Companion Diagnostics: Cut the waste
News and Insights

Companion Diagnostics: Cut the waste

Companion diagnostics (CDx’s) are a group of clinical tests, emerging over the last decade, as an essential part of the concept of "personalized medicine".

They allow clinicians to identify specific patients who are more likely to benefit from treatment with a particular drug or to estimate a patient’s prognosis.1 In other words, a diagnostic and a treatment would be tied together for an individual patient: Only when a patient tests positive for a specific biomarker or mutation, he will be receiving the corresponding treatment.

How can the use of companion diagnostics cut the waste in the R&D process?

With the use of companion diagnostics in the development process, there are significant savings to be realized. By not including patients where the diagnostic markers indicate they will most likely not benefit from a treatment, the clinical trial can be much smaller in size but still show a statistically significant benefit. Also, a new medication would most often target a very difficult to treat segment of the patient population (e.g. with a specific mutation). Showing a benefit where there were no good treatment options so far greatly enhances the odds of approval and speeds up time to approval.

How can the use of companion diagnostics cut the waste in treating patients?

A drug which was developed in combination with a companion diagnostic usually gets a label from the regulator that would state the effectiveness of the treatment in the studied population, which is the one selected by using the companion diagnostic. While the use of a companion diagnostic is not always a mandatory part of the product label, it is still highly relevant: The label usually says nothing about a population that was excluded by the companion diagnostic, and the payor often mandates the companion diagnostic test to be positive on a patient before a treatment will be paid for. By avoiding to pay for treatments that are highly unlikely to have a benefit for a specific patient, the payor saves money despite paying the cost of the companion diagnostic. Currently, a companion diagnostic assay costs approximately 2’000 USD, but a treatment can easily cost 100’000 USD in total cost, including the care around the patient who is receiving the medication. Furthermore, it is ethically questionable to make patients undergo such a tough treatment and the risk of significant side effects without an acceptable benefit expectation.

Outlook for the companion diagnostics market

The companion diagnostics market is one of the most attractive markets. Not only is it growing, but very often the supplier of a specific companion diagnostic test is becoming part of the label at the point of approval of a new medication. As long as the product stays on the market, the companion diagnostic test is often part of the whole package and therefore creates high barriers to entry for competitor test offerings.

Precision medicine promises tailored treatment for patients and significantly reduced drug failure rates for biopharmaceutical companies.

Patrick Burke, Executive Vice President of Emerging Products, Myriad Genetics Inc. 2


Companion diagnostics are an essential tool to establish a true personalized medicine, which will in turn be more cost effective. These tests have a cost associated with them, currently approximately 2’000 USD per test, but savings from avoiding costly treatments for patients who will not respond should more than offset that cost. Pharma and biotechnology companies have to adapt to the idea of targeted drugs, with a shorter and less expensive development process, but a smaller patient population for whom the drug will be sold. Despite the challenges, most drugs are currently developed with companion diagnostics. The lack of a companion diagnostic is increasingly considered as an outdated way to develop drugs and treat patients, as the caregiver would then have to try the drug on the individual patient without any hint whether the patient is likely a responder or not.

In a value-based approach which is increasingly important in healthcare, a payor is much more willing to pay for tangible value and more certainty of the patient reaching the therapy goal, and this can be greatly enhanced with the use of targeted drugs and companion diagnostics.

At Credit Suisse, we believe in this long-term opportunity. We have therefore designed a strategy to give investors exposure to the theme of personalized medicine with use of companion diagnostics, within the broader context of digital health.