Brief About the Industry
Indian medical device industry is dominated by MNCs. The industry is majorly dependent on imports covering average 70-75% of the demand and that is huge !
The medical devices industry was valued at US $ 4.9 billion (estd. Rs. 32,874 cr.) in 2017 which is expected to reach US $ 11 billion (estd. Rs 78,100 cr.) by 2022. The overall healthcare industry was valued at US $ 160 billion (estd. Rs. 10,47,360cr.) in 2017 and is expected to reach US $ 372 billion (estd. Rs. 26,41,200 cr.) by 2022.
- Due to current outbreak of COVID-19 - Coronavirus pandemic, overall impact (negative or positive) on Indian healthcare industry is yet to unfold.
The share of multinational firms is around 40% – 50% in consumables and instruments
and appliances and, as 80% – 90% in all other sub-segments. Most multinational companies have their production base outside India and import their products for the Indian market.
Key Players
Currently there are around 800 medical devices manufacturers in India with a very few in the listed space. Key Players are:
(A) Poly Medicure Ltd.
was conceived and established in 1995 by a group of engineers and technocrats dedicated with a vision of providing highest quality of healthcare to the mankind at affordable price. The company was promoted by Mr. Jugal Kishore Baid. It is the only listed company in the industry.
The company is into manufacturing of disposable medical devices. The company currently operates five Manufacturing units in India, three of which are located at Faridabad (Haryana), one at Jaipur (Rajasthan) and one at Haridwar (Uttarakhand).
The distribution network includes over 25 super distributors, over 10 authorised agents and over 1300 dealers, Over 200 persons in Sales, Marketing and Product Management Team. Globally they have dedicated Sales Network and Tie-up with key distributors in over 100 countries including in Europe, south-east Asia, the Middle East, Americas and Africa, distributing through a network of approximately over 200 distributors. Approximately 70% of the total revenues are attributable to exports.
Institutional holding represents holding of Foreign Portfolio Investor - Mathews India Fund. There is no holding by any Mutual Fund in the company.
The company's 70% business is from 'Infusion Therapy/Vascular Access devices' 
Other big segment is the 'Blood Management Systems' contributing 10% of the revenue -Blood Bag Systems, Transfusion Pump Set, Safety Blood Collection Set, Blood Administration Sets, Blood Bag with Safety Device & Sampling Bag, CPD-SAGM-TOTM Bag System, Top & Bottom Extraction Bag System, ACD Bag.
A few highlights from past years are as under:
(B) Wipro GE Healthcare Pvt. Ltd.
GE Healthcare is subsidiary company of General Electric incorporated in New York and headquartered in Chicago and operates in more than 100 countries. In India, it operates as Wipro GE Healthcare Pvt. Ltd. as in 2009, GE Healthcare had merged its healthcare business unit in India with its joint venture partner Wipro. It has 13 service branches here. The company offers medical machinery - categorized as Advanced Visualization, Anesthesia Delivery, Bone and Metabolic Health, Computed Tomography, Hemodynamic Recording Diagnostic, ECG, EP, Recording GoldSeal - Refurbished Systems, Healthcare IT, Magnetic Resonance Imaging, Mammography, Maternal Infant Care, Respiratory Care Nuclear Medicine, patient monitoring, radigraphy etc.
(C) Philips India Ltd.
It is an unlisted Indian subsidiary of Royal Philips of the Netherlands, a leading health technology company. The company is into the business of manufacturing Diagnostic Imaging equipments covering 32% of revenue along with its business of manufacturing domestic appliances, personal healthcare products and software development. Its major products include Health Systems: Computed Tomography and Intervention Guided Therapy, Magnetic Resonance Imaging (MRI), Ultrasound and Patient Monitoring.
The company sells its products primarily in India through independent distributors and modern trade.
(D) Schiller Healthcare India Pvt. Ltd.
SCHILLER, founded in 1974 by Alfred E. Schiller is a successful group with 30 subsidiaries and a global sales network. It is manufacturer and supplier of devices for cardiopulmonary diagnostics, defibrillation and patient monitoring as well as software solutions for the medical industry.
Schiller AG began its operations in India in 1990. This was in the form of a distribution tie-up with the Mumbai-based Hinditron, a supplier of cardiac diagnostic equipment.
Presently it is in India through a 50:50 joint venture with the RR Group of Mumbai, under the name Schiller Healthcare India Pvt. Ltd. Today it holds about 75 per cent of the market share in the field of multi-channel ECG analyser. Besides manufacturing, Schiller is also a distributor of products of other companies. It is the authorised distributor of products of Medrad of USA, market leader in the field of vascular pressure injection systems for Angiography, CT and MRI.
(E) Danaher Corporation
Danaher Corporation is a globally diversified conglomerate with its headquarters in United States. Danaher is ranked 162nd on the 2018 Fortune 500 list. It operates in four segments: environmental & applied solutions, life sciences, diagnostics, and dental.
It operates in India as a subsidiary with the name DHR Holding India Pvt. Ltd. Like its parent, which thrives on an acquisition-led growth model with around 400 buyouts in past 30 years, Danaher India owns and runs as many as 30 companies, employing over 5,000 people, out of which 1,500 are at its R&D centre in Bangalore.
(F) Hindustan Syringes & Medical Devices Ltd.
Mr. Narindra Nath founded Hindustan Syringes & medical Devices Ltd. in 1957 and pioneered to launch a comprehensive range of sizes of Auto Disable Syringes for the curative segment. He is the current Chairman and MD. The company is mainly into Hypodermic Syringes, I.V. Cannulus, Infusion Set/Winged Needle, Needles, Blood collection and other testing sets.
The company has 7 Plants in different locations in South Asia. Has national and international distribution network of more than 4,500 dealers to ensure ready availability even in remote areas. Its Primary markets are India, USA, Europe, Middle East and secondary markets include Africa and South East Asia.
Other players of Syringes, needles, catheters, bandages, dressings include - Lotus Surgicals, Sutures India, B Braun, Beckton Dickinson etc.
Key Players of Knee and hip implants, artificial joints, dental fixtures include - Smith and Nephew Healthcare Pvt. Ltd., Narang Medical Ltd., Zimmer India Pvt. Ltd., Johnson & Johnson Pvt. Ltd. etc.
What "will or may" uplift the Industry ?!
(A) Ease of Regulations
From January 1, 2018 the new Medical Devices Rules 2017 were implemented, bringing ease of business for the industry - a) Eased norms for obtaining license and conducting clinical trials. b) Reduced manufacturer-regulator interface by prompting
digital platform. Earlier medical devices were regulated as drugs but with this implementation the two were separated and rules were formed specifically catering to the medical devices industry.
The rules were aimed to standardise and regulate medical devices manufacturing industry, on par with international standards. The new Rules were framed in conformity with Global Harmonisation Task Force (GHTF) framework, following best international practices.
Further amendments to such rules in 2018 have been conducive to the industry environment and will ahead be done for betterment only. Such ease of regulations is a big boosting factor for the industry.
This is expected to lead the quality focused domestic players can capture market share of sub standard players. More over it is an opportunity for the MNCs to launch newer products.
On 7th December 2018 Department of Industrial Policy and Promotion (DIPP) under Ministry of Commerce and Industry notified National Medical Devices Promotion Council. The formal announcement was made on the occasion of 4th WHO Global Forum on Medical Devices in Vishakhapatnam by Union Minister of Commerce and Industry and Civil Aviation, Shri Suresh Prabhu. The Council will be headed by Secretary of the Department of Industrial Policy and Promotion (DIPP). Apart from the concerned departments of Government, it will also have representatives from health care industry and quality control institutions. The council would act as a facilitating, promotional & developmental body for the Indian Medical Devices Industry. The Government aims to boost the medical device sector by setting up the council.
(B) Rising Geriatric Population
According to the United Nations, India’s population is set to touch 1.45 billion by 2028, making it the world’s most populous nation. With socio-economic changes such as rapid urbanisation, demographic and lifestyle changes, the society is more prone to lifestyle-related ailments, including diabetes, obesity, stroke and cancer. Also, out of the total population, the share of ageing population in 2011 was ~8.6%and is expected to increase to 19% of the total population by 2050. With an increasingly ageing population, there will be a greater demand for better health care facilities and medical devices.
(C) International Players' Foray into Indian market
The Indian medical devices industry is a sunrise segment in the healthcare space. With a strong focus on technology, innovation and a conducive regulatory framework, this sector is expected to attract strong investments in the coming years.
Many international companies in this field are already using India as a manufacturing base by either setting up facilities of their own or by acquiring domestic manufacturers. Some examples include 3M’s manufacturing plant in Pune, Becton Dickinson’s manufacturing facility in Haryana, Hollister’s setting up manufacturing facility in India
and Philips Medical Systems’ acquisition of Medtronics and Alpha X-Ray Technologies.
The Government of India has taken multiple steps to boost the medical device manufacturing in the country. One such step is permitting 100 per cent automatic foreign direct investment in the sector. Another step has been the rolling back import duty concessions for 67 medical devices.
(D) Ever Booming Healthcare Industry
There are numerous attractive factors for rise in the Healthcare Industry:
a) Presence of world-class hospitals and skilled medical professionals has strengthened India’s position as a preferred destination for medical tourism. Treatment for major surgeries in India costs approximately 20 per cent of that in developed countries. Indian medical tourism market is growing at the rate of 22-25 per cent and is expected to reach US$ 6.0 billion by 2018 from US$ 3.0 billion in 2017.
b) The Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (PMJAY), the largest government-funded healthcare programme targeting more than 500 million beneficiaries, was allocated Rs 6,400 core (US$ 887.04 million).
c) With increasing urbanisation and problems related to modern-day living in urban settings, currently, about 50 per cent of spending on in-patient beds is for lifestyle diseases; this has increased the demand for specialised care. In India, lifestyle diseases have replaced traditional health problems. Most lifestyle diseases are caused by high cholesterol, high blood pressure, obesity, poor diet and alcohol.
d) The hospital industry in India stood at Rs 4 trillion (US$ 61.79 billion) in FY17 and is expected to increase at a Compound Annual Growth Rate (CAGR) of 16-17 per cent to reach Rs 8.6 trillion (US$ 132.84 billion) by FY22.
e) From September 2014 onwards, special attention was diverted towards medical devices sector, with its inclusion in the focussed 25 sectors under "Make in India" campaign. In December 2014, medical devices sector was carved out from the pharmaceutical sector thereby allowing 100% FDI under the automatic route, for brown field as well as greenfield set ups. The development took more interesting face on the launch of new medical devices policy in 2018 as discussed earlier.
(E) Untapped growth drivers
- Density of doctors per 1000 population: 0.73 v/s Global density of 3 doctors.
- Population covered under health insurance: 34% vs world average of 85%
- Health Spending: 1.15% of GDP far below Singapore which has the lowest public spend on health at 2.2% of GDP among countries with significant universal health coverage service.
- Per capita Public Expenditure on health: Rs. 1,112 by year 2016 v/s spend Switzerland $6944, US- $4802, UK- $3500.
- Hospital beds per 1000 population: 1.1 beds - far below the global average of 3 beds.
- Furthermore, ~70% of the hospital beds and health workforce are in urban areas where only ~30% of the country’s total population resides.
- The growth rate of India's medical-device industry is around ~15% which is more than double of the global industry growth rate of ~4-6%. With majority of demand coming from the metro cities, rural areas which consist of a significant chunk of the
population is highly underserved. The Indian medical device market has grown from USD 2.02 billion in 2009 to USD 4.9 billion in 2017 at a CAGR of 17%
(F) Technology Improvements
Globally, the healthcare sector is witnessing rapid advancements in how patients are diagnosed and treated and the Medical Technology industry is at the core of this transformation. The industry is well positioned to revolutionize healthcare in India as well. Using a mix of nascent as well as advanced technologies such as artificial intelligence, remote sensing, 3D printing, E-ICUs, virtual reality, telemedicine and others – MedTech has the potential to help India’s healthcare industry overcome many of the challenges faced by it – be it accessibility, affordability or quality.
Poly Medicure is known for its innovative "single use" medical devices, Phillips Intuis, an advanced entry-level catheterization lab, is helping provide affordable cardiac care in smaller cities and towns in India. It has a live image guidance technology which can help vascular specialists to decide, guide and confirm the right therapy for their patients in real-time, GE Healthcare developed a CT scan system that uses 40% less power,
produces less radiation and is 40% cheaper than imported equivalents. It has
a substantially smaller size (can fit in smaller clinics and hospitals) and a higher
throughput (scan time is 28% faster).
Many global medical device players have also set up large R&D facilities in India which are driving innovation,
Indian entrepreneurs have realized that developing products and solutions
that bridge the gaps in the Indian healthcare system can lead to long-term financially viable businesses.
There have been many Startups as well in this industry - Sattva (Fetal Heartrate Monitor ), Forus Health (Neonatal retinal scanner), Axio (Haemostatic emergency
dressing), Tricog Health Services (Cloud based ECG machine for faster diagnosis) and many others.
Major Challenges for the Industry Players
(A) Competition challenges hinder growth of domestic players
The medical device industry is subject to rapid technology and regulatory changes, and the domestic players experience significant competition from a wide range of companies. These include large medical device companies, some of which may have greater financial and marketing resources. Non-medical device companies, including pharmaceutical companies, also offer or are attempting to develop alternative therapies for diseases that may be cured without a medical device. This demands extensive innovations by the domestic players.
High reliance on products designed for global markets leads to low suitability of such products for the Indian market i.e. more contextual innovation is required.
(B) Insufficient Talent Base
Lack of trained professionals and clinical staff required for installing, operating, servicing and repairing medical devices is a critical limiting factor.
The main ground level challenges because of which Indian players have not done breakthrough yet include: weak healthcare delivery infrastructure, problems with obtaining Intellectual Property Rights, inadequate regulatory environment.
Conclusion
This segment has not yet stood out to be an investable opportunity in the past. But in near future, the untapped opportunities are huge in India and can be looked into with deep research & analysis. The industry will certainly take quite number of years to bring a shift from imports to indigenous productions; Imports of medical devices from the US increased from Rs 61.5 billion in 2014-15 to Rs 74.2 bn in 2017-18 . When it comes to quality, India is still not completely confident on the Indian manufacturers in case of high-end medical machinery.
It is expected that the industry might grow probably with international players starting manufacturing in India with independent units here as evident from the current trend. Also if there is continuous push from the regulatory environment, tremendous growth is bound to happen in coming years.
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References: Companies' Annual reports, Media reports, Investor presentations, Industry reports. (We have taken the most recent published details of the companies and the latest investors' meet)
Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. The report & references mentioned are only for information of the readers about the industry stated.
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