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Microarray Industry Growth Potential Takes Center Stage at Chips to Hits

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BOSTON — Almost all of the major players in the microarray industry, as well as a healthy number of start-ups, gathered here last week for IBC Life Sciences’ annual Chips to Hits conference, which provided a rosy picture of the industry’s future as applications converge and the field looks forward to entry into the diagnostics market.

The conference featured talks about the current state of microarray technology and the industry (mature, but still with room to grow), strategies on entering the market and protecting intellectual property, and future growth potential. Most notably, protein arrays, tissue arrays, biomarkers, microfluidics, and the future use of microarray technology in clinical and point of care diagnostics all featured prominently in presentations throughout the conference.

However, there were a couple of conspicuous absences. First, Agilent, the No. 2 player in the microarray market, did not have a booth at the show, which several participants remarked was odd. The firm said in a statement sent to BioArray News, “We’re focusing on scientific meetings where we can reach customers and help them apply microarrays to their research, and we feel that Chips to Hits is becoming too commercial to be effective in that regard.”

But perhaps even more perplexing was the lack of discussion regarding standards and the regulatory picture for the use of microarrays in diagnostic applications. Several presentations pointed to clinical and point-of-care diagnostic uses as potentially huge markets for microarray technologies, yet virtually no one discussed the US Food and Drug Administration’s current thinking on the subject.

Joseph Hackett, the FDA’s associate director of the division of clinical laboratory devices, was invited to speak about the agency’s approach to multiplex diagnostic products, but when the final program was released he was no longer on the schedule. An IBC conference official told BioArray News that the FDA had initially accepted the invitation but later backed out.

FDA officials did not return calls seeking comment for this article.

With the recent European approval of Affymetrix’s GeneChip System 3000Dx and Roche’s CYP450 AmpliChip, the issue of how the FDA intends to regulate such products has taken on greater urgency. The agency is working with a number of firms on developing requirements, but it has yet to publish a guidance document seeking comments on potential regulations.

Andy Brooks, director of the American Medicine Development Company’s Microarray Resource Center, said, “People are at least thinking about the applications, so now it makes sense to start turning the crank.”

“What this field needs to think about is the process,” Brooks told BioArray News. “There needs to be educational materials from people from clinical molecular diagnostics labs that have been through this for other tests — and gene expression is not foreign to them — [to] educate the labs that are getting into this. The FDA are in some cases as novice as a lot of your research labs in that they are not sure how to handle the variability associated with this data, and they need the community’s help to get that information.”

He pointed to Expression Analysis’ efforts to provide the FDA with data from the Affymetrix platform to show ways of approaching variability and how it might apply to any application the FDA wanted to regulate.

Microarray Market: Strong and Growing

Although Agilent did not have a booth at the show, the firm’s senior director of science and technology, Barney Saunders, provided a view of the current landscape of the microarray market.

Saunders cited a Frost & Sullivan market report stating that the microarray market is currently worth an estimated $600 million and is growing at roughly 6 percent annually. The commercial segment of the industry is estimated at $341 million, with microarrays accounting for $219 million of that amount. Microarray reagents bring in about $31 million, while instrument sales are currently estimated at $91 million, Saunders said.

Eric Eastman, senior vice president and chief scientific officer of Gaithersburg, Md.-based MetriGenix, cited a Frontline market research report that concluded the DNA microarray market will reach $1.2 billion by 2008 and is expected to grow at a 12 percent clip until then. According to that report, while tissue and protein arrays will make significant headway over the next several years, DNA arrays will still account for 72 percent of the microarray market by 2008.

According to Eastman, the report predicted the molecular diagnostics market will reach $6 billion by 2010 and clinical proteomics will bring in $3 billion in revenue by the same year. He also noted the huge market potential of microarrays in the theranostics space — largely because of the relatively poor efficacy of drugs and high number of adverse reactions.

The report also predicted a significant period of consolidation over the next three years. Several conference speakers and attendees backed this up, saying they believe acquisitions will pick up in the near future. Among the reasons for this is that a few players — Affymetrix, Applied Biosystems, and Agilent — hold a massive lead in the commercial gene expression market, with Affy being the clear dominant presence in the space, holding a 70 percent to 80 percent share of the market.

With those firms having the advantages of being first to the market and relatively large R&D and sales and marketing budgets, it is going to be difficult for start-ups and smaller firms to gain market share in the microarray gene expression segment, presenters agreed. And this isn’t the only barrier to entry. New players face key challenges that will factor into whether they decide to go it alone or seek to be acquired or partner with established players.

Agilent’s Saunders said that in addition to the standard considerations such as profit/loss potential, cash management, manufacturing, and financing issues, “there are very significant entry hurdles for small, new suppliers, such as quality and price, to get them to industrial scale.” Piper Jaffray analyst Edward Tenthoff added during his presentation that intellectual property issues, global distribution, and strong collaborations also would be key to any firm trying to make gains or enter the market.

“But looking forward, I actually think we’re at the beginning of this industry,” Saunders said. “I think there are some really major opportunities.” He said that biology is consistently driving new technologies in the industry and will continue to do so, and he suggested that new technologies would have to provide breakthroughs, not incremental improvements.

According to Tenthoff, the total gene expression market — including both commercial and home-brew technologies, and including chips, instruments, reagents, and oligos —stands at roughly $1.5 billion. He said home-brew arrays, once the dominant half of the industry, have slipped to 46 percent of the market and is declining. The reasons for this, he said, are that the liabilities have increased, the cost has come down for commercial microarrays, and a lot of standardized formats can now do whole-genome analysis. Several presenters said they expected home brews to lose even more market share as commercial microarrays come down in price.

Tenthoff said the microarray industry is growing in several segments: gene expression, microfluidics, genotyping, and protein identification and expression. He also noted a growing trend toward convergence of the gene expression and genotyping market, with companies such as Illumina, Sequenom, ABI, and Affymetrix crossing over into each others’ market segments with platforms that were initially used for one of these applications.

“Gene expression has moved down in the drug discovery process,” Tenthoff said during his presentation. It has been used for target discovery and validation, he noted, and “certainly we’re now getting into very exciting opportunities in predictive toxicology or preclinical studies and also pharmacogenomics.”

“One of the reasons this market has been growing and continues to grow is the technology itself has really moved downstream … [and] a lot of people have been looking at diagnostics opportunities.”

Meanwhile, the industry awaits guidance from the FDA on what kind of information the agency will require for approval of a microarray-based diagnostic test. “A lot of research people on the FDA side are not the policymakers,” Brooks said. “There’s a disconnect, and that’s why things take so long at FDA.”

— EW