Demand for new next-gen sequencing systems remains "healthy" in clinical labs in the US and EU, though most lab directors do not expect their availability to affect how their facilities will use arrays this year, according to results of a recent survey.
JP Morgan's Life Science Tools & Diagnostics group recently surveyed 30 lab directors in the US and EU to "gauge [their] appetite" for new second-generation sequencing instruments, for third-generation systems in development, and for microarray platforms.
According to the survey, published last week, on average 16 percent of directors said they expect that sequencing could replace around 16 percent of microarray usage in their labs by 2011, and supplant up to one-third within three years.
Despite this projected decline, JP Morgan's analysts suggested that increased demand for whole-genome genotyping arrays for use in genome-wide association studies could soften the blow for firms like Affymetrix and Illumina.
"Microarray demand remains lukewarm, but GWAS recovery could provide a cushion," the analysts said in the report. They cited "recent setbacks" to the array market, particularly Affy's anemic 3-percent growth in product sales in 2009 and JP Morgan's estimate that Illumina's GWAS-related sales fell between 20 percent and 30 percent last year.
Because of this, the outlook for the array market "remains cloudy vis-à-vis the impact from NGS technologies, although in the near term, [Illumina] and others should benefit from … a partial recovery in GWAS demand," the analysts said.
Twenty-four of the respondents were based in the US and six were located in the EU. While all 30 supplied answers relevant to the sequencing market, only 19 of them, or 63 percent, said they currently either own or expect to buy an array platform during the next three years.
Of these 19, 38 percent said they currently use Affymetrix chips; 34 percent are Illumina customers; and 17 percent currently use Agilent Technologies' platform.The remaining respondents said they use custom arrays.
Respondents were split evenly between those who ran academic or government labs and those who work at genome centers and private industry, including diagnostic labs, a pharmaceutical laboratory, an industrial laboratory, and a laboratory within a private research foundation.
Based on the lab directors' responses, the JP Morgan analysts estimated that the sequencing market is currently worth around $540 million and expect it to grow 22 percent annually over the next three years. Additionally, demand for new next-generation sequencing instruments and upgrades "remains healthy," and respondents said that they expect sequencing-related activity to increase from around 37 percent of research today to 48 percent in 2011, and 56 percent by 2012.
In comparison, the analysts estimated the current commercial platform-based microarray market is now worth around $700 million and is expected to grow 9 percent over the next three years.
According to the survey, respondents anticipated "modest declines" in the market for chips used in GWAS. JP Morgan said 26 percent of microarray usage in 2009 was represented in GWA studies, a proportion that is expected to decline to 22 percent this year, 21 percent in 2011, and 20 percent in 2012. However, the analysts said that new chips containing rare variant content planned by Affy and Illumina could "cushion" this decrease.
Despite the forecast drop in demand for whole-genome genotyping arrays, most lab directors surveyed said that they do not anticipate that sequencing will impact microarray usage this year.
In particular, the analysts wrote that "while five respondents did not have additional thoughts on microarray-based GWAS trends, the rest of the lab directors largely believe microarray-based GWAS will be replaced by sequencing in the near future given various limitations."
JP Morgan noted that the remaining respondents were "slightly biased" toward decreased microarray usage, while directors' projections for 2011 and 2012 were evenly split between those who expect sequencing to cause an increase in microarray usage versus those who predict a decline.
The top three microarray applications that respondents believed sequencing will replace most rapidly were re-sequencing, de novo sequencing, and exon splice variance analysis.
Elsewhere in the survey, 58 percent of lab directors expect that array usage will increase in diagnostics. Other application areas expected to rise include gene expression and genotyping, while respondents expected no change in usage of arrays for comparative genomic hybridization and pharmacogenomics.
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The survey also provided estimates of market share for the four largest microarray vendors, along with predictions for sales growth and shifts in market share through 2012.
Its analysts estimated that Affymetrix's microarray product sales were $279.2 million in 2009, and said they expect sales to grow 8.7 percent to $303.5 this year. They estimate that array sales will grow 7 percent to $324.8 million in 2011, and reach $347.5 million in 2012.
Affy does not break out its sales by technology platform. JP Morgan estimated that Affy currently controls around 40 percent of the total worldwide array market, and that its share will decrease to about 38 percent by 2012.
The analysts acknowledged that Affy's new instrument platforms, namely the GeneTitan and GeneAtlas and its new array plate format, have helped the company regain confidence. However, they said that "technology obsolescence remains a longer-term concern given the pace of innovation in DNA sequencing," though "demand for low-cost, rich variant studies and custom arrays should provide cushion."
For Illumina, the analysts estimate array sales will reach $301.3 million in 2009 and rise 5.8 percent to $318.9 million in 2010. They expect array sales to grow 13.1 percent to $360.6 million in 2011 and reach $396.7 million in 2012.
Like Affy, Illumina does not break out sales for its microarray business. JP Morgan projected that Illumina's market share would grow from its current 41.6 percent to 43.1 percent in 2012.
Agilent's 2009 microarray sales were estimated to be $88.8 million, and JP Morgan estimates that number to grow 7 percent over the next few years. It expects the company to post $95 million in array sales in 2010; $101.7 million in 2011, and $108.8 million in 2012.
Agilent has not provided data on array sales to date. The analysts estimated that around 12 percent of arrays used today are made by Agilent and expect that percentage to dip to 11.8 percent within the next two years.
Sales of Roche NimbleGen arrays, meantime, were estimated to grow in coming years. The analysts expect Roche to sell $36.7 million worth of arrays in 2009 and $49.6 million worth of arrays in 2010. They anticipate array sales to reach $59.5 million in 2011 and $68.4 million in 2012.
Roche does not break out sales figures for its array business. The JP Morgan analysts predicted that NimbleGen's current share of the market is 5.5 percent, but expected it to grow to 7.4 percent by 2012.
In total, JP Morgan estimated that in spite of the challenge of next-generation sequencing, the array market would grow from its current approximate size of about $700 million by nearly 20 percent to $921 million in 2012.