6 min readImproved Understanding of End User Needs to Rejuvenate Bioinformatics Industry

Despite bioinformatics having failed to live up to the earlier hype surrounding it, there still exists a tremendous scope for its rapid commercial success. Pharmaceutical companies are struggling to increase their drug research productivity, introduce new drugs to the market and keep down product development costs. Here, bioinformatics and other IT tools have emerged as key tools to enhancing productivity and reducing the time involved in drug discovery.

Much of the blame for the bioinformatics industry’s disappointing performance has centred on the kind of solutions that it offered in the early days. Typically, these tended to be highly priced and catered to very few customers. Moreover, the solutions tended to target a specific step in the drug discovery process rather than focus on the entire value chain. Many companies raced to commercially launch their bioinformatics products without first properly ascertaining or understanding customer needs. There was also a huge hype about what bioinformatics could exactly do from the end users end and bioinformatics tools were looked at as a “black box” where a scientist would just need to feed in the data and they would get required output from the other end. With many bioinformatics companies failing to manage these high expectations from the scientists there was a mounting scepticism about the value of these tools.

Today, customers are more aware of what bioinformatics can deliver – viewing them as tools for improving productivity rather than being an end in themselves. The growing acceptance of bioinformatics solutions by the mainstream has been motivated by companies that have focused on understanding, and providing suitable solutions for customers’ problems.

Companies which have built total solutions are now penetrating pragmatic buyers. From mere product leadership, companies are embracing customer intimacy. Bioinformatics industry has just crossed what is looked at as a “chasm” stage of the classic product life cycle of any technological products. As these niche markets are being successfully penetrated, bioinformatics companies are now developing solutions which are perceived to be less of niche products but more of an all-purpose solution. This is expected to rejuvenate the bioinformatics market and drive it to attain high growth.

Need for Improved Drug Research Productivity Supports Market Growth
Dwindling drug pipelines, a lack of recent blockbuster drugs and imminent patent expiries of existing blockbuster drugs are placing the pharmaceutical industry under enormous pressure. A 96 per cent failure rate of drug candidates making it to the final approval phase together with the nearly USD 72 billion of drug sales at stake due to blockbuster drugs going off patent is compelling the pharmaceutical industry to develop tools that boost drug research productivity, accelerate the drug discovery process and reduce R&D expenditure. Accordingly, the bioinformatics market is anticipated to be one of the most exciting segments in the total drug discovery tools market.

The flood of data being generated by genomic and proteomic research activities worldwide is turning out to be more of a bane rather than a boon and is threatening to slow down drug discovery productivity. With scientists finding it increasingly difficult to collect and analyse such data, bioinformatics tools are emerging as key tools in facilitating effective information processing.At the same time, the varying range of data sets generated during drug research and the almost negligible value of a stand-alone data set, such as a bacterial genome, are creating further difficulties for scientists. The value of a sequenced genome is distinctly amplified if other genomes are brought into the same conceptual space for comparison. In this context, in-silico simulation offers the ultimate means of integrating data, while facilitating the dynamic utilisation of such data for varied purposes. The increased value presented by such technologies is reinforcing their importance in drug discovery.

The expanding use of throughput systems is also underlining the need for bioinformatics to comprehend the immensity of data being generated. Technologies such as homology mapping, DNA microarrays, computer aided molecular design and, high throughput screening, have triggered a dramatic increase in throughput from target identification to target validation. Even as an increasing number of compounds are being pushed through the drug discovery pipeline, the rate at which these compounds are being validated is moderated by the state of the technology available to the drug discovery and development community. This is creating a pressing case for in silico simulation and modelling technologies that promise to offer a whole new level of ‘filtering’ in identifying the best possible targets.

While these trends are supporting the uptake of bioinformatics tools, solid government support is also proving critical in sustaining the bioinformatics industry. Governments across Europe, particularly in the United Kingdom and Germany, are nurturing academic research by establishing new institutions and augmenting R&D expenditure.

Rapid Revenue Expansion Projected
Supported by growing R&D investments by both the public and private sectors, the European bioinformatics market registered a growth rate of about ten per cent in 2004 to accrue USD 310 million. Anticipated to grow at a compound annual growth rate (CAGR) of 12.7 per cent during the period 2004 to 2011, the market is projected to reach USD 720 million. Compared to the past few years, the proteomics informatics segment is expected to exhibit a higher growth rate due to increased research efforts and the widening deployment of several commercially available high throughput technologies to study protein expression. At an estimated CAGR of 14.4 per cent over 2004 to 2011, proteomics is expected to have the highest growth potential within the European bioinformatics market.

Market maturation and consolidation amongst suppliers will underlie the low growth exhibited by the genomics software tools segment. Its revenue share of the overall market is expected to fall from 40 per cent in 2004 to 38 per cent in 2011.

Consolidation to Redefine Competitive Structure
The European bioinformatics market is highly fragmented and populated by numerous small and large sized, domestic and international participants. Suppliers span the gamut from companies having a single product to those offering a varied assortment of tools.

Typically, larger market participants possess a broad technology portfolio and provide solutions for almost all segments. Small suppliers, in contrast, have tended to focus on niche markets. The leading bioinformatics companies also offer a range of services including R&D, database curing, and consulting services.

Consolidations have constituted a major trend with mergers and acquisitions constantly redefining the competitive structure. Many companies such as DoubleTwist closed operations, others such as Rosetta and Informax were acquired by bigger companies while companies such as Compugen, have risen up the value chain by offering their own drug discovery programmes.

Large pharma companies account for 65 per cent of total R&D spend but have less than 30 per cent of drugs in the pipeline. In contrast, smaller biotech companies account for just 30 per cent of total R&D spending, but are responsible for nearly 60 per cent of the total drugs in the pipeline. This situation has transformed market dynamics for bioinformatics companies. The market is likely to see a continued consolidation with many big life sciences supply companies considering bioinformatics companies as future targets for acquisition or partnerships to increase their product coverage.

Limited End User Base, Lack of Common Standards Pose Challenge
Despite companies having achieved the leap to mainstream acceptance of bioinformatics solutions, the general perception is that currently available bioinformatics tools are limited for use to only specialised and trained end user groups. This is due to the fact that many pieces of software demand a thorough understanding of biology and also how algorithms are implemented and run on computers.

The lack of common technology standards in bioinformatics applications is also acting as hindrance to market expansion. There are a lot of tools in the market which are designed using various technological platforms. There are very few industry wide standards which have made it tough to validate results. The biggest challenge right now is finding a way to devise the most effective approach for organising, analysing, storing, manipulating and applying results from various high-throughput systems.

Strategies for Success
The key to market growth will lie in bioinformatics companies developing solutions that increase the productivity of the R&D process and reduce the time to market for new drugs. Bioinformatics vendors need to consider the various bottlenecks in the drug discovery process and develop easy to use and effective solutions to alleviate them.

The lack of common technology standards and the inability of bioinformatics tools to reach a wider base of end users present significant challenges for suppliers as well.

With the tools not viewed as user-friendly, the critical need is to facilitate their transfer from trained users to those performing the actual research on the workbench. The challenge here is to develop solutions that are perceived less as niche products and more as mainstream solutions which can be used by a broad spectrum of end users. Moreover, for truly high-throughput screening and similar processes, automated synthesis systems need to be installed and integrated with the lab’s workflow. This will require simpler and more accessible user-interface software.

At the same time, standardisation will be key to future success in genomics, proteomics, gene expression studies, drug development, and computational biology. Improved and better integrated systems, algorithms, annotation protocols, and user interfaces must be developed to ensure useful and effective interpretation of vast information flows. While the demand for software tools will continue, companies need to constantly introduce the right kind of tools for their customers. The key to success would be to demonstrate to customers, the value that can be created by proper implementation of bioinformatics tools. This needs to be accompanied by a comprehensive and ongoing revaluation of technology and service portfolios. There is now a pressing need for an integrated approach with improved value proposition. Value added services including improved understanding of customer’s requirements, enhanced management of technical aspects, budget issues, strategic regulatory issues and quality assurance would enable manufacturers to charge customers higher prices.

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