Healthcare Insights

Rapid diagnostic innovation paving the way for individualized medicine


With unprecedented speed, the cost of scanning an individual’s genome has declined to a commercially viable cost in the past decade. At the same time, the top 10 drugs successfully treat an average of 1 patient for every 12 taking the prescription (ranging from 1:3 to 1:24)1. Individualized medicine can help identify treatments with the highest likelihood of success, limiting the need for trial and error for the remaining 11 patients who are receiving ineffective treatment.

The $1,000 genome

At the heart of personalized medicine is the ability to sequence an individual patient’s genome. The cost to sequence an individual genome has significantly declined since 2007, dropping from nearly $10 million to just over $1,000 in 2015, and is projected to continue to decline. Along with the price declines, the quality of the sequenced data continues to increase – making precision medicine more viable; healthcare providers and biopharmaceutical companies now need to learn how to use the data to improve clinical outcomes.

Gnome Chart

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Source: National Human Genome Research Institute

A diagnostic whetstone

Nature Genetics estimates that by selecting trial patient populations for specific biomarkers the success rates for drugs in clinical development could double. This improvement in the drug development economic calculus will dramatically change how pharmaceutical firms view the risks of spending an estimated $2.6 billion to develop a new drug2. Today, there are over 150 FDA approved drugs which include genetic information in their labeling guide and we see this trend accelerating with 28% of 2015 FDA approvals being personalized treatments, up from 21% in 20143,4. In fact, the Tufts Center for the Study of Drug Development suggested that 42% of all drugs in development are personalized medicines.

Personalized medicine is far from being standard and the clinical implications will take decades to materialize. Pharmacological treatments for high cost, high mortality conditions including cancer and cardiovascular diseases are likely to be among the first generation of personalized medicine. As the technology improves, the diagnostic costs continue to drop we expect to see protocols expand to more common conditions as well as innovation in treating patient specific co-morbidities.

The private capital requirements for both diagnostic and pharmaceutical innovation will continue to grow with limited federal funding. Our clients are looking at both M&A as well as the equity markets to support their growth.

As always, Baird’s Healthcare team is watching the interaction between diagnostic innovation and improved patient care closely and will continue to share our thoughts. Want to learn more or have a suggestion? Drop us a note at


1Nature - Time for one-person trials

2Tufts Center for the Study of Drug Development - Cost to Develop and Win Marketing Approval for a New Drug Is $2.6 Billion

3FDA - Table of Pharmacogenomic Biomarkers in Drug Labeling

4Personalized Medicine Coalition - More Than 1 in 4 Novel New Drugs Approved by FDA in 2015 are Personalized Medicines