I recently decided the time was right for a general check-up at the doctors. Following 20 minutes struggling with an automated phone system, and after typing in my date of birth and phone number multiple times, before being offered an appointment at 11am on a Wednesday, I gave up. Patient waiting times grabbed headlines earlier in the year, after data collected by the Labour party revealed that in 2015 14.2m people waited a week to see their doctor and many did not get an appointment at all. Booking a GP's appointment, more often than not, is a pretty painful experience - one that's exacerbated by the necessity for a blood test, which could take up to three weeks to come back and thus require another lengthy automated telephone experience.
The need for better medical testing and diagnostics is crucial, not just for patient experience, but for reducing pressure on GP surgeries and for helping save lives through faster diagnosis. The need for instant data generated at the point of care (in the GP's surgery or at home) presents a significant opportunity for companies operating in the diagnostics space. At present, some of the big players, such as
The need for instant data generated at the point of care presents a significant opportunity for companies operating in the diagnostics space
Small-caps in the mix
In the UK, several smaller players are hoping to take a slice of this expanding market.
New kid on the block
Point-of-care and early diagnosis of cancer is incredibly important in terms of the implications for future treatment. Early detection gives patients more treatment options and the potential to avoid the ordeal of chemo- or radiotherapy. Oncimmune (ONC) owns heavily patented technology, approved in the US, which has been proved to identify lung cancer up to four years before symptoms reveal themselves. Lung cancer is one of the biggest killers in the western world and survival rates are shockingly low, mainly because diagnosis is often delayed. Since joining Aim in May 2016, the group has increased its salesforce in the US to more than 140 distributors and signed up research agreements to assess new technology for ovarian and liver cancer diagnostics. The lung product is currently undergoing clinical trials with NHS Scotland and the company has also developed a diagnostics point-of-care kit which it aims to sell across Asian markets.
Improvements in cancer diagnostics have also allowed for better personalised treatment and greater efficiency when prescribing therapies.
Improvements in understanding of genetics is presenting new and exciting opportunities
Genetics make a difference
As in the wider pharmaceutical and biotechnology markets, improvements in understanding of genetics is presenting new and exciting opportunities in diagnostics. Doctors can now identify patients who have a greater risk of contracting a disease based on their genetic profile. Angelina Jolie became a famous case for the use of genetics in diagnostics when, in 2013, she underwent a double mastectomy after discovering she had an 87 per cent risk of contracting breast cancer due to a faulty BRCA1 gene.
Genetics can be used to test for a wide range of illnesses. Aim-traded group
Providing the tools
Of course the big players in the industry are also busy innovating in the point-of-care market, but their main focus remains in improving diagnostics in central labs. For UK investors, the opportunity to benefit from innovation by the larger players has been provided by companies such as
A black mark on the industry
Theranos is one of the highest profile companies aiming to improve disease detection. The group was founded by Elizabeth Holmes after her uncle died from skin cancer, which was only detected after it had spread to his brain and bones. Theranos aimed to use its 'nanotainer' technology to promote regular blood testing to help individuals spot potential illnesses before symptoms presented themselves. The nanotainer is a tiny glass vial which allows for regular, unobtrusive blood testing. It was sold via Walgreens pharmacies and Theranos played a role in changing US legislation to allow it to be purchased without having to consult a doctor first. Investors clamoured to buy in to the Theranos vision and the group reached a market value of $9bn (£6.8bn) by early 2015, just two years after plans for the company were more widely publicised.
However, Theranos has been marred in scandal since October 2015 when the Wall Street Journal published a damning report stating that the company was not in fact using its own technology to monitor blood samples, condemning it "at best fundamentally flawed and at worst unsafe". Theranos has continued to grab headlines since then, casting a shadow across the diagnostics market.
Abcamis in a pretty unique position in the pharma and biotech world, in that it has the ability to benefit from growth across all sections of the market
Abcam is in a pretty unique position in the pharma and biotech world, in that it has the ability to benefit from growth across all sections of the market, without the risk traditionally attached to clinical trials. For this reason we think it's an excellent addition to investors' portfolios and rate the shares a buy, despite their lofty valuation.
Oncimmune is yet to grab investor interest since its Aim admission earlier this year, yet it owns exciting technology which is already being sold in the US - the largest healthcare market in the world. Without any current earnings it's hard to value the company based on normal fundamentals, but for those looking for innovative options in the diagnostics space, it might be worth a punt.
EKF Diagnostics has been struggling and, while the market it operates in is growing, its main competitors are the behemoths of the industry. Without any real innovation it's hard to see how EKF can compete.
Genedrive is also in a difficult position, with many larger competitors in the infectious disease diagnostics market. Despite the product launch in India two years ago, sales have failed to take off and the sudden departure of the group's chief executive in 2015 didn't do much to improve sentiment for the shares.
Today there is a call for more diagnostics generally, more day-to-day at the point of care and more complex tests in central laboratories. EKF provides an example of point-of-care diagnostics, working closer to the patient for fast turnaround of results. These developments in the diagnostics market allow a more streamlined treatment pathway for a wide range of diseases and conditions, for example anaemia, diabetes or respiratory diseases. Oncimmune and Angle provide more cutting-edge technology. Using the genetic characteristics of tumours for diagnostics fits more with how healthcare is moving towards personalised medicine.
Genetics is playing a big role in diagnostics, either by identifying patients at risk of contracting a disease or by assessing how a patient metabolises a drug. Previously, physicians would prescribe a drug and if it didn't work move on to the next one. This trial and error technique was not the most efficient and has been improved by better diagnostics. Today doctors can assess which treatment options may work best, before they are prescribed.
Oncology diagnostics and treatment provide a clear example of how genetics are improving patient outcomes. Early research was in breast cancer, but scientists now know that all cancers have individual genetic profiles. Tracking how a cancer mutates is going to become part of how cancer is treated and companies are beginning to develop drugs because their exact use in specific patient populations can be identified by improved diagnostics. Improved diagnostics will subsequently result in better treatment options for patients. In short, diagnostics has caught up with the rest of the pharma space.
Julie Simmonds is a healthcare analyst at Panmure Gordon