Markets, strategy and brand management
Tecan is the market leader in laboratory automation. The Company provides the life science research and the diagnostics industry with laboratory instruments and comprehensive automation solutions. Tecan also offers solutions for various applied markets such as forensics, the food industry, crop research, the cosmetic industry and veterinary applications. Automation solutions include instruments, software packages, numerous configurable modules, special application expertise as well as regulatory and quality consulting, service, plastic consumables and (for selected applications) the corresponding reagents.
BUSINESS SEGMENTS & MARKETS
It is Tecan’s goal to enable efficient workflows in laboratories around the world. Everywhere researchers, clinicians and eventually patients rely on dependable, safe and fast results to improve health and the quality of life. Tecan’s solutions automate all types of repetitive work steps in the laboratory and make procedures more precise, more efficient and safer. They also pipette the smallest volumes of different fluids with optimum precision. By automating these work steps, laboratories can significantly increase the volume of samples they process, obtain test results sooner and ensure reproducible output. The instruments can also perform necessary work overnight without supervision, allowing laboratory personnel to evaluate the results or continue with the next steps upon returning the following morning. Tecan also offers a wide range of detection devices. This includes analytical devices such as microplate readers, which analyze reactions on a microtiter plate, as well as washers, which perform the washing and purification operations of a test procedure. In 2014, Tecan acquired IBL International, a leading supplier of microtiter plate-based immunoassays. IBL International has one of the widest ranges of specialty diagnostic tests for use in research and routine diagnostics.
The Company serves some customers directly, but is also a leader in developing and manufacturing OEM instruments and components that are distributed by partner companies under their own names. The Tecan Group can count on two strong pillars in the Life Sciences Business (end-customer business) and Partnering Business (OEM business) segments. The majority of end-users come from the diagnostics market, accounting for around 60 % of total sales. The needs of the diagnostics market are largely addressed via the OEM sales channel and, to a smaller extent, via the end-customer business. Tecan serves the life science research sector and the various applied markets largely under its own brand using its internal sales and service organization. Group-wide functions are combined in the Development & Operations division to better unlock synergies in research, development, procurement and production across different locations.
Market development and structure as the basis for corporate strategy
Tecan’s two main markets are diagnostics and life science research.
The volume of the diagnostics market exceeds USD 40 billion and is growing at an annual rate of 3 % to 5 %. Diagnostics companies obtain the majority of their sales, around 80 %, from reagent sales, while instruments generate around 20 % of sales. In the instruments market segment, Tecan primarily supplies diagnostics companies with automation solutions via its Partnering Business segment. Then the customers market them with their own reagents and as a total solution to institutions such as hospitals, large diagnostic laboratories and blood banks. In its Life Sciences Business segment, Tecan distributes open automation platforms, which are used, for example, by clinical laboratories for ELISA-based protocols to investigate blood samples for specialty diagnostics, such as evidence of rare infectious diseases or to determine certain hormone levels. These laboratories are able to obtain the reagents from a variety of suppliers. Tecan was not traditionally involved in the reagent segment of the diagnostics market and made the first step in this direction with the acquisition of IBL International.
The life science research market is comparable to the diagnostics market in size and average annual growth rate. However, there is a difference in its market structure; some two-thirds of sales come from instruments and only a third from reagents. Laboratory automation, a field in which Tecan is active, forms part of the instruments market segment and has a market volume of over USD 2 billion.
Strategy for profitable growth
The corporate strategy is based on the structure of the two main markets. It pursues three vectors to ensure sustainable profitable growth.
In the two main markets the core business will be further expanded and market share gained by new product launches and geographical expansion. In Life Sciences the market leading position in laboratory automation will be further increased by launching innovative new products. In recent years Tecan has introduced next-generation platforms in both main product lines, and more market launches will follow. In the in-vitro diagnostics market, some of the instrument development and production will be outsourced to specialists like Tecan. In this addressable market share, Tecan, through its Partnering Business, is the partner of choice in automation systems for many companies in the in-vitro diagnostics industry. Tecan supports these partners with their regional product launches of new instruments – developed and manufactured by Tecan – and the associated ramp up in serial production. Tecan has a well-stocked pipeline of additional opportunities and leverages its proprietary platforms, technologies and service footprint to expand market share. In the components business, part of the Partnering Business, Tecan aims to defend and expand its leading position for liquid handling components. Various customers are launching new instruments ramping up series production, which allows Tecan to further grow this business.
Market share in the core business will also be expanded through acquisitions. The acquisition of Sias AG in the year under review further expanded the Partnering Business and added new corporate customers in in-vitro diagnostics and a well-stocked pipeline of new development projects
Tecan is also aiming to build up further pillars in the instrument market for life science research. This applies in particular to areas beyond conventional, open and flexible robotics solutions for liquid handling and microplate readers. There are plenty of opportunities here, especially in dedicated instruments for sample preparation. In adjacent markets, Tecan sees opportunities to extend its traditional core business so as to grow faster than the overall markets for life science research instruments. This potential can be accessed both organically and through acquisitions.
The third vector focuses on expanding recurring revenues in Tecan’s two main markets, life science research and in-vitro diagnostics. The Company wants to supply reagents and consumables for both markets so as to be able to offer fully integrated solutions. For Tecan this includes instruments, software, applications support and, crucially, reagents and consumables for the platforms for selected applications. In future Tecan will focus more closely on fully integrated solutions rather than acting just as a pure instrument provider, which was the focus of the business in the past. With reagents, this growth will be achieved primarily through acquisitions. The purchase of IBL International was an important first step in this direction. This company expanded the Tecan offering by adding a key element – diagnostics for special parameters.
Tecan benefitting from various megatrends
Megatrends are long-term transformation processes that embody far-reaching social and technological changes. The markets in which Tecan is active are positively influenced by a number of megatrends. Tecan has focused its corporate strategy accordingly and will thus be in a position to obtain significant benefits from these transformation processes.
Positive effects on Tecan
Population growth and the aging population
Many diseases, such as cancer and cardiovascular diseases, are more prevalent in old age. Around the world, significant sums are being invested in the development of innovative drugs to improve treatments. In the USA, 45 new medications were approved in 2015 – the largest number for 19 years. The total volume of diagnostic tests that enable diseases to be identified is increasing and more tests are being carried out per person.
As many diseases are being treated with increasing success, the progression of these diseases can be observed over a longer time span. Tecan benefits from the increased demand for automated solutions both in life-science research and in the field of diagnostics.
High levels of investment in healthcare and life science research in emerging markets
Growing levels of prosperity mean that the demand in the area of healthcare is rising continuously. China, for instance, is now the world’s fourth largest healthcare market, although its spending per capita is only a fraction of that in many western industrialized countries. Hundreds of new hospitals are being built each year and the government is investing large sums in university research. Tecan supplies important automation solutions to upgrade laboratory infrastructure and is investing in its own marketing and service organization to serve more customers directly.
Development of targeted pharmaceuticals and use of companion diagnostics
The growing use of personalized medicine means that the biomolecular constitutions of individual patients are increasingly taken into account, allowing targeted drugs to be deployed. Tecan supports research into characteristic biological features (biomarkers) and the development of new active ingredients with automation solutions. Tecan solutions are also being used in companion diagnostics.
An explosion of knowledge in the field of biological correlations and molecular processes – using these findings in applied markets
Life science research is coming up with new findings at an ever quicker pace. These are being increasingly used not only in drug development and human diagnostics, but also in numerous applied markets.
Some examples: In forensics, criminals are being convicted based on DNA profiling.
The same techniques and procedures used in human diagnostics are being employed in diagnostics for farm animals.
In the area of foodstuffs, impurities are not tolerated and genetic modifications must be declared. In these laboratories too, state-of-the-art automation solutions from Tecan improve efficiency.
Tecan is a leading brand in laboratory automation. It stands for the highest standards, quality, innovation and reliability. These are decisive success factors for building up and strengthening a brand in this sector on a sustainable basis. A carefully selected and nurtured portfolio of several brands is of prime importance to Tecan and is a necessity if it is to differentiate itself from its competitors. The Company’s most important brand is the Tecan umbrella brand, followed by various brand names for product platforms.
In 2015, Tecan conducted a global survey of over 1,000 scientists to find out how the Company adds value to their work. The resounding answer from the respondents was the solid reliability that Tecan stands for. Every day around the world, Tecan products are used in key studies in life science labs, as well as in daily operations in diagnostic labs that are critical to human lives. Tecan provides a high level of reliability and responsiveness that many people have come to depend upon.
It also highlights the need to give more visibility to the OEM business, which comes under the Partnering Business segment. This will be more strongly anchored in the market under “Tecan Partnering”. Scientists and engineers have described to Tecan how they envision the Company empowering their life sciences and diagnostic applications. And by working together with Tecan, they can launch new, innovative solutions faster to market and better than they could on their own.
As a consequence, Tecan clearly formulated what it stands for and refreshed its brand. It started out by defining its new vision: Every Lab. Every Day. Empowered. This vision is not about Tecan, but is about its customers and partners, wherever they are around the world.
Next, Tecan looked at what the Company needs to commit to, in order to achieve its vision. Its promise to its customers is to be Always There For You. Tecan strives to be closer to customers and partners, to be more responsive, and help them achieve their goals by contributing with its expertise wherever it can.
The Company’s visual image was also redesigned, with the introduction of new graphic elements. The Tecan barcode, with its new range of colors, is the Company’s visual identity signature. The red dot reinforces the design of the Tecan corporate logo and appears as a unique sign-off at the end of headlines. The transparent box is a feature of Tecan’s visual identity that lends a touch of refinement to its brand presentation. With its new style of photography, the Company aims to express the positioning and the promise of the Tecan brand through the use of powerful images. Close-up and detail shots allow Tecan to focus on the things it values and the areas where it claims leadership.
To strengthen its brand identity, Tecan had previously introduced a uniform image for the various product platforms in 2014. The Fluent liquid handling platform introduced in the same year and the Spark detection platform introduced at the start of 2015 are linked by the graphic element of a characteristic grey curve. Individual modules also carry the new industry design and are therefore easily identifiable as Tecan products.
Patents and protection of intellectual property
Tecan makes above-average investments in research and development to maintain and reinforce its position as market leader. In the year under review, such expenditure amounted to 9.1 % of sales. Protecting its intellectual property is of major importance in ensuring that the development of new products and technologies gives the Company a sustainable advantage in the market. Tecan registers patents on relevant developments for the most important markets in a timely manner. The Company has several hundred patents in various patent families. Once again, numerous new patents were granted in the year under review.
Patents strengthen Tecan’s competitive position in a variety of products and applications. Numerous patents were also registered for the newly developed platforms in both product lines, the Fluent liquid handling platform and the Spark reader platform, some of which have already been granted. These patent registrations relate to a variety of basic inventions in the fields of both hardware and software that were made during the development of the platforms.
For example, the Fluent liquid handling platform’s patented Dynamic Deck™ has a modular structure over several levels and offers an extremely high processing capacity. This can be achieved because the platform’s work surface can be assembled from modular table-top elements, rather than a fixed surface. This enables the rapid, problem-free exchange of the individual elements to adapt the work process to specific applications for short periods. All of the additional devices required for work processes, e.g. cell-based applications, such as incubators, microplate readers and washers, can be flexibly integrated into a single, fully automated platform. If required, additional working levels can be added above or below the main working level and equipped with additional table-top elements.
During the development of Fluent, important inventions were also made in other areas and registered as patents. These made it possible to further increase the security, reliability and reproducibility of data offered by Fluent. The patented Adaptive Signal Technology™ precisely detects even small volumes enabling accurate monitoring of liquid, allowing for the use of smaller reagent and sample volumes for significant cost savings.
An overview of the various patents has been published on the Company’s website. The overall strategy to protect intellectual property includes patents, trademark registrations of the names of product platforms, registering designs to protect Tecan products from copycat products and protecting individual graphic software elements by means of design rights and trademark rights. In 2015, Tecan arranged for key branding elements of the new design to be protected and applied for brand registration.
Tecan’s success is based on core competences that the Company has systematically acquired and expanded over the years. Tecan’s overall core competence is the automation of complex processes in life-science research laboratories and in the strictly regulated diagnostics market. This overall competence is made possible by core competences in individual aspects of an application’s typical processes. In robotics, Tecan is the market leader in the automation of very diverse repetitive work steps that have to be conducted in laboratories. Its core competences cover both instruments and the software packages needed for their operation. The Company is an expert at handling various test formats, from microtiter plates through test tubes. Tecan offers a wide-ranging portfolio of different modules to automate applications and work processes, such as examining DNA or cells. To enable the entire workflow to be automated, Tecan also integrates third-party devices. Customers benefit from the enormous application know-how of Tecan’s specialists, even in strictly regulated areas such as clinical diagnostics.
Tecan has particular expertise in liquid handling and detection. Liquid handling involves the high-precision handling of fluids, even in the smallest quantities. This process includes the aspiration and dispensing of liquids with differing physical and chemical properties, such as reagents and blood (both whole blood and serum). The quantities of fluid involved can range from milliliters to microliters. Tecan also has the necessary sensor technology to monitor processes, for example to ascertain whether a liquid transfer has actually taken place. One of the Company’s particular competences is the ability to make these often highly complex processes easy to perform through user-friendly software with an intuitive user interface.
In the area of detection, Tecan specializes in analytical devices that use a variety of optical methods to detect reactions in a test procedure, such as the binding of an antibody to a target molecule. This may be done using fluorescence, luminescence or absorption techniques, for example. Tecan also uses patented technologies here to lower the detection limit or reduce diffused light and thereby increase the sensitivity. Tecan detection instruments are able to process varying wavelengths quickly and flexibly, even in parallel.
IBL International, acquired by Tecan in 2014, is a leading provider in the field of microtiter plate-based immunoassays, with one of the widest ranges of tests for specialty diagnostics to be used in research and clinical laboratories. It covers enzyme, radio and luminescence immunoassays for research and clinical laboratories, including a large selection of specialty assays for endocrinology (hormone measurement), neurodegeneration (e.g. Alzheimer’s disease), neonatal screening and assessing steroid hormones in saliva. Together with IBL International, Tecan can leverage its automation expertise and leading position within the immunoassay market for open instrumentation platforms and combine dedicated instruments with one of the widest ranges of immunoassays for specialty diagnostics.