IVD industry – On the brink of significant expansion

As the Indian IVD sector continues to evolve, it presents immense opportunities for growth and innovation. And, creates an industry well-positioned to make healthcare more accessible, effective, and equitable across India.

Diagnostic testing has become a fundamental aspect of healthcare, aiding physicians in diagnosing conditions and determining treatments. Despite a decline in Covid-19 testing affecting total revenues, core diagnostic segments have generally experienced growth. Factors, such as new products, changes in global health spending, regulatory shifts, and disease trends, contribute to a constantly changing market, yet one that remains resilient.

The Indian IVD industry is estimated at Rs 16,000 crore in FY23. The diagnostic space is significantly transforming with the world’s largest young population and increasing life expectancy. Improved patient awareness, better accessibility to healthcare services, rising lifestyle disorders, and changing attitudes toward preventive healthcare have revolutionized growth.

Make in India has encouraged the development of affordable and high-quality indigenous products. These products are gaining increasing acceptance among Indian laboratories, and are expected to go global in the coming years. Global IVD companies are also expanding their operational footprint in India.

The market benefits from a 100-percent FDI allowance under the automatic route for both brownfield and greenfield setups, are adding to its growth and resilience.

India is witnessing significant advances and growth in the next-generation IVD market. The increasing prevalence of chronic diseases and infectious ailments fuels the expansion. Growing awareness and the need for personalized medicine and early disease detection, perhaps due to the pandemic, are spurring demand.

The hospital and clinic segments dominate the next-generation IVD market by end user. Apart from central laboratory testing at hospitals, it is being increasingly adopted for rapid and bedside analysis of various parameters.

Next-generation in-vitro diagnostics refers to advanced and innovative technologies that are utilized for diagnostic testing outside the human body. Molecular diagnostics, genomics, and NGS are expected to be primary facilitators of this growth by providing new avenues for improved disease diagnosis.

Technological innovations are playing a crucial role in transformation. Next-generation sequencing, molecular diagnostics, and point-of-care (POC) testing are revolutionizing disease detection and management, particularly in India’s vast rural regions where access to healthcare is often limited. These advancements enable quicker, more accurate diagnoses, empowering patients with better health outcomes. IVDs are bridging the gap by enabling early disease detection and effective management, thus expanding healthcare access in previously underserved regions.

Integrating digital health technologies further enhances the reach and effectiveness of diagnostics, bridging the gap between urban and rural healthcare services.

Worldwide, too, next-generation sequencing (NGS) that enables detailed genetic analysis for personalized medicine, an advanced segment of the IVD industry, is gaining traction. Estimated at USD 1.9 billion in 2023 with a 10.3-percent CAGR, revenue is expected to be generated primarily by high-throughput and medium-throughput NGS.

Other technologies being adopted are micro-physiological systems (MPS) and digital PCR (dPCR), which enable more precise and comprehensive diagnostic solutions.

Artificial intelligence (AI) and machine learning (ML) are being integrated into diagnostic processes to improve accuracy, efficiency, and the personalization of treatment plans. These technologies enable the analysis of large datasets, leading to more informed and effective healthcare decisions.

The increased focus on personalized medicine and prevention drives demand for self-diagnostic tools and wearables. These devices support continuous health monitoring, and empower individuals to manage their health proactively.

Technologies, such as lateral flow tests, which were widely used during the pandemic, are now being leveraged for various applications beyond infectious diseases. These include veterinary diagnostics, environmental testing, food safety, drug monitoring, cancer biomarker detection, and chronic disease management.

Moreover, enhanced lateral flow assays show significant improvements in the sensitivity and specificity, and multiplexing capabilities of lateral flow assays are now being realized. Integrating digital platforms and nanotechnology further enhances the performance and user experience of these diagnostic tools.

Digital transformation is revolutionizing the IVD industry, creating significant new opportunities for growth and innovation. Traditionally, IVD companies have focused on developing tests that detect diseases and conditions through laboratory-based analysis of samples like blood or tissue. However, as the market for these conventional diagnostics matures, growth has begun to slow, particularly in established areas, such as hematology, clinical chemistry, and immunoassays. To continue thriving in this evolving landscape, IVD players are increasingly embracing digital diagnostics, which combine traditional testing methods with advanced data analytics to generate deeper clinical insights and more efficient workflows.

Moreover, digital diagnostics are particularly well-suited to addressing the challenges of modern healthcare systems, such as the need for cost-effective solutions and streamlined clinical workflows. In an era where healthcare providers face increasing pressure to reduce costs while maintaining high standards of care, digital diagnostics offer a way to achieve both goals. By automating certain aspects of the diagnostic process and integrating test results with electronic medical records, digital diagnostics can reduce the burden on healthcare workers, who are often stretched thin due to staff shortages and burnout. Additionally, these technologies enable more precise and timely decision-making, leading to better patient outcomes and lower overall healthcare costs.

One of the primary advantages of digital diagnostics is their ability to enhance the value of IVD tests by integrating them into a broader digital health ecosystem. This integration allows for collecting and analyzing large datasets, which can be used to identify trends, improve population health management, and support personalized medicine. For instance, digital tools can help translate the results of diagnostic tests into actionable insights by considering patient-specific factors and providing tailored treatment recommendations. This approach improves diagnostic accuracy and ensures patients receive the most appropriate care based on their unique health profiles.

Another critical aspect of digital transformation in IVD is the ability to support new business models and revenue streams. As the traditional market for diagnostic tests becomes more competitive, IVD companies are exploring ways to expand their offerings through digital products and services. This includes the development of data-driven solutions, such as NGS, companion diagnostics, and real-time patient monitoring systems. These innovations provide additional value to healthcare providers and patients and open up new avenues for IVD companies to differentiate themselves in the market.

Furthermore, the shift toward digital diagnostics is driving the need for IVD companies to rethink their operating models. To fully capitalize on the opportunities presented by digital transformation, these companies must adopt a more agile and customer-centric approach. This involves investing in new capabilities, such as data analytics and software development, and forging strategic partnerships with technology firms and other stakeholders in the healthcare ecosystem. By collaborating with experts in fields like cloud computing, cyber security, and telehealth, IVD companies can accelerate the development and deployment of digital diagnostics, ensuring that their solutions are both innovative and scalable.

Finally, the regulatory landscape for digital diagnostics is evolving, presenting both challenges and opportunities for IVD players. As regulatory bodies around the world update their guidelines to reflect the growing importance of digital health, IVD companies must stay ahead of these changes to ensure compliance and secure the necessary approvals for their digital products. Developing a clear regulatory strategy that accounts for regional and global variations is essential for success in this rapidly changing environment.

Despite some contraction, POC technology, another advanced segment, has gained worldwide recognition over the past decade due to its convenience and ability to rapidly and accurately detect various diseases and conditions. POC is emerging as a strong alternative to traditional laboratory testing methods, thanks to advancements in extraction techniques, microfluidics, miniaturization, and data processing. These improvements have brought POC test sensitivity and specificity closer to those of lab-based tests.

Due to its convenience and rapid results, POC testing is expanding into new areas, such as pharmacies, clinics, remote settings, and workplaces. This expansion is driven by the need for more accessible and timely diagnostic solutions.

However, POC faces significant challenges that impact its growth. One major issue is the potential for inaccurate results, including false positives and negatives, which can undermine confidence in the technology. User error, environmental conditions, and technological limitations can all affect the accuracy of POC devices. Additionally, the cost-effectiveness of these devices is a concern, especially in resource-limited settings. The regulatory landscape for POC is also complex and varies by region, posing further challenges for manufacturers and end-users.

Challenges abound. Despite the promising trends, the IVD industry faces several challenges.

Ensuring compliance with evolving regulations is challenging, particularly when transitioning away from widely used materials like PTFE, which face sustainability concerns. Maintaining high standards of quality control and regulatory compliance, while scaling production efficiently, is also challenging.

Sustainability is a major concern. Finding alternatives to PTFE and other materials to meet sustainability goals without compromising product performance is important. Addressing the environmental impact of production processes and materials, with an emphasis on reducing CO2 footprints, is also important.

Another production challenge is developing shelf-stable solutions that maintain the purity and efficacy of reagents over time. Incorporating precise microfluidics and flexible circuits into disposable devices requires extensive experience and innovation.

It is crucial to adapt to newer technologies, such as AI, NGS, and advanced automation while ensuring compatibility and stability in various testing environments. Additionally, to keep pace with advancements in the IVD industry, addressing the scarcity of skilled labor through automation and training initiatives is necessary.

Moreover, managing excess capacity in the market involves selecting manufacturing partners with proven expertise in high-throughput production. Additionally, balancing the cost of new technologies and materials with the need to keep overall product costs within the target ranges is essential for maintaining economic viability.

Regulatory impact on the IVD sector
The regulatory landscape for IVDs is undergoing a significant transformation, particularly with implementing the in-vitro diagnostics regulation (IVDR) in the European Union (EU) and evolving policies in the United States. These changes are reshaping the IVD sector, requiring manufacturers to adapt strategically and ensure compliance with new, stringent requirements.

EU. Many IVDs currently on the market do not yet comply with the new rules adopted in 2017, nor have they been replaced by new devices. This situation is especially critical for high-risk IVDs, which are used, for example, to test for infections in blood and organ donations. The regulation aims to address risks of IVD shortages in the EU and speed up the launch of some elements of the European database on medical devices (Eudamed).

In January 2024, the European Commission put forward a proposal for a regulation amending Regulations (EU) 2017/745 and (EU) 2017/746, to give manufacturers more time to apply the EU legislation on, respectively, medical devices and IVDs, without compromising safety requirements. On April 25, 2024, the European Parliament adopted its position at first reading under the urgent procedure by an overwhelming majority to avoid shortages. The Council adopted its position on May 30, 2024. The final Act was signed on June 13, 2024, and published in the Official Journal of the EU on July 9, 2024, the day of its entry into force.

The IVDR mandates that all IVD devices demonstrate high quality and safety standards before entering the market. The adoption of EN ISO 20916:2024 harmonizes good study practices, providing detailed guidelines on study design, ethical considerations, site qualifications, and the contents of a clinical performance study report (CPSR). This alignment ensures that IVD performance studies are conducted under rigorous and standardized conditions, reducing variability and improving comparability of study outcomes across different settings.

The need for more detailed and comprehensive clinical evidence can lead to increased costs and longer timelines for the development and approval of new IVD devices. Manufacturers must now ensure that their data collection and reporting methods meet the higher standards of IVDR and ISO 20916. Companies may need to enhance their in-house expertise or seek external support to navigate the new regulatory requirements effectively.

Compliance with the IVDR is an ongoing journey. Manufacturers must remain agile and proactive, continually adapting to regulatory updates and advancements.

USA. The FDA in the United States regulates around 190,000 cleared or approved medical devices and, on an average, clears 12 devices every business day. The Federal Food, Drug, and Cosmetic Act assigns risk-based device classifications (I, II, or III), based on the level of control necessary to ensure safety and effectiveness. As classification increases from I to III, the regulatory controls also increase. The Center for Devices and Radiological Health (CDRH) approves and monitors these devices and diagnostics.

In February 2024, The Food and Drug Administration’s Center for Devices and Radiological Health (CDRH) announced plans to reclassify the majority of high-risk IVDs from class III devices to class II moderate-risk devices. This move aims to streamline the regulatory process and facilitate quicker market access for certain types of tests.

Under the proposed change, manufacturers of select IVDs would be able to seek marketing clearance through the less burdensome premarket notification pathway (510[k]) instead of the agency’s more rigorous premarket approval (PMA) pathway. CDHR expects the reclassification to foster innovation and competition in the diagnostic testing space and increase patient access to IVDs.

On April 29, 2024, the FDA issued the laboratory-developed tests (LDTs), IVDs that the FDA describes as intended for clinical use and are designed, manufactured, and used within a single clinical laboratory that meets certain regulatory requirements. The final rule amends FDA’s regulations to make explicit that IVDs are devices under the Federal Food, Drug, and Cosmetic Act (FDCA), including when the manufacturer of the IVD is a laboratory. Along with this amendment, the FDA finalized its policy to phase out its general enforcement discretion approach for many LDTs over four years. The agency also issued targeted enforcement discretion policies for certain categories of IVDs manufactured by laboratories.

Indian diagnostic companies focusing on exports must be fully aware of and adapt to new regulatory frameworks, including increased oversight and compliance requirements. The evolving regulatory landscape aims to balance innovation with patient safety, but uncertainties and implementation delays could affect the availability of novel diagnostics. These regulatory changes underscore the dynamic nature of the diagnostics sector, with ongoing efforts to streamline processes while ensuring robust oversight and patient safety.

Strategic acquisitions
In this dynamic environment, strategic acquisitions are being made that add revenue streams and drive product innovation. Although some segments of the overall IVD market remain relatively small, they represent the biggest growth areas and are anticipated to play a significant role in the future IVD market.

However, the inflationary pressures and high-interest borrowing affected the mergers and acquisitions (M&A) landscape in 2023 as the value of the top 10 deals shrunk, compared to the previous year. The total value of the top 10 M&A deals completed in 2023 was less than half of the previous year.

This is in direct contrast to 2022 when:

• Large IVD companies acquired smaller ones to expand their product portfolios and geographic reach. Danaher Corporation acquired Cytiva for USD 25.4 billion. This acquisition gave Danaher a strong presence in the IVD market, as Cytiva offered a wide range of IVD products, including immunoassays, molecular diagnostics, and POC testing solutions.
• Companies outside the IVD industry acquired IVD companies to gain access to new technologies. For example, Alphabet Inc. (Google) acquired Fitbit for USD 2.1 billion. This acquisition gave Alphabet access to Fitbit’s health data, which could be used to develop new IVD products and services.
• Private equity firms invested in IVD companies. For example, Hellman & Friedman acquired Bio-Rad Laboratories for USD 8.2 billion. This acquisition gave Hellman & Friedman a strong presence in the IVD market.

In 2023, Thermo Fisher Scientific was on a buying streak. In January, the company completed its acquisition of The Binding Site Group in an all-cash transaction valued at USD 2.8 billion. In August, Thermo Fisher completed the acquisition of data intelligence company CorEvitas for USD 912.5 million in cash. In October, Thermo Fisher announced a USD 3.1-billion acquisition of proteomics solutions company Olink.

The challenging economic climate prompted companies to shift to partnerships instead of acquisitions to develop and license devices and technologies. In October 2023, Roche, Ibex Medical Analytics, and Amazon Web Services partnered to enable pathology laboratories to access Ibex’s AI-powered decision-support tools to aid in the diagnosis of breast and prostate cancer through Roche’s Navify Digital Pathology software platform, with the technology hosted on the AWS platform.

The year also saw the end of Illumina’s long-contested USD 8-billion acquisition of cancer test manufacturer Grail. The US-based genomic and molecular diagnostic company is expected to divest Grail in 2024. Both the US Federal Trade Commission and the European Commission opposed the deal, stating that Illumina could leverage its position as one of the only companies equipped to process the tests to prevent competition in the space.

In March 2024, Agappe and Japanese partners Fujirebio Holdings, Inc. made a collaborative advancement in the IVD sector. This partnership focuses on chemiluminescence immunoassay (CLIA) diagnostics, which offer a complete CLIA solution with locally manufactured reagents.

In July 2024, another major collaboration involved Biogen, Beckman Coulter, and Fujirebio. This partnership aims to develop accessible, minimally invasive blood-based biomarkers, specific for tau pathology in the brain. These biomarkers could provide critical insights into the underlying pathological processes of Alzheimer’s disease and advance new therapies impacting tau pathology. The collaboration can potentially create diagnostic tools for use in clinical trials and practice, enabling the adoption of future tau-targeting therapies. This collaboration is planned to leverage scientific expertise in biomarkers and accelerate the development of blood-based diagnostics for measuring tau pathology.

These collaborations bring state-of-the-art IVD technologies and reagents to India, significantly improving diagnostic precision and efficiency. By enhancing diagnostic accuracy and reliability, these partnerships contribute to better patient care and treatment outcomes. Advanced diagnostic solutions become more accessible and affordable, particularly benefiting the rural Indian population.

Some companies are also making diagnostic agreements by which they broaden their availability in the market and can move forward. One such multi-year agreement is between Veracyte, Inc. and Illumina, Inc. to develop and offer high-performing molecular tests as decentralized IVD tests using Illumina’s NextSeq 550Dx NGS instrument. This collaboration is part of Veracyte’s expanded IVD strategy, which will also include qPCR technologies.

The future of such collaborations holds immense potential. With continuous advancements in medical technology, market insights, and a distribution network, these partnerships are poised to introduce more innovative solutions in diagnostics and beyond. The focus on digital health technologies, including wearables and healthcare service systems, presents a new frontier for collaboration, potentially revolutionizing patient care and healthcare delivery in India and beyond.

Outlook
The IVD industry in India is on the brink of significant expansion, driven by many factors beyond technological advancements. The rapid growth of private hospitals and diagnostic laboratories is a major contributor, while the pharmaceutical and biotechnology sectors’ increasing reliance on IVDs for R&D is spurring investment and innovation.

Recent developments in POC testing, digitization, and multiplex panel capabilities are revolutionizing early disease prevention and detection. By addressing crucial needs for accessibility, affordability, accuracy, and speed, diagnostic companies are equipping consumers, patients, physicians, and health systems with vital information. This surge in innovation and investment ensures that the IVD industry will continue to advance, ultimately enhancing health outcomes globally and solidifying its critical role in the future of healthcare.