Dwindling drug pipelines, the lack of potential blockbuster drugs and the anticipated patent expires of existing drugs are forcing the pharmaceutical industry to develop tools that increase drug research productivity, accelerate the drug discovery process and reduce R&D expenditure.
In the short term, bioinformatics will establish itself as a vibrant segment in the total drug discovery tools market, with competition set to intensify as profitability levels rise.
The report claims that the industry has concentrated its efforts on managing the deluge of genetic and protein data being generated. The quantity makes it increasingly difficult to collect and analyse the data. Moreover, high throughput systems are significantly augmenting the yield of promising compounds.
The limited value of standalone data sets has triggered the search for tools that can help study disparate data in the same conceptual framework. Bioinformatics, which fulfils these multiple needs, is understandably growing in appeal.
Governments of European countries, such as Germany and the United Kingdom have taken initiatives to promote the benefits of bioinformatics. They have also increased their overall R&D investments, which is likely to have a positive impact on the growth rate of the European bioinformatics market.
According to the report's authors, Frost & Sullivan, the forecast predicts that the total European bioinformatics market is set to expand from nearly $310 million (€252.8 million) in 2004 to $720 million by 2011.
At an estimated compound annual growth rate (CAGR) of 14.4 per cent over 2004 to 2011, proteomics is expected to have the highest growth potential within the European bioinformatics market.
The report predicts that while the information manipulation segment will maintain its current revenue contribution levels- about 40 per cent - to the overall market until 2011, the genomics software tools segment is likely to exhibit low growth.
Despite projections of strong growth, challenges are persisting in the market. Even as companies have achieved the leap to mainstream acceptance of bioinformatics solutions, the general perception is that currently available bioinformatics tools are restricted for use to only specialised end user groups.
"With the tools not as user-friendly as they are required to be, the critical need is to facilitate their transfer from trained users to those performing the actual research on the workbench," said Raghavendra Chitta, industry analyst at Frost & Sullivan.
"In the long run, if the tools are put in the hands of the actual users, the entire user base will increase, making it an attractive proposition for the bioinformatics companies," he added.
Highly fragmented and competitive with both global and local company participation, the European bioinformatics market has been in constant flux. Large pharma companies typically account for 65 per cent of total R&D expenditure but have less than 30 per cent of drugs in the pipeline.
On the other hand, smaller biotech companies account for just 30 per cent of total R&D spending, but lay claim to nearly 60 per cent of the total drugs in the pipeline. This has changed the entire market dynamics for bioinformatics companies.
Consolidations have become common with mergers and acquisitions causing changes in the competitive structure. Many companies, such as DoubleTwist, have exited the market, while a few, such as Compugen, have moved up the value chain by offering their own drug discovery programmes.
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," commented Chitta.
Frost and Sullivan's report: "Opportunities for Bioinformatics in European Drug Discovery Market (B495-55)," is now available to buy.