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WestLB London
Friday, 5 March 2010

So far 'Theranostics has not held an attractive business model for pharma as it
undermines the blockbuster paradigm. However, with exploding healthcare costs,
payers and regulators increasingly emphasise a drug's cost-benefit ratio. Some
pharma companies have discovered that using diagnostics to identify patients likely
to benefit from their drugs can be attractive, as it can improve the results of clinical
trials and shorten development times.

We forecast that 'Theranostics' is here to stay with the integrated pharma /
diagnostic firm likely to benefit most. Diagnostics companies look set to gain from
this development as it would give them a more important role in patient work up
and may spark a takevoer frenzy from pharma firms not wanting to be left behind.

Since publication of our report last September a handful of significant deals and
take overs - including the acquisition of DxS and SABiosciences by Qiagen and
partnering deals between Oncomethylome and Roche as well as DAKO and
AstraZeneca - have highlighted the increasing significance of this area.