Next Generation Sequencing (NGS) Market Assessment Trends (2019-2025)

Next Generation Sequencing (NGS)* has transformed the life sciences and diagnostics landscapes. This technology is used for applications including human whole genome sequencing (WGS), whole exome sequencing (WES), targeted sequencing using panels of a few-to-thousands of genes, and expression profiling (i.e., RNA-Seq). Following a “soft” year in 2020 (~$4.1B) due to the COVID-19 pandemic, the market rebounded and reached ~$5.8B in 2021. 2022 proved to be another anomaly, with many factors contributing to a tepid ~6% growth for a market with a long runway and strong growth prospects across multiple applications. As a result, we estimate that the market will reach ~$9.3B. Looking at the next 3 years, and despite a challenging macroeconomic environment (and despite dropping cost per Gb), we forecast that market growth will be accelerating.

‍

The 8th edition of this report was published to provide granularity on the “post-pandemic” market landscape. We predict that:

• While novel players will gain traction across customer types for a broad range of applications, we uphold our perspective that Illumina will maintain strong market share in clinical settings, most notably in clinical oncology, as their instruments start to be used across the patient journey (including multiple cancer monitoring applications [e.g., MRD, recurrence monitoring] and early cancer detection) in addition to the penetration of therapy selection (now moving from metastatic to earlier-stage cancer patients [stage IIB and stage III])
• The drop in cost per Gb (e.g., NovaSeq X decreasing reagent costs ~2.5x) will be offset by an increasing in sequencing volumes, both in terms of number of samples, plex (e.g., 500 genes to WES), sequencing complexity (e.g., adding gene expression profiling to cancer panels / tumor characterization) and depth of sequencing (in some cases)
• While new entrants will gain share given their revenues start from a low / zero base, established customers, especially in Biopharma and in the clinic, will continue to use established players that they trust and have established a strong ecosystem that covers the bookends of the workflow (i.e., sample preparation and bioinformatic pipelines)

This report assesses the NGS manufacturer market (i.e., excluding NGS service revenues [e.g., GH, NTRA]) across six segments:

• Company: Illumina, Thermo Fisher (Ion Torrent), Roche, Pacific Biosciences, and others**
• Product Type: Instruments (including software) and Reagents (including consumables)
• Customer: Academic Basic Research, Population Studies, Biopharma R&D, Biopharma Clinical Trials, Liquid Biopsy Clinical Trials, Clinical Diagnostics (Oncology), Clinical Diagnostics (NIPT), Clinical Diagnostics (All other), Liquid Biopsy (Dx), Applied Markets, Industry, Epidemiology (including SARS-CoV-2)
• Application: human WGS, WES, Targeted Resequencing, RNA-Seq, Other
• Therapeutic Area: Genomics, Oncology, Infectious Diseases, Method Development, and Others
• Geography: U.S., Europe, China, Asia/Pacific (APAC), and Rest of the world (RoW)

For each segment, we provide the market size annually from 2019 to 2025, and commentary on key growth drivers and moderators. At a high level; these factors include:

• Accelerating adoption in clinical settings (both in clinical trial and routine testing) now representing more than half of the market, especially for clinical oncology where liquid biopsies are utilized across the patient journey from early detection (e.g., GRAIL) to therapy selection (e.g., Guardant Health, Foundation Medicine), or therapy monitoring and cancer recurrence testing (e.g., Natera); many of these tests have now received FDA approval
• Increased reagent usage on an expanding instrument installed base across applications, especially for higher throughput instruments (e.g., NovaSeq)
• Increased adoption of the technology by new customers (e.g., Forensics, AgBio, Biopharma for patient stratification during clinical trials)
• Increased usage for new scientific applications built upon sequencing detection (e.g., [single cell] RNA-Seq, ChIP-Seq, methylation studies, spatial profiling on NanoString GeoMx, microbiome analysis)
• Overall, we believe that a silver lining of the COVID-19 pandemic will be the acceleration of NGS adoption for personalized medicine purposes, beyond oncology applications (e.g., infectious diseases, women’s health) as tools and diagnostics took center stage in the public discourse in 2020. NGS-based SARS-CoV-2 testing won’t contribute meaningfully to this market in the long term (peaking at ~8%of the manufacturer market in 2021 [~$450M], and dropping to <4% in 2022 [~$220M])
• Increasing number of competitors with differentiated offerings (e.g., Oxford Nanopore, Element Bio)

Key factors moderating growth include:

• Excess capacity, with some installed (primarily low throughput) instruments operating at only 20-30% of capacity
• Pricing pressure has decreased cost per Gb, moderating overall revenue growth, due to competitive pressure announcements (e.g., Ultima Genomics), and the availability of more affordable instrument options (e.g., Illumina’s iSeq, Oxford Nanopore’s Flongle)
• Reimbursement uncertainty and pushback in clinical settings (due in part to lack of education even in some cases where tests are covered by insurance companies) limiting access to the vast majority of clinical samples in the U.S.
• Out-of-pocket pay for some tests in China limiting adoption
• Continued bioinformatics and data analysis challenges, especially for structural variants or translational and clinical applications (e.g., clinical variant interpretation), gating access to most potentially addressable samples
• Moderate growth in research funding in established markets

We also review interesting market trends, such as:

• Increased use of native long read (NLR) technologies, and exciting announcements from Illumina with “complete long reads” that may help generate data / information on structural variants (and in turn additional use of NLR platforms)
• Increased number (and scale) of population sequencing programs (e.g., Korea planning to sequence 1M genomes by 2029)
• Diversification of sequencing options driven by the launch of multiple new platforms, with more to come (e.g., Apton Biosystems)
• Consolidation of applications on increasingly differentiated platforms, based on their workflow, turnaround time and cost (e.g., human WGS on NovaSeq, field-based pathogen sequencing on the MinION)
• Simplification of the overall workflow with the launch of more automated (e.g., Genexus) or flexible (e.g., Singular G4) instruments or (third party) automated sample preparation instruments, saving time, and increasing reproducibility
• Continued decentralization of sequencing runs driven by the availability of low cost desktop sequencers (e.g., MiSeq), but in turn a centralization of sequencing volumes as high throughput platforms can cost-effectively run 10,000’s of samples
• Natera for example experienced explosive growth of its Signatera franchise, growing yearly from 3K (2019), 18K (2020), 76K (2021) and 185K+ (2022 forecast) samples; as a tumor-informed test, all of these assay require baselining using NGS
• Increasing use of service providers, particularly in the U.S., offering an alternative to in-house platform adoption, as many customers don’t have the budget for large capital expenditures, and many such service providers offer unique applications
• Increasing number of players participating in this fast-growing market, typically offering front end (sample preparation) or backend (bioinformatics) solutions, with most targeting (clinical) oncology
• Increasing competitive intensity on dimensions others than cost per base pair (e.g., workflow, portability, clinical content)

Overall, our analyses suggest that over the next 3 years, the spotlight will be on four NGS manufacturers:

• Illumina, given its high reliability and the existence of an entire ecosystem to support “Illumina sequencing”, the company will remain dominant, especially given the Nova X launch that is expected to gain share in the largest (and most attractive) high throughput segment
• Long read technologies will gain traction, with customers increasingly excited about the richness of information they generate; Illumina’s Complete Long Reads (CLR) may actually help accelerate excitement for native long reads (as users build SV insight databases)
• Oxford Nanopore, given the value of long reads, form factor, and additional information “for free” (e.g., methylation)
• While less bullish than management expectations on PacBio, we still expect them to gain significant traction, with revenues in the $300-350M range in 2025
• Short read entrants (e.g., Element, Singular, Ultima, MGI, PacBio with Onso) will battle it out across multiple customer types, applications and geographies trying to articulate their value proposition, demonstrate platform robustness and execute commercially

‍