After stops and starts, successes and disappointments, point-of-care diagnostic testing (POCT) has finally come of age. From its humble beginnings in the 1990’s, POCT has become a $16 billion market, delivering value to patients, caregivers and investors. As a participant in several of the early blood gas POCT transactions (1990’s) and one of the most relevant recent deals (the sale of HemoSonics to Stago), I’ve seen the market reach a level of stability and credibility. It is time to take it further.
The nagging question for market participants is simple: what is the point of point-of-care-diagnostic testing? As the market has changed, so has the answer: it’s not solely about the patient, the easy delivery of care or financial returns. This market has now matured to be relevant to patients, physicians, and financial markets.
The POCT market is vital where the test results enable an immediate medical decision. These tests include a number of well-characterized ones including glucose, BUN/creatinine, electrolytes, arterial blood gas, cardiac and stroke markers. Until now, these tests have traditionally been run in a central lab by a technician far away from the site of care. Given advances in technology and patient care, POCT products have been designed to be easy to use (nurse, caregiver, even the patient) at the bedside where a rapid result leads to a quick informed decision regarding which treatment path to pursue. POCT not only shifts testing away from central labs, but also puts relevant health information into the hands of caregivers, leading to better care and decision-making.
The simplicity in the use of POCT tests has made them attractive in less developed countries with insufficient lab services. In large high-growth countries, POCT are attractive only if they are simple to use. In China, these systems are utilized where there are insufficient central lab services, and this trend will likely spread to other, less developed nations where healthcare is increasingly decentralized. POCT supports emerging patient care models not just in developed markets, but also in those high-growth emerging markets where care is decentralized and POCT is a necessity.
Given its proven ability to increase efficiency, eliminate follow up visits, and save time and money, market reports estimate that the POCT market will grow to $36 billion by 2021. Advances in technology and the increasing demands of growing and aging populations worldwide have supported the growth of this sector of healthcare.
Although the business model and logic related to POCT are sound, achieving success in this market is challenging and has proven difficult. The bar is high for companies, as they must provide substantial advantage over central laboratory testing companies who provide reliable, cheap, but relatively slow turnaround times for crucial tests. There are four primary ways these companies can demonstrate a clear and distinct advantage:
- Ease of use/operation and system connectivity – Since the user is not a skilled lab technician, the best products/devices/test need to be easy to use and must interface with existing LIMS and EMR systems.
- Time to result – In addition to ease of use, time to result is crucial as it underpins the entire value proposition of POCT. New entrants to the market not only have to be faster than traditional central lab tests, but must also provide benefit over existing POCT tests already in the market.
- Biomarker differentiation or test menu beyond that which already exists in the market – Unless a company has unique biomarkers for a specific disease or condition, they have to compete on the basis of a more expansive test menu.
- Price/cost of goods – Virtually all of the POCT market is in-patient testing which is not reimbursed on a test-by-test basis. Instead, all costs of patient care are rolled into one prospective payment under the DRG (Diagnosis Related Group) system. This makes reimbursement a negligible factor. In turn, the most relevant factor becomes the low cost of goods to enable the POCT company to maintain a healthy gross profit while protecting itself from price competition.
Like all sectors of biotech and medtech, the POCT market has seen substantial capital invested, multiple successes and its share of failures, and the promise of a lasting impact on reducing the cost and improving the delivery of healthcare. The market continues to evolve, and a recent increase in M&A activity in the sector (Stago acquiring HemoSonics, Werfen acquiring TEM and Accriva, Siemens acquiring epocal, Quidel acquiring Alere’s Triage assets, Danaher acquiring Cepheid) and a rise in funding for novel POCT companies suggests that investors are coming back to the sector given the potential for return on investment. POCT investing represents an interesting and profitable part of an overall investment strategy and will continue to deliver real returns.
| Target | Buyer | Date | Deal
Size ($M) |
Comments |
| Epocal | Siemens | 07/2017 | Undisclosed | Enhance POC blood diagnostic offerings |
| Alere (Triage) | Quidel Corporation | 07/2017 | 440.0 | Enhance POC diagnostics and presence in the hospital and cardiac biomarker segment with the acquisition of Alere Triage® assets |
| HemoSonics | Stago Group | 05/2017 | Undisclosed | Further development of POC offering to complete leadership in hemostasis testing through acquisition of SEER technology and the associated Quantra Hemostasis Analyzer |
| Accriva Diagnostics | Werfen Life Group | 01/2017 | 378.6 | Enhance hospital-based POC hemostasis testing and expand position in POC critical care testing |
| TEM | Werfen Life Group | 09/2016 | 140.0 | Complement product offerings in hemostasis and critical care IVD as well as POC portfolio |
| Cepheid | Danaher | 09/2016 | 4,000.0 | Market leadership in molecular diagnostics |
| Kapplex | Miroculus | 05/2016 | Undisclosed |
Digital microfluidic platform allowing clinicians to detect complex conditions, such as cancer or infectious diseases, at the POC |
In summary, point-of-care testing allows patient diagnoses in the physician’s office, an ambulance, the home, the field, or in the hospital. The results of care are timely, and allow rapid treatment to the patient. Empowering clinicians to make decisions at the point-of-care has the potential to significantly impact health care delivery and to address the challenges of health disparities. The success of a potential shift from curative medicine, to predictive, personalized, and preemptive medicine relies on the development of portable diagnostic and monitoring devices for point-of-care testing. As the M&A market continues to grow and POCT investors reap positive returns, the outlook for the sector is bright. When patients, caregivers, healthcare systems and investors all win, we can all understand the point of Point-of-Care.
Please contact hunt@locustwalk.com to learn more about our medical technology practice and our transaction advisory capabilities focused on assisting entrepreneurs in sell-side, buy-side, private placements and strategic advisory engagements.
