Software solutions hold the key to laboratory automation

Achim Newrzella

The idea to automate laboratory processes is not a new concept. Equipment containing at least some form of automation has been developed since as early as the second half of the 19th century.

It certainly isn’t surprising that scientists have long sought to automate experimental processes, as any laboratory scientist can attest, many of the most time-consuming tasks such as reagent pipetting and tube labelling provide no value-add, leave room for human error and are simply put, boring. Until recently progress on the development of a fully integrated, automated laboratory has however been slow.

While great strides have been made on individual pieces of equipment such as robotic arms, high-throughput plate readers or sequencing equipment, there has been a lack of equipment integration, meaning considerable manual labour input is still required. The key hurdle to overcome this issue has been a lack of adequate software to allow equipment, often from different manufacturers, to communicate effectively to create a seamless, automated process. However, in recent years software capabilities of so-called laboratory information (management) systems (LIS or LIMS) have improved drastically, providing greater equipment integration, data analytics capabilities and data sharing across organisations through cloud-based solutions that mean experimental data can more easily be accessed from across the globe in a standardised format.

As a result, the LIMS market is expected to grow strongly at a CAGR of 6.7-9.4% to 2024, significantly outperforming the wider laboratory automation market, which is expected to grow at approximately 5% CAGR over the period. Unsurprisingly then, laboratory software providers have been a hot target for M&A. Companies in the space are seen as attractive buys for a number of reasons. Firstly, they hold huge strategic importance for laboratory equipment manufacturers that are seeking to provide integrated, turn-key laboratory solutions, as evidenced by both ThermoFisher and Roper paying around 10x revenue for their acquisitions of Core Informatics and CliniSys respectively. Secondly, LIMS providers often have a high quality of earnings, thanks to a SaaS business model and high levels of customer retention.

Increasingly, private equity is also showing interest in the space, attracted by the market growth prospects and ‘compelling financial metrics’. In a significant recent transaction, CG Results advised SEP on its investment in UK-based LIMS provider Dotmatics. The company is a pioneer in cloud based LIMS platforms to enable and facilitate research collaboration and provides a comprehensive suite of solutions focused on automated, standardised data capture and analysis.

Although the market has recently seen some significant transactions, it remains highly fragmented. Over 250 different software solutions with varying capabilities are on offer, owing to a still relatively immature industry that remains in a phase of rapid development.We expect this fragmentation to be a powerful driver of increasing M&A activity in the market as companies will view acquisitions as an attractive route to gain market share or add complementary capabilities. Both strategic buyers and PE are likely to actively pursue acquisition opportunities, meaning sellers can expect to see continued strong valuations in the space.

Benefits and challenges of implementing laboratory automation

Source: Global Markets Insight, 2017 & Grand View Research, 2016, Markets and Markets, 2017

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