Note: The information below is an example of an analysis that stratagem would create for a client needing an initial look at a market prior to undertaking a more detailed market assessment project. Contact stratagem today for a free consultation for your business at 720-840-6060 or garycarter@stratagem-mr.com

With the completion of the Human Genome Project, scientists plunged full-speed ahead into the field of functional genomics. The real-time PCR instrumentation and reagent market segment is a key component of the functional genomics market that is expected to grow at annual growth rate of 28% over the next six years according to Frost & Sullivan. In the analysis below, stratagem market research + strategy consulting combines several information sources, including information from leading market research vendors in the field of life science research tools, in order to create a high-level view of this market.

Market Size & Growth:
The first step in analyzing this market is evaluation of the size and growth of the real-time PCR instrument market. PhorTech International’s 2002 Global Laboratory Product Usage Survey can be used to size the total addressable market for real-time PCR instruments. The survey estimated that there was a total population of 356,600 life scientists worldwide, of whom 92.69% or 281,250 were working in the laboratory.

To drill down to the next level of the market, amplification instrumentation, which includes both real-time PCR and standard thermal cycler instruments, PhorTech International’s MSPPSA 2002/2003 US DNA Amplification Instrumentation report can be utilized with the US results extrapolated to the total world market. The report estimates that amplification instrumentation is employed by 86,100 researchers in the US, with annual sales projected to easily exceed $150M in 2002. Using a standard 2.5 multiplier to project the US market to the total world, the amplification instrumentation market was composed of roughly 215,000 researchers globally, accounting for greater than $375M in sales in 2002.

As a further drill-down, results from PhorTech International’s MSPPSA 2002/2003 US DNA Amplification Instrumentation report can be used to estimate the proportion of researchers having access to the two types of amplification instrumentation. The chart below indicates that three out of ten researchers utilizing amplification technology had access to real-time PCR instruments in 2002.

In terms of growth, competitive intelligence indicates that the market for Real-Time PCR instruments exploded from 2000 through 2002. Cepheid reported that they sold 1,000 SmartCycler® systems from May 2000 to December 2002, and industry sources indicated that Bio-Rad had placed 1,000 real-time PCR instruments by the end of 2002. 

Competitive Landscape:
During this period of rapid growth in the real-time PCR instrument market, the competitive landscape was changing. Cepheid, Bio-Rad, and possibly MJ Research, were potentially taking market share away from Applied Biosystems, one of the established leaders in the market.

The chart below contain sales figures for Applied Biosciences SDS (Sequence Detection Systems) and Applied Genomics segment, which during 2001 and 2002 was predominately composed of sales of real-time PCR instruments and to a lesser extent reagents for real-time PCR. In contrast to the robust instrument placement numbers for Cepheid and Bio-Rad noted above, Applied Biosystems sales showed a relatively small increase during this period of time. It appears that Applied Biosystems potentially did not capture its “fair share” of growth versus smaller competitors such as Bio-Rad, Cepheid, and potentially MJ Research as well.

Demographics and Applications for Scientists Utilizing Real-Time PCR:
Researchers utilizing amplification instrumentation can be segmented by organization type to gain a better understanding of customers in this market. While this includes users of thermal cyclers and real-time PCR instruments market trends indicate that many users of thermal cyclers have, or will potentially purchase, real-time PCR instruments in the near future. On a numeric basis users from academia make up more than a third of all users, with users from Biotech/Pharma representing one out of five users.

In terms of specific applications that scientists utilize real-time PCR instruments for there are several sources. The first is PhorTech International’s DNA Amplification Instrumentation report cited earlier, which found that three out of four respondents utilized real-time PCR for gene expression applications, while approximately a quarter of respondents utilized the technology for confirmation of data and quantification of cells/viruses. 

The second source of information regarding applications is BioInformatics LLC’s report “The Market for Real-Time PCR Reagents & Instrumentation”. Since its inception in 1994, BioInformatics, LLC has provided critical market intelligence to leading companies serving the life science, medical device and pharmaceutical industries. “Enabling Discovery”, a publication from BioInformatics, utilizes data from “The Market for Real-Time PCR Reagents & Instrumentation” to describe the evolution of applications in this market (note that BioInformatics also refers to Real-Time PCR as qPCR): 

When qPCR products first became available, scientists performed kinetic or qPCR largely using DNA templates. However, with the increasing popularity of DNA microarrays, as well as other techniques associated with RNA analysis such like Northern blot analysis and in situ hybridization, the majority of scientists now perform qPCR using RNA templates. Only 17% of the study population exclusively uses DNA as a template. 

The chart below delves deeper into the applications that users of real-time PCR perform when using RNA or cDNA as a template. Similar to the results of the PhorTech study referenced above, more than four out of five respondents utilizing RNA or cDNA templates in real-time PCR experiments are performing primary validation of gene expression data or confirming gene expression microarray data.

Key Customer Decision Criteria for when Purchasing Real-Time PCR Instruments & Reagents:
In the report entitled “The Market for Real-Time PCR Reagents and Instrumentation” BioInformatics reports that the three most influential features in a scientist’s decision to purchase one real-time quantitative PCR instrument over another are “price”, “sensitivity” and “software.” Competitors in the real-time PCR instrument market must be paying attention as they recently introduced several new models at lower price points.

Applied Biosystems recently launched two instruments at price points below the $47,250 list price for the PRISM 7000, which was previously their lowest priced instrument. The entry-level 7300 has a four-color system with a single excitation wavelength and a fixed ramp rate and lists for $34,900. The 7500, listed at $42,500, includes upgraded software, five-color dye detection, variable-excitation wavelengths, and comes with an optional future upgrade to high-speed cycling. On Applied Biosystems Q3 2004 investor conference call the company noted that these two new instruments drove quarterly YOY sales growth in real-time instruments for the company.

Last year, Stratagene launched the Mx3000P, priced at $24,995 with features such as a 96-well format, multiplexing of up to four dyes per reaction tube, and compatibility with a wide range of dyes and chemistries.

Bio-Rad recently purchased MJ Research and both companies currently offer low-price optical block add-ons in order to convert their standard thermal cyclers into real-time systems. It appears that these products are enjoying success in the market as Bio-Rad reported strong growth in their amplification product line in Q3 2004 and stated that they expect double-digit growth in this area in the future.

Information from PhorTech International’s 2002 Global Product Laboratory Usage study indicates that these price points for Real-Time PCR instruments are within the range of the annual instrument budget for one to two Life Scientists working in the lab. The study estimated that researchers are estimated to handle instrumentation budgets of $17.8 thousand per researcher, with a reported mean of 12 researchers per lab group. These budget levels indicate that the new low-priced models mentioned above could be considered “personal” instruments, mimicking an earlier trend in the standard thermal cycler market.

While price is clearly important in this market, overall value, defined as the benefits of the product over the price, must also be considered. PhorTech International asked users of thermal cycler instruments to evaluate manufactures based on “best value for the money” in their MSPPSA 2002/2003 US DNA Amplification Instrumentation report. The chart below indicates that MJ Research was the leader by a wide margin followed by Applied Biosystems. While this was not specifically for the real-time PCR instrument market, the performance criteria and competitive set for both instrument types are very similar, and thus it would be assumed that there is a strong carryover effect into the real-time PCR instrument market. 

In terms of real-time PCR reagents, BioInformatics forecasts strong growth with 48% of respondents projecting that the number of qPCR (or real-time PCR) amplifications conducted in their lab will increase over the next year, and 43% of these scientists predict an increase of over 40%.

The chart below from BioInformatics indicates that reproducibility had the strongest relationship between high derived importance and low satisfaction, indicating that improvement in this area could offer a competitive edge for suppliers. It is interesting to note that reproducibility is often reported as an area of needed improvement for microarray technologies as well, another rapidly growing area of the functional genomics market.

Source: “The Market for Real-Time PCR Reagents and Instrumentation”, BioInformatics LLC

The “Market for Real-Time PCR Reagents and Instrumentation” reported that Applied Biosystems is the market leader for qRT-PCR kits followed by Roche Applied Science, and Qiagen. It is interesting to note in the chart below, from another BioInformatics report entitled “Building Brand Equity in the Molecular Biology Market”, that all three of these companies have a dominant brand equity position in the molecular biology market. 

Source: “Building Brand Equity in the Molecular Biology Market”, BioInformatics LLC

Younger lesser-known companies should carefully evaluate a decision to enter the real-time PCR reagent market as brand name and company reputation play a key role in convincing scientists to try products not previously used before. Recently, in a reported entitled “Marketing to Life Scientists: A Psychographic Analysis”, BioInformatics reported that “brand name /company reputation” was the third most influential factor in getting a scientist to purchase a product never used before, with free product sample for evaluation and recommendation from co-worker or colleague being first and second respectively. 

Future Directions for Real-Time PCR Instrumentation and Reagents:
Three primary trends will potentially shape the future of the real-time PCR instrumentation and reagent market. 

·         As real-time PCR technology becomes more widely adopted within the life science research tools market prices for instruments in the mainstream market will continue to drop, potentially favoring large suppliers willing to sacrifice margin for market share, much as Dell has done recently in the personal computer market. 

·         At the other end of the market vendors will continue to develop and market specialized real-time instruments in order to attempt to maintain margins. The recent introduction of the 7900HT Fast Real-Time PCR system by Applied Biosystems is a prime example of this trend. The instrument reduces PCR thermal cycling times up to four times, while utilizing a traditional 96 well plate format.

·        Real-time PCR technology will continue to penetrate the applied markets beyond life science research tools, such as detection of bio-terrorism and clinical diagnostics. Cepheid has already launched real-time PCR products in both of these applied markets today. Through collaboration with Northrop Gruman, the company’s GeneExpert® system is used to detect the presence of anthrax from air samples at US Postal Service sorting centers nationwide. Cepheid also distributes two out the four FDA approved real-time PCR diagnostic tests with their IDI-Strep B™ Assay and IDI-MRSA™ Assay (Source: Association for Molecular Pathology Directory of FDA-Approved Molecular Diagnostic Tests).

o        As validation of this emerging trend, Applied Biosystems reported on their Q3 2004 conference call that bio-terror products were a main driver of YOY growth in the company’s real-time PCR segment.

The analysis above demonstrates how stratagem’s market research and consulting services can help your company make better business decisions.

Contact stratagem today for a free consultation for your business at 720-840-6060 or garycarter@stratagem-mr.com