Market and strategy
Tecan is a pioneer and has been the market leader in laboratory automation for 40 years. 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 - from basic science to prevention, diagnosis and treatment of diseases. 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 innovation and 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. It is only through automation that complex biological work processes become robust and human error sources are eliminated. 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 appropriate reagents and functional consumables.
UNIQUE POSITION WITH TWO STRONG PILLARS
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 that complement each other and achieve a position for that Company that is unique in such depth on the market. Tecan can offer the complete spectrum for different customer groups, from benchtop devices for basic research to sample-to-result solutions for in-vitro diagnostics companies.
The life science research area is highly innovative and is where most new technologies are developed and initially employed as a matter of routine. Traditionally Tecan has a strong position in life science research thanks to its own end-customer business, covering a broad range of applications with modular and configurable instrument platforms.
Many of these technologies here also have great potential for diagnostic application. In the last few years, for example, next-generation sequencing has proved to be of great benefit, such as in identifying inheritable diseases, in cancer diagnostics or in non-invasive prenatal diagnostics.
New types of tests are normally carried out after an initial transition to diagnostic application, at first in large or special laboratories. As demand rises and the processing of many samples is centralized in a small number of locations, automation solutions are mostly required for a high throughput. As in life science research, most individual work steps of a workflow are separately optimized and carried out in succession. As lab developed tests, the test procedures are internally developed and validated by the laboratories in this regulated market segment. The application is scaled and industrialized. Tecan has already gained significant experience in new types of technologiesand can now make this available to clinical laboratories. Through its life science business, Tecan often has application-specific platforms that are permitted for use in the regulated area. For example, the Fluent Gx platform variant has been successfully registered as a Class I medical device in the US. Its specific functionalities facilitate greater process security, traceability of samples and stricter user management.
For further transition to routine clinical application, diagnostics companies mostly develop a range of special tests based on new kinds of technologies. Together with these tests, the automation platform specially designed for this purpose is then offered by diagnostics companies as a complete solution. This type of solution is very popular, even with less specialized laboratories. For companies in the in-vitro diagnostics sector, Tecan is the preferred partner for these automation systems through the partnering business. For example, Fluent Gx can be adapted for a partner company’s specific test and workflow. A diagnostics company can benefit from Tecan’s expertise and platform availability, leading to cost-efficient development and quicker market entry. Based on this strategic orientation, collaboration with different partners enables Tecan in turn to benefit from the growth potential in a range of different types of technologies and tests for numerous therapeutic areas and other special parameters.
As a technology becomes increasingly mature, demand from decentralized clinical laboratories for the new types of test procedures also rises, such as in hospitals. These laboratories typically have other requirements for a total solution: The tests should be developed by a diagnostics company as ready-made reagent kits and the licensing authorities should have granted a license. Furthermore, the dedicated automation platform designed for a specific functionality should be very easy to use and all work steps necessary for carrying out the test covered in one instrument (sample in result out).
Here the sample volume is normally lower, therefore less value is placed on a high throughput. However, other requirements often take priority. For example, particularly urgent cases should be rapidly processed by loading samples into the instrument on the fly, allowing for prioritization. Despite these different requirements, the fundamental technologies are very similar for the automation of work steps compared to previous solutions. By choosing to partner with Tecan as OEM customers, diagnostics companies get access to all the Company’s previously developed technologies and platforms, all modules and software solutions as well as its expertise in system integration and regulatory and quality-related processes.
At the moment, different technologies are in a transition phase towards increased deployment in in-vitro diagnostics, such as next-generation sequencing (NGS), mass spectrometry or the use of liquid biopsies, such as for cancer diagnostics.
MARKET DEVELOPMENT AND STRUCTURE AS THE BASIS FOR CORPORATE STRATEGY
Tecan’s two main markets are diagnostics and life science research.
The majority of end-users originate 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. Research and development as well as the Operations division are organized across the Group in order to better leverage synergies through various locations.
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 market. Customers then market these instruments under their own names, combined with their own reagents as a total solution, such as hospitals, major diagnostic laboratories and blood banks.
In its Life Sciences Business segment, Tecan distributes open automation platforms, mainly to major diagnostics laboratories. For example, these extract the DNA from patient samples for subsequent molecular diagnostic tests or prepare blood samples for next-generation sequencing. ELISA technology is another popular application, for example, to determine specialty diagnostic parameters, such as evidence of rare infectious diseases or to verify certain hormone levels. In this specialty diagnostics area, Tecan has also been offering a portfolio of test kits as well as dedicated automation platforms since acquiring IBL International in 2014. Overall, just over a third of sales in the Life Sciences Business are generated in regulated markets such as clinical diagnostics.
The life science research market is valued at more than USD 55 billion and is comparable to the diagnostics market in terms of the average 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 generates approximately half of the sales in this market segment. It also represents the largest product area for instruments at Tecan. Detection instruments, the second largest instrument group at Tecan, account for more than one-quarter of the market segment.
SPECIAL FOCUS ON THREE APPLICATION AREAS
Tecan covers a large number of different application areas thanks to its two divisions of Life Sciences Business and Partnering Business. Special focus is placed on three applications to achieve continued growth that outstrips the market average. Particularly strong growth drivers form the basis of them:
- Protein analysis, particularly workflows of mass spectrometry
- Cell and tissue analysis
These three applications are generally used in life science research as well as in in-vitro diagnostics. Both business segments therefore offer growth potential for Tecan.
Genomics is the systematic analysis of the genome, e.g. a cell, tissue, organ or complete organism. A genome is the complete DNA sequence of an organism, including all its genes. Genomics is now a basic application in life science research. In in-vitro diagnostics, for example, techniques of molecular diagnostics are used to prove the DNA of a pathogen in the blood. The whole genomics market has since grown to more than USD 20 billion. Some of the subsegments are developing here at an average single-digit rate, others such as next-generation sequencing (NGS) at a double-digit rate.
NGS workflows are composed of multiple complex steps, most of which need to be performed prior to loading samples in the actual sequencer. The crucial step prior to sequencing is library preparation, which is a particularly attractive market segment and a focus of Tecan’s area of work. But even with other work steps of the various genomics workflows, starting with the basic step of DNA extraction, Tecan is extremely well positioned.
All proteins in an organism, tissue or cell are called proteomes. Unlike with the genome, the composition of a proteome changes all the time. These changes are crucially affected by the environment and diseases, but also by drugs, for example. In order to research and analyze proteins, a range of techniques is available, notably mass spectrometry.
The market for all areas of mass spectrometry is worth around USD 5 billion. The sub-segment of sample preparation, which is particularly attractive for Tecan, has grown at an average rate in the high single-digit range to some USD 0.7 billion. The key growth driver here is the increasing number of biopharmaceuticals, a class of compounds produced using biotechnology resources and genetically modified organisms. Analyses based on mass spectrometry are also increasingly applied in in-vitro diagnostics in addition to their traditional use in life science research.
The focus of Tecan’s work area is mainly on sample preparation for mass spectrometry, but also on analysis methods, such as immunoassays. Tecan is also extremely well positioned for other common work steps, such as protein purification.
Cell and tissue analysis
Cells are independent biological functional units and the starting point for many studies. Biological processes can be understood and clarified at cellular level thanks to cell analysis. Researchers offer trials a more realistic model with cells or groups of cells for transferring findings on organisms. For example, cell assays are increasingly used to develop new drugs.
The size of the overall cell analysis market, i.e. the various areas of cell biology and imaging, is estimated to be around USD 10 billion. Here market growth is in the mid-single digit percent range.
In cell analysis, Tecan offers innovative detection and imaging solutions, but also a broad portfolio of automation solutions for different work steps.
Through its partnering business, Tecan also supplies leading diagnostics companies in the areas of tissue analysis for cancer diagnostics, flow cytometry and other applications.
Strategy for profitable growth
The structure of both main markets of life science research and in-vitro diagnostics plus the core applications of genomics, protein analysis and cell analysis form the basis of the corporate strategy. It follows three vectors to ensure sustainable profitable growth.
- In both main markets, the aim is to further consolidate core business and gain market share by 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 innovative next-generation platforms in both of its largest product lines and continuously introduced additional platform variants in recent years. Several new launches are also continually planned for the forthcoming years.
As already implemented in the last few years, it is also intended to further expand market share in the core business of both business segments through acquisitions. The addressed market segments are still relatively fragmented and therefore offer opportunities for further 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. One example for implementation of this strategy is the adoption of SPEware in 2016 (now knownas Tecan SP). Since then, Tecan has been able to offer its customers dedicated instruments in sample processing for mass spectronomy. 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 also wants to supply more reagents and consumables for select applications 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. For a long time, Tecan has been offering a broad portfolio of consumables, most of which are pipette tips used on liquid handling platforms. 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 and functional consumables on these platforms. Thanks to several acquisitions, the Company can now offer complete solutions in three areas:
- Immunoassays for the specialty diagnostics market segment
- Sample preparation for mass spectrometry
- Sample preparation for next-generation sequencing (NGS).
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 depict far-reaching social and technological changes. The markets in which Tecan is active are positively influenced by a number of megatrends. They also result in increased sample volume and a significant rise in tests carried out. This requires higher laboratory productivity. The tests must be reproducible and accurate, the processes standardized and robust. Strict regulatory standards must also be complied with. Tecan has systematically focused its corporate strategy on these markets and requirements and can therefore obtain significant benefits from these transformation 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 biological 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 Administration (FDA) approved 48 new drugs in the year under review. Last year, new registrations had risen to a record 59. The new drugs that have been approved in the last few 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 ground-breaking 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 significantly below that of 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 food industry, special products are being developed that counteract disorders of the intestinal flora. In these laboratories too, state-of-the-art automation solutions from Tecan improve efficiency.
Genetic testing for large parts of the population and consumers
Another trend that Tecan is benefiting from is the fast-growing and increasingly popular market for genetic testing. This development was made possible by the rapidly declining costs of gene sequencing and other technologies. In various research programs, some of which are state-funded, the DNA of several million people is to be analyzed to increase the diagnosis rate of rare and sometimes inheritable diseases. Analysts assume that in future, most people in developed nations will undergo gene sequencing at least once in their life. At the same time, a highly relevant market segment has emerged, mainly in the US, where millions of consumers on the internet apply for genetic testing, for example, tests for inheritable diseases or for genealogical research. Various work steps are being automated in large laboratories using Tecan instruments.
Tecan’s success is based on core competencies 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 competencies in system integration as well as 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 competencies 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 typically range from milliliters to microliters. Some applications even require the handling of even smaller quantities, for which Tecan can also provide technologies. 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 competencies 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 can take place, for example, with fluorescence, luminescence, absorption methods or through imaging technologies. 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.
Beyond technical expertise, Tecan has significant application know-how in the various disciplines of life science research and clinical diagnostics. One of the Company’s unique selling points and core competencies is its ability to bridge the gap between research and the strictly regulated diagnostics market for its customers and partner firms. 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 competencies and invested in regulatory compliance for years.