The technology is advancing to such an extent that biotechnology firms are now performing the functions of drug discovery that were traditionally considered the area of big pharma.
The trend observed demonstrates that biochip manufacturers provide novel and effective solutions in drug discovery, encouraging the acceptance of new technologies by end users.
Frost and Sullivan's latest report details the drive currently occurring in pharma which has seen drug discovery companies gradually evolving to adapt innovative biochip technology into their product pipeline with the aim of bringing down attrition rates and reducing drug pipeline timelines.
Such objectives are being supported by advances in biochip technology such as multi-parameter testing, miniaturisation of chip technology and the increasing flexibility of array technology.
Of course, the innovative nature of this technology means companies have been initially wary of investing in such untried equipment and techniques.
However, with costs continually decreasing and the streams of encouraging data as a result of biochip technology are forcing pharma to have a rethink.
Biochips identify and prioritise drug targets based on their ability to corroborate a multitude of gene expressions in parallel.
The concept of doubling information content while contracting feature size is being developed with the help of technical know-how drawn from semiconductor technology.
"With the recent FDA guidelines on pharmacogenomics and steady growth potential anticipated in the biochips markets, companies can expect to see a boost in their revenues and market share holdings, if they focus on developing mainstream applications with genomics/proteomics technology," said Frost & Sullivan's healthcare analyst Charanya Ramachandran.
In 2004, the European biochip market accrued nearly $126.9 million. The report stated that as it was projected to grow at a compound annual growth rate (CAGR) of 25 per cent over the period 2004-2011, the protein chips segment would experience higher growth than the DNA chip segment, as most drug targets are proteins.
Due to strong growth in the protein chip sector, the DNA chip segment (which currently accounts for nearly 90 per cent of overall revenues), would witness a marginal drop in its market share over the long term.
"In terms of working out a cost-effective solution, some chip companies are following an open platform model wherein chips are compatible with most of the other instrumentation available in the market," said Ramachandran.
"This strategy should attract all end users - the academic research base that forms a major chunk in the biochip community, as well as pharmaceutical and biotech companies that consider this open technology as a valuable tool for their targeted applications," she added.
As competition escalates, the provision of value-added services will be critical for success. Initiatives to ensure better value propositions will include an improved understanding of the customer's requirements, budget issues and regulations as well as comprehensive knowledge and management of technical aspects and assured quality standards.
While biochip technology is undoubtedly innovative and adds real value to the drug development chain, their cost continues to pose a major deterrent to more widespread uptake.
End users remain sceptical of the financial rewards yielded by investments in such chip-based solutions. Here, cost effective solutions can promote their use in routine product development practice.
"Currently, although many teething technical problems are limiting their penetration into routine target validation and compound screening phases of drug discovery, a synergistic climate in the coming years along with the strong double digit growth rate estimated at nearly 21.6 per cent during the period 2005 to 2011 - offers a promising outlook for biochips," said Ramachandran.
The competitive landscape of the highly fragmented and aggressive European biochips market is in the process of being transformed. Despite the mounting rivalry, companies are entering into alliances and partnerships.
Such strategies are bolstering the trend of biochips being rapidly adopted into the drug discovery process.
At the same time, alliances between chip companies and pharmaceutical firms are driving market growth, in addition to underlining the positive impact of biochips as a complementary technology.
These trends are expected to benefit some participants and evoke a cautionary response in others. For instance, smaller firms can retain their competitiveness by affiliating themselves with the larger, more established suppliers either by licensing or distributorships.
Alliances can also help firms adopt a vertical integrated approach of offering solutions from array slide manufacturing to data readouts.
However, this will threaten niche participants that chose to concentrate solely on one of the functional components.
Frost and Sullivan's latest report, "Biochips in Drug Discovery in Europe (B574)," is available for purchase now.