Markets, strategy and brand management
Tecan is the market leader in laboratory automation. It enables customers in the life science research and diagnostics sectors to put seminal discoveries into practice in their daily business thanks to laboratory instruments and comprehensive automation solutions. Tecan also offers solutions for various applied markets such as forensics, environmental and crop research, the food industry, the cosmetic industry and veterinary applications. Automation solutions include instruments, software packages, numerous configurable modules, special application know-how, regulatory expertise as well as consulting, service, plastic consumables and increasingly (for selected applications) the corresponding reagents.
BUSINESS SEGMENTS & MARKETS
The name Tecan is synonymous with a level of reliability that has, through countless tests and over many years, become one of the foundations of numerous research institutes and clinical laboratories. Laboratories throughout the world can rely on the consistent excellent quality of Tecan products they use to analyze thousands of blood, cell and tissue samples every day.
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, for example. 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. For selected applications, Tecan also increasingly offers integrated total solutions, including reagents and functional consumables.
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 – mainly diagnostics companies – under their own names as total solutions together with the relevant test kits. 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. 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 60 billion and is growing at an annual rate of 3% to 5%. This is the largest sales market for Tecan, accounting for approximately 60% of sales. The market structure in general is dominated by the share of sales generated by diagnostics companies through the sale of reagents and consumables. These recurring sales make up about 80% of the market volume, while the remaining 20% of sales are generated with instruments. However, the instruments are only partly developed and produced by the diagnostic companies themselves, with some being outsourced to specialists such as Tecan. In this sub-sector of the market segment, which has a value of about USD 3.5 billion, Tecan supplies diagnostics companies with automation solutions through its Partnering Business segment. The Partnering Business segment generates more than 90% of its sales in the diagnostic mar- ket. Customers then market these instruments under their own name, combined 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. Just over a third of sales in the Life Sciences Business are generated in regulated markets such as clinical diagnostics. 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 Interna- tional in 2014. Other fast-growing areas of the regulated diagnostics market that Tecan serves directly with automation solutions include molecular diagnostic applications, such as in gene sequencing. The Fluent Gx platform variant was developed for the automation of laboratory workflows in regulated markets.
The life science research market is valued at more than USD 55 bil- lion and is comparable to the diagnostics market in terms of the aver- age annual growth rate. However, there is a difference in its market structure; some two-thirds of sales come from instruments and only about 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 more than USD 3 billion. The automated Liquid Handling & Robotics product group, which is the largest product area at Tecan, generates approximately half of the sales in this market segment. Detection instruments, the second largest instrument group at Tecan, accounts for more than one-quarter of the market segment.
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 both markets, the aim is to further consolidate the core business and gain market share through launching new products and expanding geographically. In Life Sciences, the market-leading position in laboratory automation will be further increased primarily by launching innovative new products. Tecan has introduced next-generation platforms in both of its largest product lines and continuously introduced additional platform variants in recent years. An example of this in the year under review was Fluent Gx for customers in clinical diagnostics and other regulated markets. Several new launches are also planned for 2019. In the in-vitro diagnostics market, some of the instrument development and production will be outsourced to specialistslike 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 it leverages its proprietary platforms, technologies and service footprint to expand market share. In the components business, part of the Partnering Business, Tecan aims to expand its leading position for liquid handling components. Various customers are launching new instruments and 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 late 2015 and Pulssar Technologies S.A.S in early 2018 further expanded the Partnering Business and added new corporate customers in in-vitro diagnostics and a well-stocked pipeline of new development projects. Both companies are now an integral part of the Group and have each been merged with a Tecan company. Similar opportunities exist in the Life Sciences Business, such as in the area of instruments for life science research – a rather fragmented market segment with scope for consolidation.
- 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 acquisition of SPEware in 2016 – since renamed Tecan SP – enables the Company, for example, to offer dedicated instruments in the area of sample preparation for mass spectrometry. As part of its comprehensive genomics strategy, Tecan is also working on developing its own dedicated automation platforms for this area of application.
- 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 select applications in both markets so as to be able to offer better matched or even fully integrated solutions. For Tecan this includes instruments, software, applications support and, as a crucial element for selected applications, reagents and consumables for the platforms. Tecan now offers a broad portfolio of consumables, most of which are pipette tips used on liquid handling platforms. In future, however, Tecan will focus even more on fully integrated solutions for selected applications rather than acting just as a pure instrument provider, which was the focus of the business in the past. Tecan has a long tradition of providing instruments in various areas of application, but has not benefited from recurring revenue from the use of reagents on these platforms. Through several acquisitions, the company now offers complete solutions in three areas:
- Immunoassays for the specialty diagnostics market segment
- Sample preparation for mass spectrometry
- Sample preparation for gene sequencing (NGS, next-generation sequencing). Access was gained to this new market segment in the year under review with the acquisition of NuGEN Technologies.
The offering for these three areas can be expanded going forward, while also adding new applications.
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 transfor- mation processes.
The 21st century has often been described as a century of biological discovery and development – the century of biology. It is estimated that, every six months, the world’s laboratories generate more biolog- ical data than has ever been created in human history. The ensuing discoveries and their applications will change human life forever.
For example, the new findings are being used with increasing success in drug development. In the US, the Food and Drug Admini- stration (FDA) approved 59 novel drugs in the year under review, breaking the record of 1996. This followed a sharp increase in new registrations in the previous year. The new drugs that have been approved in the last two years include various anticancer drugs, some with entirely novel mechanisms of action for treatment, such as the first products based on gene therapy approaches. One of these groundbreaking drugs, for example, genetically modifies immune cells taken from the patient’s blood so that they recognize specific tumor antigens and destroy cancer cells.
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. Numerous novel drugs were approved in recent years, many of which are based on previously unused modes of action. 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 one of the world’s largest healthcare markets, although its spending per capita is still 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.
Genetic testing for consumers
Another trend that Tecan is benefiting from is the fast-growing market for genetic testing carried out directly for consumers. This development was made possible by the rapidly declining costs of gene sequencing and other technologies. In the US in particular, this segment has already become a highly relevant market, with approximately 12 million samples tested in 2018. Areas of application include, for example, tests for inheritable diseases or genealogical research. Various work steps are being automated in large laboratories using Tecan instruments.
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 to 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 specialists, even in strictly regulated areas such as clinical diagnostics.
Tecan has particular technical 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.
Over and above the technical expertise, Tecan also has extensive application know-how in the various disciplines of life science research and clinical diagnostics. One of the Company’s unique selling points and core competences is its ability to bridge the gap between research and the strictly regulated diagnostics market for its customers and partner firms. Various new technologies are no longer applied solely in a research context, but increasingly also in diagnostics. Two such technologies that have expanded into diagnostics are next-generation sequencing and mass spectrometry, both of which were originally used exclusively for research purposes. Via its Life Science Business, Tecan already collaborates with research institutes and companies in the early phases of such technologies and supports them in automating them. As a result, the Company gains application knowledge and the required technical modules early on. When these technologies reach a later stage and are to be marketed worldwide as standardized, approved tests, Tecan can then bring this expertise to the development of dedicated automation platforms through partnerships with diagnostics companies and significantly reduce time to market. The steady increase in regulatory requirements presents a major challenge, in particular for smaller companies and companies that are traditionally oriented only toward the research market. Tecan can benefit from these growing market barriers, as it has built up these core competences and invested in regulatory compliance for years.
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 8.6% 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.
An overview of the various patents has been published on Tecan’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. Tecan has also arranged for the protection of key branding elements of the new design that has been launched or has applied for brand registration.
Tecan is a leading brand in laboratory automation. It stands for the highest standards, quality, reliability and innovation. These are decisive success factors for building up and strengthening a brand in this sector on a long-term 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.
With the “Every lab. Every day. Empowered.” vision, Tecan aims to maintain a global presence with outstanding technologies, products and support.
In fiscal year 2017, Tecan again carried out a comprehensive inter- national customer survey. It found that the vast majority of customers were satisfied with Tecan’s products and services, with most describ- ing themselves as “completely satisfied” or “very satisfied”. A large proportion of customers would also recommend Tecan to someone else – both within and outside of their own organization. In addition to the largely positive results, the survey also identified room for improvement, which Tecan addressed in the year under review with appropriate measures. Previous surveys also found that Tecan is synonymous with solid reliability. 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.
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. To further develop customer focus, continuous assessment of customer satisfaction was set up in the year under review, as a further key pillar of the customer satisfaction program. In addition to the regular comprehensive survey, customers are also surveyed directly after transactions, service interventions or at set intervals as of 2018. This feedback forms the basis for ongoing improvements. Tecan has a clearly identifiable visual signature, including the five- color barcode. The red dot reinforces the design of the Tecan cor- porate logo and appears as a unique sign-off at the end of headlines and after the product name on instruments. The transparent box is a feature of Tecan’s visual identity that lends a touch of refinement to its brand presentation.
To strengthen its brand identity, Tecan had previously introduced a uniform image for the various product platforms in 2014. A charac- teristic curve is used as a graphic element to link the various instrument platforms. Individual modules also carry the consistent industry design and are therefore easily identifiable as Tecan products.