Indian medical devices cos finding space in global arena.
Driving through Bangalore’s Whitefield, it’s easy to miss MediVed Innovations’ office tucked away in a corner building. It looks dwarfed by its more
glamorous neighbours—the campuses of India’s IT biggies. But there’s something about the work it does that makes the tech revolution pale in comparison.
MediVed’s facilities make pacemakers, which while in existence for years, have been difficult to produce. A pacemaker goes through over 50 processes and is a complex system of wires and polymer components which power the human heart for many years. “The scope for error is zero. A pacemaker just cannot stop working or malfunction else the patient will die,” says Dinesh Puri, chairman, MediVed, which develops active implantable devices and diagnostic devices for cardiac rhythm disorder, a frequent cause of heart attacks.
Ask Rita Chakravarty who had to undergo emergency surgery to get a pacemaker fixed in her heart. Her husband had lost his job in the slowdown and she worried about the cost of the operation—Rs 3 lakhs. “I was taken by surprise when my surgeon told me that the pacemaker would cost around Rs 40,000 only,” she says. That was less than a seventh of what an imported pacemaker would have come for.
MediVed is among a clutch of mid-sized Indian companies which includes Trivitron Healthcare and Opto Circuits who are taking on global leaders like Johnson & Johnson, Boston Scientific and Hologic with affordable alternatives to life-saving medical equipment. A mix of backward integration, technological competence and smart acquisitions, is making them tick.
Opto Circuits operates out of Electronic City. This BSE and NYSE listed company has grown to Rs 818 crore in the last decade from Rs 19 crore making devices like stents and through acquisitions both in India and Europe. Chairman Vinod Ramnani says, “Until now we sold ‘non-invasive’ medical devices like electronic patient monitors and medical sensors that make up three-quarters of our business. But it’s the new ‘invasive’ products line—which includes stents and balloons—that holds promise.”
So how have Indian medical device makers managed to crack this tough business? Globally, demand for cardiac pacemakers has been rising. The US produces half of the world's medical devices and consumes approximately 40 % of the world's output. Indian manufacturers have leveraged their cost advantage to offer world-class quality at affordable prices. Opto, for instance, makes most of its monitors and sensors at its Indian facilities in Bangalore, Vizag, Chennai and Himachal Pradesh where production costs are lower. It also pays zero taxes due to its EOU status.
MediVed hired top class professionals from bigger rivals and also from ISRO. “We got the talent to produce the devices, and at the same time regulated the costs,” says Puri.
Imports of medical equipment and supplies by India were valued at around $12 billion in 2007. “This can be significantly reduced when domestic products are used,” says Puri, whose company plans to make Rs 150 crore by next year. However, at present, most of them are looking to capture the lucrative markets in western Europe and the US.
And also South East Asia. Here, Indian companies took the inorganic route. Opto acquired EuroCor, a company with proprietary technology, manufacturing facilities and distribution network for 11 million euros in December 2005, which now has the coveted CE (Communité European) mark. The company then bought US-based maker and distributor of patient monitoring devices, Criticare Systems, for $70 million in 2008. “This way, you are not spending time developing a product and going through numerous trials. You get the approvals as the target company had done the hard part,” says S Srinivasan, professor at IIIT Bangalore, who’s working on medical and IT technologies.
The medical devices and supplies market in India is expected to touch Rs 7,650 crore in 2010, growing at 23% annually from the current Rs 5,750
crores, according to a recently released report by National Institute of Pharmaceutical Education & Research (NIPER). Currently, the high value products being imported are in areas of cancer diagnostics, pacemakers, medical imaging, ultrasonic scanning, plastic surgery and polymerase chain reaction technologies. Those are also the areas where Trivitron Healthcare aims to be in some time.
Unlike MediVed, which quickly moved to manufacturing, Chennai-based Trivitron took time to develop clients like Boston Scientific, Siemens, Hamilton, Nihon Kohden and Hologic. It has now started producing X-ray and ultrasound machines in collaboration with a Japanese company Aloka, and in the next couple of years plans to start making cardiac testing equipment, to double its current revenue of Rs 400 crore over the next three years.
Most companies still import devices and instal them at top hospitals, but are also eyeing manufacture when the time is right. Ranjan Roy, CEO, Aeon Medical Systems has improvised. His company makes specialty ambulances for different illnesses, apart from importing high-end medical equipment for hospitals like Leelavati in Mumbai and Nimhans in Bangalore, and did Rs 38 crore in revenues last year. Trivitron’s managing director GSK Velu has been demanding STPI status for the park his company is setting up. “IT boomed because the government encouraged it by making it less costly. We need the same for medical devices,” he says.
Of course contract outsourcing is still a major business and stiff competition ensues to supply to major companies.
So while it means that a patient’s heart in the US is beating thanks to Indian companies, they now want a bigger share of the pie. MediVed plans to test the waters in Greece, Balkans, and China next year, while Opto further makes inroads in the US market while increasing its manufacture of the lucrative ‘invasive’ products. This will take a year as regulatory approvals come through. These companies will also need to think like big players, revamp organisational structures and induct top quality people into their R&D departments. “Those are the major challenges now,” says Ramnani, who has overseen the integration of companies rapidly acquired by Opto over the last four years, and has a R&D team in Wisconsin. There are other issues like delayed payments during the recession and raising funds that these entrepreneurs need to address as they go global.
