Our Markets’ Growth Drivers
Testing, Inspection & Certification Services Market
Bioanalytical testing (defined by Eurofins as testing all products or substances that we eat, drink, ingest, inhale or which come into contact with our bodies) is a relatively new market, that started expanding significantly only a few decades ago, particularly for third party service providers. Despite the ongoing consolidation process, the market is still highly fragmented with a large number of smaller and medium sized laboratories offering a limited technological portfolio, regional presence and customer reach. In contrast, the Eurofins Group and a few large international peers offer their customers almost global support and a very large range of analytical services.
Eurofins’ management believes that several significant trends and factors are supportive of the continued growth of the markets in which it operates.
The Bioanalytical Testing Market Growth Drivers
Wealth & Life Expectation
Thanks to sufficient food, modern technology, healthcare, and medical coverage in industrialised countries, most people can live comfortably and grow old healthily. As the average wealth in these countries increases, the demand even for expensive pharmaceuticals enabling people to enjoy better lives is growing. The aversion to risk that may be associated with some food and consumer products and contamination of the environment is also increasing as people become more aware of the issues that surround them.
New technologies open new perspectives for applications in the pharmaceutical, food, and environmental markets. In recent years, the food industry has developed many new products which apply new technologies and processes, such as “functional food”, a food given an additional function (often one related to health promotion or disease prevention) by adding new ingredients or more of existing ingredients.
Eurofins benefits from both the needs of its customers to test the application of new technologies and to test and control their products. The Group is capable of developing new methods to help develop and register new pharmaceutical products and to track and analyse, for example, residues of pesticides, pharmaceutical substances, allergens or GMOs in a wide range of food products. Increasingly sensitive analytical equipment and methods also act as a driver for better quality assurance and to detect substances that people were not previously aware of or able to measure.
Along with the development of new technologies and a rising standard of living in the industrialised countries, consumers are becoming increasingly aware of product safety and quality and are averse to any health risks linked with food, pharmaceuticals or the environment. The demand for higher quality goods and services, and the associated requirement for testing, are also driven by increasingly strict regulations introduced by governmental authorities, the European Commission, the US Food and Drug Administration or worldwide standardisation bodies in the pharmaceutical, food and environmental markets.
As businesses increasingly look to global markets for their suppliers, they also become more exposed to the additional risks that are created by this global sourcing. The wider the supply chain becomes, the greater and more complex the risk of quality divergence across the chain becomes and hence the need for testing.
In addition to Europe and North America, Eurofins is able to meet clients’ needs across the globe including in an increasing number of supply chain locations in South America, Eastern Europe, and Asia. By operating laboratories in many of the countries where suppliers of food ingredients or agriculture commodities exist, Eurofins has a clear understanding of the global conditions and regulations and possibilities to test at source. Furthermore, Eurofins also offers a reliable standard of high quality and extensive expertise in those local markets for global customers with worldwide operations.
One-stop Service Provider
Eurofins aims to provide its customers with as wide a range of analytical services as possible. The main way in which this is achieved is through Eurofins market-leading testing portfolio of over 200,000 tests. In addition, most large customers benefit from having dedicated account managers. This account manager can draw on the possibility of a large number of Eurofins laboratories, some being very specialised. Eurofins in turn is able to allow each laboratory in the Group to focus on their own area of expertise and yet retain customers through being able to offer the complete range of tests provided by most laboratories in the Group or in one Business Line.
In times of enhanced quality and safety consciousness of consumers, global marketing of products and international media coverage, brands are very valuable and highly vulnerable assets that need constant protection. By carrying out a large range of analyses as part of pro-active quality assurance programmes, Eurofins supports its global customers in maintaining the integrity of their brands.
To run in-house or government/public laboratories, as a rule, is seldom cost effective and therefore outsourcing to a global supplier, such as Eurofins, is becoming increasingly common. An outsourcing deal can represent a win-win situation for both sides. It allows the outsourcing partner to use its capital more efficiently, turn fixed costs into variable costs, and to benefit from Eurofins’ expertise in operating laboratories. On the other hand, Eurofins gains a long-term partnership with the customer, allowing both parties to concentrate on their core businesses.
Clinical Diagnostics Market Growth Drivers
The clinical diagnostics market comprises assays, instruments, and services that help in the diagnosis and treatment of diseases. Since 2014 Eurofins has been focusing a large part of its investments in this sector with a special focus, on innovative specialised diagnostic services with a growing genetic and genomic component. As further detailed below under paragraph “Global Clinical Diagnostics market growth drivers” the market is expected to grow as effective diagnosis enables a more personalised medicine – i.e., allow healthcare professionals to better diagnose and prescribe more accurate treatment for each patient.
Multiple companies provide either specialised or routine clinical diagnostic testing services, or both, depending on their technologies, or scientific expertise, or the relevant regulations. The competitive landscape is therefore highly localised, and in certain geographies, competition is along the lines of specialisation or branches of medical science. Financial analysts typically cite Labcorp, Quest Diagnostics, Sonic Healthcare, among others, as comparable peers to Eurofins’ clinical diagnostics activities.
Eurofins believes that as world population grows and ages, the need for earlier and more sophisticated diagnosis and treatment of diseases will likely drive up the demand for laboratory diagnostic services.
Technological innovations relevant to medicine could lead to earlier or more accurate diagnosis and treatment of diseases. Advances in genomics, for example, are expected to lead to advanced diagnostic tests, which in turn could bring the healthcare system closer to personalised medicine, which relies on individualised diagnostic and prognostic testing. Based on such individualised testing physicians may prescribe the most effective healthcare treatments or lifestyle changes for individual patients.
The increased availability of healthcare data, including those resulting from modern sequencing technologies frequently referred to as “next generation DNA sequencing” and continually improving ability to analyse such data at the patient level is likely to open new possibilities to positively impact diagnosis and treatment of diseases.
Prevention & Wellness
The increasing burden of healthcare costs on government and healthcare agencies has advanced the case for better control of medical and laboratory diagnostic costs but also for greater focus on early diagnosis and prevention. In some cases, healthcare providers and payers (governments or insurance agencies) increasingly recognise the value of diagnostics as a means to improve health and reduce the cost of healthcare through early detection, prevention, and more effective treatment.
There is no guarantee that these growth trends will remain or materialise, or that the industry, or indeed Eurofins' businesses and operations may not be negatively influenced or impacted by a variety of factors and possible events. Please refer to the Risk Factors Section on Commercial risks, Technological risks, Industrial risks and other factors that could have a negative impact on the laboratory testing industry and Eurofins' growth and financial results.