosensor, Biotime and Innova, Siemens and Healgen, Seegene and Bio-Rad. As I mentioned, Seegene is developing or providing assays for the Bio-Rad OpenPCR platforms. In addition, there are emerging players circling the market and with a focus on establishing more consumer-centric health care delivery and diagnostic testing models as a future opportunity. Walgreens, CVS, in case in point, developing their on-site clinics for pharmacies and potentially expanding their vaccination business to the delivery of point-of-care testing within minute clinics and other rapid or urgent care types of offerings.
LAWRENCE WORDEN: Then this is an expansion of the installled base of analyzers due to the pandemic. In order to handle demand for SARS-CoV-2 testing, laboratory testing capacity had to be rapidly expanded in 2020. This resulted in a major expansion in the number of laboratories, both performing molecular tests and a major expansion of the installed base in current laboratories. And this was influenced by four factors that you see here.
LAWRENCE WORDEN: First and most fundamentally, all these laboratories had to increase their daily testing capacity beyond the excess capacity of their original installed base. Some of the need they were able to accommodate by simply the decreased demand in other assays. There's a change in operations from testing on demand to batch processing for some of the non-COVID tests. And some of these non-COVID tests were actually then referred out to reference labs to increase, at least, the availability of personnel within these laboratories.
LAWRENCE WORDEN: And they repurposed some of their OpenPCR platforms from research applications and genetic applications to infectious disease. But most of the need really required the acquisition of additional testing platforms. So second, there were instrument and supply chain issues to be dealt with. Getting another copy of a system that was already in the lab was often not possible due to limited supply.
LAWRENCE WORDEN: In fact, some manufacturers simply would not take on new customers that were not already using one of their systems. And even if you could increase the testing capacity with additional platforms, utilizing that capacity was constrained by limits on the availability of testing kits and the allocation programs that were required by the manufacturers of those kits. So you might get this-- you might only have kits for a certain number of tests on each analyzer, so you had to have more analyzers to cover your capacity needs.
LAWRENCE WORDEN: And the type of platforms that were placed were influenced by other factors. The first was test turnaround, which was related to test reimbursement. This influenced the demand for certain platforms because it favored tests performed on high-volume platforms that can be turned around in under two days. And second, there was a shortage of skilled technologists who could perform testing on OpenPCR platforms that require a separate sample prep and extraction step.
LAWRENCE WORDEN: This meant that some labs, even if they had the necessary CLIA certification, had more limited choices in the platforms they could actually employ. And oftentimes, because instruments were on backorder, labs were placing orders with multiple vendors and by the end of the year, may have ended up with instruments from four or five different companies. In the end, there are a lot more platforms in the market now and a question on how they will be used.
LAWRENCE WORDEN: The situation that was quantified by the Association for Molecular Pathology in two surveys in 2020 ended up where 80% of hospitals and health systems and 29% of commercial reference labs were using three or more different testing methodologies both to meet overall demand and address the factors we noted in the previous slide, such as test turnaround time, automation, and supply chain issues. Some of the laboratories we talked to during the height of the pandemic actually were using as many as 8 to 10 different platforms to meet their testing capacity needs.
LAWRENCE WORDEN: So the question then becomes, what becomes of all of these extra platforms in the market and all this excess capacity? What will the labs do with these instruments? And for one thing, space is critical in these labs. So they're not likely to want to keep all of them around. It also portends a bit of a dogfight in the coming years from a competitive standpoint, as labs decide which instruments to keep and how to utilize them.
LAWRENCE WORDEN: What happens to each system will be heavily influenced by the type of system as noted on the slide here. And of the four options listed for these systems, expanding the menu may be the preferred option, but it's not an option for all systems. So the expand menu option-- if it's a broad menu sample-to-answer molecular platform, that's easy to use. It has a more likely chance of finding an ongoing role in the laboratory.
LAWRENCE WORDEN: There are going to be some deferred backlog of deferred menu additions to those platforms that were deferred because of pandemic requirements. And that will cover some of the excess capacity. And also, with the capital purchase already made for these systems, it may be more economically feasible to use them in different ways. And for instance, you could adopt new tests that you couldn't economically justify in the past, or you could bring certain tests in from reference labs because it's more economically feasible to do a lower testing volume on a platform that's already been paid for.
LAWRENCE WORDEN: You could repurpose these analyzers. Some of these systems that may also be easy to use sample-to-answer platforms but with more limited menu options may find a role elsewhere in the health care network. If it's a CLIA-waived single assay test, like the Abbott ID Now or the Roche Liat, it may be ceded to the affiliated physician groups or clinics.
LAWRENCE WORDEN: And this provides an incentive for these companies that create, that manufacture these analyzers to expand their approved venues beyond just respiratory pathogens to cover sexually transmitted infections or other point-of-care testing priorities. And in fact, thousands of these point-of-care platforms that perform one test at a time were acquired by health care system and networks and distributed around those systems to physicians' offices and clinics.
LAWRENCE WORDEN: So they're out there. And the challenge to the manufacturers of those platforms now is to continue their application and utilization and possibly expand in utilization to new assays. If the platform is moderately complex, it may find a role in a rapid response lab and an affiliated hospital, where there's a need for this test but where this test was not economically feasible beforehand.
LAWRENCE WORDEN: So there might be some decentralization of testing from health care system central labs to remote and rapid response laboratories in outlying hospitals. Third, I think they could sell some of these instruments. It's an option, but it may be a crowded market with depressed prices. It's possible, though, that if the pandemic lasts a bit longer in middle- and low-income countries that this demand can be propped up a bit by the continued need for laboratory equipment and testing in these countries.
LAWRENCE WORDEN: And finally, they could mothball these analyzers. It's an interesting possibility, and it could help in future pandemic responses if these platforms are still available in these laboratories. But maintaining them is expensive because you can't just sit them on a bench and not use them. You have to put some test volume through them, to keep them operational.
LAWRENCE WORDEN: And so doing this would require some financial support probably from the government, if that would be forthcoming. Next, the accelerated trend to at-home testing. This is a trend that began well before the pandemic but has been significantly accelerated by it. As in-vitro diagnostic technologies advanced over the past two decades, these advancements reduced the size of these tests, reduced the cost of these tests.
LAWRENCE WORDEN: It made point-of-care and neo-patient testing much more feasible. The next frontier, as you see in the diagram here of home testing, was already well underway but accelerated due to the COVID-19 pandemic. And companies such as Lucira, Cue Health, and Visby Medical were already developing at-home hand-held PCR tests for respiratory and sexually-transmitted infections, with the necessary infrastructure to connect patients to care via telemedicine and home delivery prescriptions.
LAWRENCE WORDEN: Prior to the pandemic, FDA had only approved one over-the-counter, self-administered tests for an infectious disease, the oral HIV test from OraSure. It was approved in 2012, and it was developed primarily to address the stigma of HIV testing and provide anonymity for the patients who decided to self-test. Because of this, though, there were no public health or epidemiological connections for this test, no connectivity solutions to connect that patient with care.
LAWRENCE WORDEN: And of course, ideally, any at-home test, especially for a communicable disease, should first of all, link that patient to care, to a care provider should there be a positive result and also enable the tracking of the results for public health purposes. Now, the OraSure test remained the only FDA-approved at-home collection or at-home infectious disease test until December of 2020 when FDA issued an EUA for the Ellume COVID home test, an antigen immunoassay.
LAWRENCE WORDEN: Since then, the FDA has cleared another 18 SARS-CoV-2 antigen assays and two more SARS-CoV-2 PCR assays for at-home use. However, only four of these assays require the use of a smartphone with a potential to link the patient to care and test result notification and tracking for public health authorities. Prior to the pandemic, the real driver in home testing development was to improve antiviral prescribing and infection control for the flu.
LAWRENCE WORDEN: This was an effort described here by Rick Bright, director of BARDA, in 2019. It was readily adopted or adapted by BARDA to expedite the development of at-home SARS-CoV-2 testing when the pandemic occurred. Prior to that, in July of 2018, they had awarded $21.9 million to Diassess, the predecessor of Lucira Health, and awarded $30 million to Cue Health for the development of at-home flu tests.
LAWRENCE WORDEN: The thinking here was that a rapid at-home test could help ensure that flu patients could get an antiviral prescription within the preferred 48 hours after onset of symptoms and could avoid exposing others to the infection by staying at home. Accomplishing this, however, does require that the test result be linked through smartphones, to a telemedicine provider, or to the patient's primary care provider.
LAWRENCE WORDEN: A future use of at-home infectious disease testing, whether for respiratory pathogens, STIs, or other infections, will depend, I think, on the kind of linkage described here. That involves one, uploading the test result to a smartphone, automatically sending that result to a provider, scheduling a telemedicine review of the results where a prescription can be authorized, sending that prescription to be filled by a pharmacy, and having that pharmacy deliver the prescription the same day to the patient's home.
LAWRENCE WORDEN: The good news is that COVID accelerated the work that was already underway by BARDA and these companies and increased both the acceptance and infrastructure for telemedicine and these kinds of connectivity solutions. But we're not there yet. I think moving forward, it's important to keep in mind the four key recommendations from a team from the Johns Hopkins Center for Health Security for the development of at-home COVID-19 and influenza test, specifically, where they recommended that COVID-19 or flu tests performed at in-home settings should have strong linkages to public health authorities, that the collection of symptoms and exposures need to be formalized to gauge severity and determine the need for an antiviral or other treatments.
LAWRENCE WORDEN: They should be part of any companion technological application, like a smartphone connection to a testing device or a smartphone reading of a lateral flow assay. Devices with the ability to test for additional respiratory viruses in the home settings should be pursued as the pandemic preparedness activity and as a countermeasure against future pandemics. And during the COVID pandemic, they said and recommended that it was essential that BARDA, the FDA, and Congress prioritize funding development and review of at-home diagnostic test, which I think was proven to be the case in 2021.
LAWRENCE WORDEN: In closing, just let me sum up the key points. First, COVID-19 testing certainly expanded the global IVD market in the near term. But as we said, it will start to decline this year as the pandemic recedes and underlying traditional market dynamics reemerge. Second, the market focus on COVID-19 and the reallocation of patient care resources had a detrimental impact on routine testing, the non-COVID testing.
LAWRENCE WORDEN: In 2020 we saw those markets decline, but they began to recover in 2021. And they're continuing that recovery in 2022 as they kind of make up for lost time. So we're seeing a resurgence in testing volume outside of COVID. Several Asia-Pacific players capitalize on the COVID-19 opportunity and leverage their ability to compete on price and enter the global market.
LAWRENCE WORDEN: And we now see that some of them are even beginning to enter the US market with the resources garnered from that opportunity. Declining COVID testing over the next few years will likely result in a surplus of testing capacity that will significantly alter the competitive landscape for a new platform adoption and menu utilization. And we'll see some losers and winners in that contest. The pandemic preparedness and response by governmental agencies and wider acceptance of telemedicine certainly accelerated a nascent trend in the development of at-home infectious disease diagnostics and in general, the acceptance of more distributed consumer-centric health care delivery, that we'll see evident in the continued increase of clinics within pharmacies, testing availability in schools and workplaces, and other locations, where the testing will be brought to the patient rather than the patient having to go to the testing.
LAWRENCE WORDEN: Connecting patients' at-home test results, though, to epidemiological databases and the patients themselves, to care providers, remains an issue. And while confidentiality and stigma concerns for HIV testing overrode this need and simply the need for COVID screening overrode many of the cases during the pandemic. Other tests are looking now to models that leverage the testing device to mobile phone connectivity and the growing acceptance of telemedicine to accommodate this better connection of self testing to more traditional informatics and database surveillance.
LAWRENCE WORDEN: So with that, I will turn this back to Damian and welcome any questions.
DAMIAN DOHERTY: Larry, thank you very much indeed for that very comprehensive analysis. And there were some fascinating insights there in terms of the impact COVID has had on the diagnostic landscape. So quite mind boggling, actually, some of those statistics and some of those revenues, certainly, and then some of the other unintended consequences of that. But on the whole, a very positive impact in many ways for an industry that's been fighting to justify its value, if you will, certainly within the industry.
DAMIAN DOHERTY: So there's just a few things I wanted to perhaps ask you based on some of the takeaways there. And maybe, the first question, you quite rightly stated that COVID has put a spotlight on clinical lab testing and the IVD industry, in general. I mean, do you see this as a catalyst that will have long-term impacts? Or do you fear maybe, when we look back in the passage of time, we'll see this very comprehensive blip albeit, but it was just something that happened?
DAMIAN DOHERTY: Or do you think now we are-- it is a catalyst for future change for a lot of these diagnostic companies? Do you think enough has happened, enough change in the landscape has happened for that to now set the pace for a completely new and renewed industry out there?
LAWRENCE WORDEN: I think there are several changes that will endure. And I think maybe fundamentally, the emergence of diagnostics as more important in the health care continuum will endure. That's kind of the truism that everybody accepts, is about 70% of medical decision making is based on clinical laboratory test results, yet it only accounts for maybe 2% to 3% of total health care expenditures. This pandemic has brought diagnostic to the forefront and even within health care.
LAWRENCE WORDEN: C-suites, prior to the pandemic, if you talk to anybody in the C-suite of a hospital about the laboratory, they would kind of say, well, it's not on our radar. We don't know anything about it. But because these laboratories were able to reorganize and boost their capacity and meet these testing demands so incredibly fast and well, they have a whole new position within their own health care administrations.
LAWRENCE WORDEN: And when you talk to C-suites now, these labs tend to be the heroes of their institutions. And they're very proud of what they're able to do. So their position within the health care structure has improved as have the position of the diagnostics companies. And just the general public awareness of diagnostics, I think, will endure. But other things that are more specific to the industry, I think, this realignment of the global competitive environment will be sustained.
LAWRENCE WORDEN: There are companies now, as you noted in the presentation, that are looking to enter the US market that would not necessarily have had the resources to do what they're doing before this. And I think another aspect is the proof that the emergency regulatory approval channels that were implemented can work, that the risks of a rapid response and streamlining our regulatory pathways, the risk were outweighed by the public health benefit, I think.
LAWRENCE WORDEN: And that may have some downstream benefit in maybe making those processes a bit more efficient.
DAMIAN DOHERTY: Yeah, absolutely. I would agree. I mean that sort of plays into the next question. You sort of answered that in part about the democratization of a lot of these diagnostic companies, certainly in an industry that was dominated by the top 10 or 12. But now, clearly, a great example in your presentation of companies that really came out of nowhere and reached stratospheric revenues and logistic capabilities.
DAMIAN DOHERTY: But this expansion of all these other companies surely has to do a good thing for the landscape, I'm assuming, geographically as well, of course. But I mean you mentioned in the talk that a lot of these companies, US-based companies, obviously, were having to fulfill government contracts. Had any of those companies that they have a manufacturing footprint in APAC? Or are they now looking rather through mergers and acquisitions?
DAMIAN DOHERTY: Are they looking to potentially create manufacturing spots in APAC? Or do you think they'll just continue to partner?
LAWRENCE WORDEN: There has been some expansion of global manufacturing capacity in these markets since then. But in many cases, that demand and need was met by partnerships, particularly now, like SD Biosensor and Roche. Roche acquired a rapid COVID test through that partnership. And as a result, SD Biosensor, as you see in the numbers, benefited significantly and is now expanding into the US market.
LAWRENCE WORDEN: So I think a lot of the companies that emerged, though, may not survive because they emerged into an environment with ready regulatory approval, easy regulatory approval, government contracts available, looking for anything to fill the demand and ready reimbursement, generous reimbursement to cover these costs. So it was kind of all the barriers to entry were lowered.
LAWRENCE WORDEN: And these companies now are in a market, where they're looking to diversify their offering. But they don't have the skills and the expertise necessary to meet the regulatory environment or the competitive environment, and particularly, the reimbursement environment that they're now going to have to engage with in order to succeed in other areas.
DAMIAN DOHERTY: Yeah. No, I hear you. And that sort of leads onto the next question, in sense of the analyzer base. It was interesting-- it's an interesting area, as you rightly said, as much remains to be seen in terms of the ongoing role of some of these systems. But clearly, those systems that have the built-in flexibility and a more of a multimodal approach seemingly would be the companies, I think, will be the winners here, I'm assuming.
DAMIAN DOHERTY: And those that are less flexible, as you put in your presentation, will probably fall by the wayside or be mothballed. But hopefully, some sort of a repurposing strategy would be very useful to certainly for limited resource settings because I suppose that's still an area that needs to be thought through, doesn't it? Lower-income countries that really just don't have the diagnostic capabilities, places that are in very remote parts of the Earth that is very hard to get testing, remote testing to those areas.
DAMIAN DOHERTY: But certainly, yeah, I'm assuming the key now will be manufacturers looking at what they've got and looking how they can repurpose, how they can expand. And as you say, with the labs, with 8 to 10 different-- I mean it's crazy to even think that because that takes an education too, right? The people in the labs have to be educated about how to use all these different systems. They've gone from being very, very au fait with using one system, and all of a sudden, you're throwing another eight systems or have completely different protocols, different ways of working.
DAMIAN DOHERTY: It's complex, isn't it?
LAWRENCE WORDEN: Very complex, yeah. But I think when you look at the excess capacity, you can look at it in three different types of analyzes. There are the low-volume, rapid point-of-care analyzers, like the Abbott ID Now, the Roche Liat, the Thermo Fisher, the Accula. They do one test at a time. And as I mentioned, in some cases, health care systems acquired thousands of these that they then distributed within their network.
LAWRENCE WORDEN: And the manufacturers don't know where they are necessarily. They just know they're out there. And they already do have a menu beyond COVID. They do flu, they do RSV, they do Strep-A in some cases. But in order to find a role where they're located now, they may need to do other assays. They may need to add some sexually-transmitted disease assays or other assays that could fit the clinical demand in these locations.
LAWRENCE WORDEN: I think that's a challenge. But the companies that produce these analyzers are working on menu expansion now. As you mentioned, the mid- to high-volume analyzers that have broad menus, like the Hologic Panther, the Abbott Alinity, the Roche 6800/8800, these are the platforms that are going to really win in this contest because they have broad menu. They can be repurposed.
LAWRENCE WORDEN: They can replace other instruments or consolidate assays that may have been done on multiple different platforms in these labs. They're going to find a role. They are definitely in the best position here. But then you have this multitude of OpenPCR platforms that require one, they can only be used in a highly complex lab. They required skilled staff to perform them.
LAWRENCE WORDEN: And they have this extra extraction step, so they're more labor intensive. And thousands of these were placed around the world to meet demand. They faced a more challenging environment because of the labor component and the skill component. But also, they're up against regulatory environments that are not favorable currently to doing laboratory-developed testing.
LAWRENCE WORDEN: In Europe, in particular, everything has to be CE-IVD and now, IVDR. And so maintaining these platforms in that environment, where only skilled academic laboratories who may really have the resources to use these platforms, is going to be difficult. And in a lot of cases, particularly in Europe, these instruments were placed with a reagent rental model or volume contract model.
LAWRENCE WORDEN: And when they're done with the COVID testing, they'll go back to the distributor or the manufacturer. And even in the US, the use of these platforms is going to be challenged with the Ballot Act, which is now going through Congress, which will limit the laboratory-developed testing market. So as you said, the sample-to-answer platforms that are FDA-cleared and particularly, moderately complex and be performed with less skilled staff will be the winners.
DAMIAN DOHERTY: Right, OK. Good stuff. And finally, obviously, you touched upon telemedicine, again, an area that's been scrambling to get out of the blocks for many years and obviously, was making some progress. But certainly COVID turbo-boosted at-home testing. There's no question about that. I mean, are you confident we can sustain this shift? Clearly, I mean you made a good point there about the infrastructure, perhaps, just isn't there yet in terms of the data capture, the linkage to public health systems.
DAMIAN DOHERTY: Do you see that as being, at the moment, probably the biggest stumbling block in terms of confidentiality, data capture, and having the systems utilizing what most people have, which is a mobile phone, but trying to find some way of coordinating that and getting that information back where it's needed, not only-- probably more importantly for a pandemic, of course. Real-time information is key, isn't it, so that we can predict behavior, predict patterns in real time.
DAMIAN DOHERTY: But is that probably you'd argue that probably the biggest stumbling block with getting telemedicine to a point where we can feel confident that the testing isn't an issue because we know the technology? That's the part, that last mile, if you will. Is that going to be the biggest hurdle, do you think?
LAWRENCE WORDEN: I think so. But I do think home testing is here to stay, and it will expand over time. It's part of an overall trend to more consumer-centric testing. It's part and parcel with the rise of these internet-testing services, like Everlywell and other services, where you can order a test kit to collect the specimen at home and send it into a lab. It gives you control over your testing.
LAWRENCE WORDEN: And I think more of that testing menu will be focused on clinical applications rather than what some people call recreational applications, like food allergy testing and other things that may have questionable clinical value. And you have the major reference labs, like Quest and LabCorp, now offering concierge services for home collection of samples. And the two major pharmacy chains and Walmart and others looking at these in-pharmacy care clinics that would offer clinical lab testing.
LAWRENCE WORDEN: So there's just-- you used the word "democratization." I think that's maybe appropriate here as well as decentralization of testing access and patient control of testing that is emerging and will continue to grow.
DAMIAN DOHERTY: That's great. And probably, just in closing, do you feel, personally, we're in a much better state now? I mean, I know there's lots of things to be resolved from a pandemic preparedness perspective. Clearly, there are going to be new technologies. We're going to need to track in real time what's happening when inevitably, the next outbreak comes, whether it's some form of zoonotic disease or some other pathogen. But certainly, do you feel when the next pandemic comes, god forbid it doesn't, we're in a much better state now, we're ready in a way that we weren't ready before?
LAWRENCE WORDEN: In some ways, yes. I think one of the most discouraging things, though, is the overregulation of laboratory-developed testing. It was a significant barrier to the rapid development of COVID testing at the beginning of the pandemic. And with these regulatory barriers to laboratory-developed testing and the use of OpenPCR platforms that can accommodate these test developments in a decentralized way rapidly, if we lose that capacity, then we definitely will lose the ability to react quickly to the next pandemic.
LAWRENCE WORDEN: It's taken two years for the other systems to become available, the sample-to-answer FDA-cleared platforms to really replace a lot of that OpenPCR testing that was originally done. So you can't wait two years during the next pandemic. So I think that's the real risk we run right now, is overregulation of laboratory-developed tests.
DAMIAN DOHERTY: OK. Good stuff. Well, listen, I think that closes a really, really interesting session, Larry. I just want to thank you, again, for taking the time to present a very thought-provoking, stimulating perspective on the effects of COVID and what it's had on the diagnostic landscape. Any of you out there, our audience, who are keen to speak to Larry or want to make contact, certainly, we can facilitate that.
DAMIAN DOHERTY: And we hope you've all enjoyed this special segment as part of the State of Biotech. So I'm thanking you all for your time and dialing in today. And again, a huge thanks to Larry as well for joining us today. Thank you very much.
LAWRENCE WORDEN: Thank you. [MUSIC PLAYING]
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