1. Executive Summary 6

2. Introduction 9
2.1 Areas covered by this report 9
2.2 Report’s intended audience 10

3. Technology 11
3.1 The field of human genetics 11
3.1.1 What is genetic testing? 11
3.1.2 Core genetics for DNA testing 15
3.1.3 Genetic disorders 18
3.1.4 Oncogenes 19
3.2 Biochip technology 19
3.2.1 Microarrays 20
3.2.2 Microfluidics & lab chips 24
3.2.3 Integrated chips 25
3.2.4 Signal amplification 25
3.2.5 Nanotechnology 26
3.3 DNA-based diagnostic testing technology 27
3.3.1 Molecular probe (DNA) assays 27
3.3.2 PCR technology 28
3.4 From central laboratory to POC and POL 29
3.4.1 POC data management: the current lack of connectivity 31

4. Market analysis by region 33

4.1 The DNA POC market overall 35

4.2 USA 37
4.2.1 Healthcare expenditure on patient testing 37
4.2.2 Ethics, genetic testing and insurance 38
4.2.3 Implications for DNA POC testing 38

4.3 Europe overall 39

4.4 United Kingdom 41
4.4.1 Healthcare expenditure on patient testing 41
4.4.2 Ethics, genetic testing and insurance 41
4.4.3 Implications for DNA POC testing 44

4.5 France 45
4.5.1 Healthcare expenditure on patient testing 45
4.5.2 Ethics, genetic testing and insurance 46
4.5.3 Implications for DNA POC testing 47

4.6 Germany 48
4.6.1 Healthcare expenditure on patient testing 48
4.6.2 Ethics, genetic testing and insurance 49
4.6.3 Implications for DNA POC testing 49

4.7 Italy 50
4.7.1 Healthcare expenditure on patient testing 50
4.7.2 Ethics, genetic testing and insurance 50
4.7.3 Implications for DNA POC testing 51

4.8 Japan 52
4.8.1 Healthcare expenditure on patient testing 53
4.8.2 Ethics, genetic testing and insurance 53
4.8.3 Implications for DNA POC testing 54
4.9 The situation in developing nations 54

5. Market analysis by application 56
5.1 The major testing areas 56
5.1.1 Infectious disease testing 56
5.1.2 Fetal and newborn screening 57
5.1.3 Cancer 59
5.2 Is there a limit? 60

6. Market Analysis by End-Users of Testing 62
6.1 Hospitals 62
6.2 General and specialty laboratories 62
6.3 Physician office laboratory 62
6.4 Ambulatory care clinics/home testing 63
6.5 Other uses 64

7. Drivers, Restraints & Issues 65
7.1 Market drivers 65
7.1.1 Growing emphasis on near patient testing 65
7.1.2 Potential cost savings 65
7.1.3 Patient and physician demand 65
7.2 Market restraints 66
7.2.1 Cost 66
7.2.2 Reliability 67
7.2.3 Changes in the regulatory environments 68
7.2.4 Resistance from labs and pathologists 69
7.3 Issues 70
7.3.1 Ethics 70
7.3.2 Intellectual property 71
7.3.3 Public education and acceptance of genetic testing 72

8. Strategies and Opportunities 73
8.1 Marketing 73
8.1.1 Pricing 73
8.1.2 Channels of distribution 74
8.1.3 Sales strategies 74
8.2 Strategic alliances, mergers and acquisitions 75
8.2.1 The interplay of diagnostics and drug discovery 75
8.2.2 Biotechnology meets diagnostic device and pharmaceutical companies 76
8.3 Developed world opportunities 77
8.4 Developing world opportunities 77

9. Company Highlights 78

9.1 Aclara BioSciences Inc. 78
9.2 Agilent Technologies 79
9.3 Bayer Diagnostics 80
9.4 Beckman Coulter, Inc. 82
9.5 BioForce, Inc. 83
9.6 bioMérieux SA 85
9.7 Biosite Diagnostics, Inc. 86
9.8 Careside 87
9.9 Cepheid 88
9.10 Clinical Micro Sensors Inc. 90
9.11 Dade Behring 91
9.12 DiGene Corporation 92
9.13 Hyseq Inc. 93
9.14 Millennium Pharmaceuticals 94
9.15 Myriad Genetics Inc. 96
9.16 Nanogen 98
9.17 Orchid Biosciences 100
9.18 Qiagen 101
9.19 Roche Diagnostics 103
9.20 Third Wave Technologies Inc. 104
9.21 Visible Genetics Inc. 106

10. Appendices 108
10.1 Table 8: A list of manufacturers of microarrays, microfluidics and related equipment. 108
10.2 Consortia 113
10.3 Government organizations & useful addresses113
10.4 Terms & abbreviations 119
10.5 Bibliography 120

Table of Figures

Figure 1 POCT Device and Test Sales 6
Figure 2. US Sales of DNA and POC Devices and Tests 7
Figure 3 US Low Density Microarray Sales 23
Figure 4 POCT Device & Test Sales 30
Figure 6 In Vitro Diagnostics Expenditure 34

List of Tables

Table 1: Some commonly used technology terms 12
Table 2: US National Screening Status Report 14
Table 3. Market analysis by region 33
Table 4 Some of the more common clinical genetic tests 58
Table 5 Leading causes of death, in US and worldwide 60
Table 6 Strategic alliances of Myriad Genetics 97

Researchers are investigating the incorporation of microarray, microfluidics, lab chip and integrated chip technologies into near patient and point of care (POC) medical devices, with an eye towards the development and launch of near patient DNA testing. HBS Consulting estimates the 2001 POC testing market to have a value of approximately $1.9 billion in the countries considered in this report (USA, UK, France, Germany, Italy, and Japan). Within some eight to ten years, the DNA POC market will have entered a strong growth stage, and is expected to reach over $250 million per annum in 2010.

The US will lead in sales, due in part to the fact that the US is the headquarters for the majority (over 60%) of biotechnology companies. These are the companies most closely involved in product development, often in a strategic partnership with a diagnostics, a devices or a pharmaceutical company. The US country market is also expected to grow earlier and faster than the other country markets, primarily because of the lack of a national healthcare system, the presence of which makes cost cutting somewhat easier to initiate and enforce.

After the US, the Japanese market is predicted to be the second largest DNA POC market. The Japanese spend a disproportionate amount of healthcare expenditure on POC devices, and this trend is expected to follow through in the DNA segment.

Germany, Italy and France are predicted to follow in terms of amount of spending. The United Kingdom, with its fairly austere healthcare spending, is predicted to spend the least on DNA POC testing.

The largest areas of DNA POC testing are anticipated to be infectious diseases, foetal and newborn screening, cancer and heart disease. Cancer, heart disease and AIDS are in the top ten causes of death in the developed world, and hence have the greatest potential for revenue generation.

Near patient testing will be taking place in the hospital, for example in the emergency department and on patient wards; in physician office laboratories (POL); and in ambulatory care centres and, eventually, the home. During the first decade of DNA POC testing, the largest markets are likely to be the hospital and POL, with the home testing market displaying significant revenue generating potential.

Market drivers include the growing emphasis on near patient testing, the potential cost savings, and the growing wave of patient and physician demand for such testing. Physicians tend to believe that the more rapidly diagnostic tests are available, then the more efficiently the results may be read and incorporated into modifications to patient therapy. Fast, accurate results are always better than slow test turnaround. We believe that the restraints on the DNA POC market, although hefty today, will largely be either resolved or diminished within the next five to eight years. These restraints include the cost of testing, especially the cost of the disposable microarray or other biochip integrated in the device; the reliability of the tests at this time; the regulatory environments in each of the target countries; and resistance from laboratories and pathology departments who want not only the assurance that tests are accurate, reliable and reproducible, but who also have an interest in defending their turf.

A number of interesting market strategies are already emerging, although the reaping of revenues from DNA POC testing is still some time away. One of the most interesting strategies employed seems to be the formation of collaborations or partnerships between cash strapped biotechnology companies and medical device or diagnostics firms. The latter are often seen to provide not only the cash to invest in development, but the connections with opinion leaders needed to sell the concept, and the distribution network to move the devices once approved.

DNA near patient and POC testing is predicted to be a dynamic product of the Human Genome Project, combined with the scramble for discovery and patenting of genetic markers and the emergence of the new pharmacogenomics companies. All in all, while genetic testing is a miniscule part of all in vitro diagnostics today, we believe that in ten years the market will be in a strong growth phase. The companies which have the investment capital, the cutting edge technology and the ear of leading physicians in their markets, are the companies likely to enjoy success in this emerging market.