Market Analysis Summary
Medical diagnostics has the greatest existing opportunity from an industry size perspective as well as the degree of match between existing needs and AgaMatrix's technology capability. The sub-segments in this market that the AgaMatrix product line is addressing in the short term (within the next two to three years) are the large, high-margin consumer blood glucose monitor market and the now quickly growing hospital point-of-care device market, i.e., customers are makers of these devices. Even by a conservative estimate, the value proposed by AgaMatrix to the glucose market alone would be enough to sustain a viable standalone venture. However, given the minimal incremental effort that would be needed, we will deliver the product to both sub-markets for the benefit of augmenting and diversifying our revenue streams.
The market that we are concerned with consists of advancing medical devices and technologies that allow healthcare professionals and home users to acquire medical diagnostic data such as blood glucose levels (e.g., for diabetics) and various other blood chemistry data (e.g., for emergency care situations) instantly, easily, cheaply, and accurately without having to send blood samples to centralized lab facilities which have longer turnaround times and are more costly. The conclusion that this market should be the company's initial focus is substantiated by the fact that it has all the relevant characteristics of a market we found to be desirable. These characteristics are discussed below:
- Large existing, robust, high-growth market.
- Converging market forces sustaining industry growth.
- Clear, immediate need for benefits provided by technology.
- Technology delivered would be strongly positioned to participate in emerging trends.
In the medium and long term (three to four years from now), AgaMatrix aims to address needs in the emerging electrochemical immunoassay and implantable biosensor markets.
The Home Blood Glucose Monitoring is the largest, immediately addressable market, over $4.1 billion in size today and growing 13% CAGR. Based on preliminary discussions with several potential customers, AgaMatrix believes that a significant portion of this market can eventually be captured. We expect device makers to pass on the modest costs of AgaMatrix's technology through the high margins currently enjoyed by the consumable reagents (test strips) they sell. While AgaMatrix technology does not directly improve the test strips themselves, potential customers will incorporate the cost of such technology as part of the total solution cost; development costs of their test devices are already paid for in this way. Diabetics generally are not price sensitive to test strips since insurance usually covers the costs of the strips.
4.1 Market Segmentation
Home Blood Glucose Monitors
AgaMatrix will initially target home blood glucose monitoring device makers. One primary dimension along which these device makers compete is the reduction of pain and discomfort from testing that involves pricking fingers to extract blood. By improving device sensitivity, AgaMatrix allows blood glucose device OEMs to reduce the required blood sample size enabling the use of less painful blood extraction mechanisms, a major competitive advantage for such devices according to customer surveys. In one foreseeable application, diabetics would be able to painlessly extract a small amount of blood using automated AgaMatrix-enabled microneedles to test blood glucose levels.
Hospital Point-of-Care Blood Analyzers
AgaMatrix will also initially target the hospital blood analyzer market ($300 million in 2001, 25% CAGR) by providing increased accuracy and increased types of tests for these devices. Based on a bottom-up analysis of end user (physicians) and device maker surveys, we believe market penetration for these players has been hindered by the relatively low accuracy (when compared to tests done by centralized labs) and by the limited number of available tests. Physicians are thus forced to wait several hours for results from blood sent to centralized labs, and only use portable blood analyzers in acute emergency situations.
AgaMatrix solves the problem of low accuracy for portable hospital blood analyzers, allowing physicians to use portable analyzers in more situations, thus increasing quality of care, increasing patient turnover, and reducing hospital costs. Our technology could also help boost the yield on current cartridge products, eliminate future cartridge production steps, and provide a broader menu of tests on portable devices, delivering a suite of offerings comparable to traditional large and expensive lab equipment analyzers.
Minimally Invasive and Implantable Glucose Monitors
Alternatives to finger-pricking devices currently include devices that continuously monitor blood glucose levels. The problem with these and similar "minimally invasive" devices is that, according to a report by Merrill Lynch, they are not sufficiently accurate (>30% error, outside bounds of FDA-approved primary glucose monitoring devices) to be used for any purpose other than a supplementary aid to traditional finger-pricking methods. Also, they cannot be used continuously for an extended period of time. AgaMatrix's value proposition of dramatically improving accuracy and usage duration is clear.
With almost all of the major players trying to develop an "artificial pancreas," commercializing implantable glucose biosensors that can regulate an implanted insulin pump has been the Holy Grail for the industry. The artificial pancreas allows diabetics to lead a near normal lifestyle without the constant pain and inconvenience of finger pricking and insulin injections. One of the key challenges in the development of implantable sensors is eliminating the use of toxic chemicals currently needed to correct for cross-sensitivity effects that reduce the accuracy of the sensor. AgaMatrix's technology minimizes these effects without having to use toxic chemicals, thus eliminating a key barrier to the development of complete implantable glucose monitoring and insulin pump systems. Such breakthroughs could lead to adoption of implantable devices on the order of today's cardiac pacemaker. These large players have expressed initial interest in using AgaMatrix's technology in these next-generation implantable devices.
Immunoassays are tests that measure biological and chemical species associated with the body's immune system. Currently, the majority of immunoassays are performed via color-changing tests strips (for simple non-critical applications like home pregnancy tests), or via time-consuming laboratory procedures for more critical tests (like cardiac markers). In hospitals and clinical labs alone, millions of these immunoassays are performed daily. These laboratory assays are based on complicated optical and radioactive detection instrumentation. Leaders in the industry are developing electrochemical immunoassays because electrochemical technologies are generally recognized to be more cost effective, robust, and possibly faster than optical methods given the fact that no complicated sample pre-treatment processes are needed. One of the main challenges to commercializing this new technology is achieving the low detection levels needed for such measurements. AgaMatrix's technology can be eventually embedded in these devices to overcome the sensitivity issues that currently hinder their commercialization.
4.2 Industry Analysis
The medical diagnostics industry is prone to disruptions because of technological innovations. We have found the following current industry needs are immediately addressable by AgaMatrix's technology based on a survey of potential customers in the blood glucose and Hospital point-of-care (POC) market:
Existing Market Need
End-User Motivation for Market Need
Bottom Line Value of Solution to Device Makers
Use of blood from less painful areas.
Lack of treatment compliance because diabetic patients are unwilling to use the devices too physically painful to use regularly.
Sample size is a critical dimension device makers compete on. Solution provides a competitive advantage.
Need for higher accuracy for hospital POC blood chemistry analyzers.
Desire to use point-of-care devices instead of central labs for emergency situations in order to instantly get life-critical diagnostic data.
Device makers increase penetration in existing hospital markets.
Need for larger test menus offered by POC devices.
Health professionals will often not use point-of-care devices unless all the required tests are available in one device/cartridge solution.
A competitive advantage increasing market share since this is an end-user valued differentiating feature.
Near future market needs prompted by emerging trends
We have also identified a number of needs for which AgaMatrix is aligned to be a major technology provider. For the sake of conservatism and maintaining a focused company positioning in the healthcare arena, we are not pursuing available applications in environmental monitoring, industrial processing, and military biological/chemical warfare agent detection. Instead, we consider our primary expansion markets to be other segments in the healthcare market including the immunoassay and implantable/minimally invasive biosensor markets, with some initial penetration into the latter in Y2 and Y3.
Motivation for Trend
Development of minimally-invasive and ultimately of implantable glucose biosensors.
Addresses compliance issues in patients having difficulty using current devices.
Toxic chemicals required to overcome interference issues prevent implantation.
|Conversion of existing immunoassays to electrochemical biosensor-based immunoassays.|
Eliminates time/equipment intensive sample pre-treatment steps.
Biological elements are in trace amounts too small to be detected. Devices are not sensitive enough.
4.2.1 Competition and Buying Patterns
Based on a prior art search and our cross-disciplinary technology expertise, we believe we are the only solution provider of our kind to medical device manufacturers. However, AgaMatrix indirectly competes against other biosensor-enhancing technologies. Rival technologies include advances in physical designs such as improvements in chemical reagents used in these devices and the integration of permselective membranes that are intended to materially filter out interfering chemicals from contacting the sensor. We have identified the research efforts of the following companies as potential competition due to their efforts to solve the same problems, albeit through very different approaches.