The Chemical and Biological Detection Market: Not So Toxic After All

Ryan Hendrix, Industry Analyst

Aerospace and Defense

December 17, 2008

2

Focus Points

• Total Market Overview

• Major Trends

• Market Challenges

• Market Drivers

• Key Participants

• Major Findings

• Conclusions

3

Market Introduction

source: http://www.army.mil/cmh-pg/photos/WWII/Preps/WW2-Prep.htm

4

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

2006 2007 2008 2009 2010 2011 2012

DoD DHS State & Local Other Fed

20122006

$113.9

$20.3

$2.1

$306.8

$62.8

$35.3

• The U.S. chemical and biological detection markets have had a high priority in receiving funds. The U.S. Department of Defense (DoD) comprises 70 percent of the total chemical and biological detection market.

$ M

illio

n

$ M

illio

n

Chemical& Biological Total Market (U.S.), 2006-2012

Note: All figures are rounded; the base year is 2007. Source: Frost & Sullivan

Total Chemical and Biological Detection Market Revenue

$11.0

$6.8

$29 , 15%

$27.10 ,

14%$136.50 ,

70%

$2.70 , 1%

$ M

illio

n

Chemical& Biological Total Market (U.S.), 2007

5

Chemical Detection Market - Trends

• More and more companies are realizing the demand for Rugged

systems

Product Miniaturization*

• Smaller systems continue to be in demand by the military

Multi-Detection Systems*

Rugged Systems*

Identifying Agents*

• The DoD has set aside significant funding for projects involving

chemical detection

• Identifying specific agents are in greater demand

* Source: Microsoft Clip Art

6

Biological Detection Market - Trends

• Government RDT&E and procurement spending increased for fixed-

site air samplers

Operating Costs*

International First Responder Market*

Continuous Sampling*

• Biological detection devices with reduced operating costs across all

market segments

• Immunoassay international first responders market has many potential

opportunities

* Source: Microsoft Clip Art

7

Chemical Detection Market - Challenges

• High DoD Standards

• Long Procurement Cycles Can Keep Potential Vendors Out of the Market

• Highly Competitive Market

• State and Local Markets are Reaching Saturation

.

Ch

alle

ng

es

Sta

te a

nd

Lo

ca

l Ma

rke

ts a

re R

eac

hin

g S

atu

ratio

n

Hig

hly

Co

mp

etitiv

e M

ark

et

Lo

ng

Pro

cu

rem

en

t Cyc

les

Weak

Strong

Hig

h D

oD

Sta

nd

ard

s

Length of arrow indicates relative impact

Source: Frost & Sullivan

8

Biological Detection Market - Challenges

• Government spending leans toward bio-counter measures rather than detection

• Lack of testing standards

• Devices for State and Local must be listed on the AEL

.

Restra

ints

De

vic

es

for s

tate

an

d lo

ca

l mu

st b

e lis

ted

on

the

AE

L

La

ck

of te

stin

g s

tan

da

rds

Weak

Strong

Go

ve

rnm

en

t sp

en

din

g le

an

s to

wa

rd b

io-

co

un

ter m

eas

ure

s ra

the

r tha

n d

ete

ctio

n

Source: Frost & Sullivan

Length of arrow indicates relative impact

9

Chemical Detection Market - Drivers

• The Demand for More Advanced Detection Equipment

• Continued Spending on Detection Equipment by Department of Defense

• Continued Spending on RDT&E by Department of Defense and Department of Homeland Security within the Detection Market

Dri

vers

Th

e d

em

an

d f

or

mo

re a

dva

nc

ed

de

tec

tio

n s

ys

tem

s

Co

nti

nu

ed

Do

Ds

pe

nd

ing

on

de

tec

tio

n e

qu

ipm

en

t

Co

nti

nu

ed

Do

Da

nd

DH

S s

pe

nd

ing

on

RD

T&

E d

ete

cti

on

eq

uip

me

nt

Strong

Weak

Source: Frost & Sullivan

Length of arrow indicates relative impact

10

Biological Detection Market - Drivers

• Persistent Fear of a Devastating Attack

• Increased DoD Expenditure

• Need for Biological Detection Equipment that Delivers Accurate Results Both in the Lab and in the Field

Dri

vers

Pers

iste

nt

fea

r o

f a

n a

ttack

Inc

rease

d D

oD

Ex

pen

dit

ure

De

live

rs a

cc

ura

te r

esu

lts

bo

th i

n t

he

la

b a

nd

in

fie

ld

Strong

Weak

Source: Frost & Sullivan

Length of arrow indicates relative impact

11

The U.S. military, which is the largest purchaser of chemical and biological agent detection equipment, has not reduced the number of programs and funding. The size of the U.S. chemical and biological markets continue to increase.

Total U.S. Chemical and Biological Detection Market

0.0

100.0

200.0

300.0($

Millio

n)

DoD 113.9 136.5 159.3 193.5 241.4 276 306.8

DHS 11 29 34.8 46.8 54.9 59 62.8

Other Federal 2.6 2.7 3.1 3.7 4.5 5.7 6.8

State & Local 20.3 27.1 28.4 31.2 34 34.6 35.3

2006 2007 2008 2009 2010 2011 2012

Total Chemical and Biological Detection Market Spending by Segment (U.S.), 2006-2012

Note: All figures are rounded; the base year is 2007. Source: Frost & Sullivan

12

0

100

200

300

400

500

($ M

illio

n)

Services 14 32.6 19.3 19.8 22.6 28.8 31.8

RDT&E 36.1 59.4 125.8 155.9 180.6 185.9 195

Procurement 97.7 103.3 80.5 99.5 131.6 160.6 184.9

2006 2007 2008 2009 2010 2011 2012

Total U.S. Chemical and Biological Detection Market

Total Chemical and Biological Detection Market Spending by Category (U.S.), 2006-2012

Note: All figures are rounded; the base year is 2007. Source: Frost & Sullivan

13

Key Participants

10%

28%

5%

4%5%12%

4%

3%

3%

2%

24%Smiths Detection

General Dynamics-ATP

ITT

Ahura Scientific

Hamilton Sundstrand

AAI Engineering

U.S. Genomics

Idaho Technology

SESI

Bechtel

Other

Total Chemical/ Biological Company Market Share (U.S.), 2007

Source: Frost & Sullivan

14

ConclusionR

eve

nue

Attra

ctive

ness

High

Low

Significant Barriers

Open Market

Market Openness

Most Attractive Markets

Chemical Detection

Biological Detection

Attractiveness

High

Medium

Low

Chemical/ Biological Company Market Assessment (U.S.), 2008

15

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