IVD Industry Flourishes as Some Clinical Labs Flounder. But It's Not All Bad

A widely circulated report about the global IVD industry has said the sector has been able to weather the global economic storm even as some of its core customers — namely, US-based clinical labs — have not.

But the news isn't all bad when you start to crunch the numbers.

First, a caveat: All of the clinical labs I mention in the post also are listed in the report, which was compiled by the consultancy Kalorama Information. I suspect mine won't be the only eyebrow raised at this curious conflict since none of the labs I mention could in any way be considered IVD companies that comprise the vast majority of vendors reviewed in the report — instrument and reagent manufacturers such as Life Technologies, Qiagen, Thermo Fisher Scientific, Beckman Coulter, Bruker Daltonics, Siemens, Roche, Illumina, Affymetrix, etc.

Yet despite the extraordinarily wide net the report casts to corral its "global IVD companies," I felt compelled to write about it if only to balance the report's gloat that the IVD industry has weathered the obstinate economic gloom and is thriving nicely, with the very real fact that the clinical lab community — including hospital- and academic-based labs, as well as public CLIA and reference labs — is not faring far worse.

According to Kalorama's biennial report, "increased demand for testing, new technologies and emerging markets have trumped the economic situation in the world in vitro diagnostics market."

Entitled “Worldwide Market for In Vitro Diagnostic Tests, 7th Edition,” the report says the global market for IVD products was $44.3 billion market in 2009 and is expected to grow at a 6 percent rate for the next five years.

According to the report, "the market has already weathered price declines and as a result developed innovative technologies and approaches. This has dulled the impact of a recession which has hurt other industries."

One such industry — and I say this despite the fact that some of its constituents are catalogued in the report — is the clinical lab sector, which continues to be haunted by declining sample volumes as patients try to avoid costly physician visits.

The IVD sector's growth, by comparison, is due in part to the world's vast research community, which is far larger than the US clinical lab sector and, unlike most clinical labs, has widespread access to funding from a wide array of governments.

"Digital pathology, multiplex assays, automation and test service commercialization represent areas where the [IVD] industry has developed new approaches," the report said, adding that "despite economic hard times, the IVD industry is on an upswing.”

At least during the past six months, this observation is in stark contrast to the clinical labs that buy much of what the IVD industry produces, including technology platforms, assays, and reagents. For instance, Quest, the biggest reference lab in the US, and Celera's Berkeley HeartLabs, a leading cardiovascular molecular test lab, have recorded at least six consecutive months of revenue declines.

Quest's second-quarter revenue fell 1.4 percent, clinical testing revenues decreased 1.6, clinical testing volume decreased 1.3 percent, and revenue from those requests fell .3 percent. During the first quarter, revenues were flat and the company was forced to cut its 2010 revenue projections by half.

Likewise, BHL's second-quarter receipts plummeted 22 percent due to "competitive pressures," and caused the company to cut by 6 percent its previous revenue projections for 2010. Meantime, first-quarter revenue plunged 39 percent as a result of receding sample volumes.

But the numbers aren't all bleak. As a whole, while the global IVD market, as defined by Kalorama, is worth around $44.3 billion, the clinical testing market in the US alone, including academic, hospital, and private reference labs, is worth $58 billion today, according to Washington G-2 Reports, and has typically grown at a rate of 7 percent per year.

However, the same down economy that bruised Quest's and BHL's revenue over the past six months has also hurt the entire US clinical lab industry. According to Brian Taylor, president and principal consultant of Growing Company Solutions, a consultancy that specializes in molecular diagnostics, the clinical lab market is projected to grow at just 4 percent annually because of the recession and other economic pressures.

However, he said that if the macroeconomic situation turns around, the clinical lab sector "can easily return to 6 percent" annual growth, at least matching the global IVD industry.

Other bright spots include those clinical labs that enjoyed rising revenue over the past six months. LabCorp's second-quarter receipts rose 3.6 percent and the company increased its 2010 revenue forecast, while first-quarter revenue grew 3.3 percent even as testing volume fell 3 percent.

And Bio-Reference Lab's second-quarter revenue swelled 26 percent as the number of patients it served increased 22 percent, while first-quarter receipts surged 31 percent as patient count rose 29 percent.

But there is one more factor to consider, which some could view as a harbinger of continued slow growth in the clinical lab sector. Genomic Health yesterday released its second-quarter earnings results, which showed that it generated its first profit ever — $900,000 — a noteworthy achievement for a company that Taylor calls the "poster child for the new kind of complex molecular diagnostics" that have been emerging.

But even as it glows from its profit and a 19-percent increase in total year-over-year revenue, the maker of the pioneering Oncotype Dx assay cut by around 4.5 percent its previous revenue guidance for 2010, said it would no longer generate a $2 million profit for the year but would instead likely post a loss or break even, and cut by 4 percent the number of tests it expects to deliver this year.

Got a tip? Click my byline above to send it along or submit it as a comment below. Follow my headlines on Twitter or subscribe to my RSS feed.