NEW NORMAL IN THE DIAGNOSTICS INDUSTRY
In January this year, the biggest deal in the Indian diagnostics space was all set to happen. Mumbaibased diagnostics major Metropolis Healthcare was going to buy the unlisted Chennaibased Dr Ganesan’s Hitech Diagnostic Centre. In early 2021, they agreed to a cashplusstock deal—rs 511 crore in cash and Rs 106 crore worth of Metropolis’ shares.
Then in June came the deal setting the new normal in the diagnostics sector: deeppocketed healthcare startup Pharmeasy paid Rs 4,546 crore to acquire 66.1% stake in Mumbaibased Thyrocare from Dr Arokiaswamy Velumani, the company’s promoter. Also, Velumani invested Rs 1,500 crore to buy 5% stake in Pharmeasy.
As of July 10, 2021, Metropolis told the stock exchanges that “in the view of no communication from the sellers to the letter issued on 5th July 2021, it can be assumed that the sellers are not intending to close the transaction.”
Why did the Metropolis Hitech deal not go through? Was it due to the new benchmarks set in the Industry?
The COVID pandemic disruption has increased the revenues of larger labs much more than smaller labs since larger labs had the infrastructure to operate during the lockdown. In India only 1% of labs are NABL certified. All the large chain labs are NABL certified. Since only NABL labs are allowed to carry out COVID19 RT PCR tests by ICMR, larger lab chains did most of the COVID19 testing. This growth has made bigger players such as Metropolis and Dr Lal Pathlabs seeking acquisitions of smaller players such as Hitech and Suburban Diagnostics that want to cash out.
With private equity money Pharmeasy may be looking for more acquisitions in the diagnostics space. Diagnostic players, especially small and regional ones, will also be keenly watching the upcoming IPOS of Punebased Krsnaa Diagnostics and Hyderabadbased Vijaya Diagnostics.
The entry of Pharmeasy through Thyrocare could increase the competitive intensity in the space. Pharmeasy will try to do something disruptive in diagnostics, similar to what it has tried to do with its epharmacy business.”
Recently Lupin has also entered the diagnostics industry. The combination of a large pharmaceutical company starting a pathology chain may also disrupt the market since Lupin has direct access to physicians across the country.
Another interesting dynamic is the entry of behemoths such as Reliance Industries (through Netmeds), the Tatas (through 1mg), and Amazon in the epharmacy space. Will these players also scout around for acquisitions in the diagnostics space? That remains to be seen.
Due to recent changes in the diagnostics industry some of the developments that may take place:
More preventive testing may happen due to the awareness created by digital platforms like Pharmeasy. More consolidation may happen as larger players flushed with investor money are hungry for growth. Lot of smaller labs may end up outsourcing more to larger labs as they will be able to offer lower prices due to high volumes.
The recent heavy investments in the diagnostics industry will cause tectonic shifts in the industry but in which directions these shifts will happen is a wait and watch scenario.
The COIVD pandemic disruption has increased the revenues of larger labs much more than smaller labs since larger labs had infrastructure to operate during the lockdowns. In India only 1% of the labs are NABL certified. All the large chain labs are NABL certified. Since only NABL labs are allowed to carry out COVID-19 RT PCR tests by ICMR the larger lab chains did most of the COVID-19 testing. This growth has made bigger players such as Metropolis and Dr Lal Pathlabs seeking acquisitions of smaller players such as Hitech and Suburban Diagnostics that want to cash out.
Abhinav Thakur Managing Director Accurex
With the continuous evolution of new Covid-19 variants, and anticipation of the third wave in our country, it has become imperative to proactively prepare ourselves for impending challenges.
As per the directive from Ministry of Health & Family Welfare (MOHFW), GOI, and guidelines of the National Centre for Disease Control (NCDC), the portable ultrasound plays a significant role in the clinical evaluation of COVID-19 patients. It should be considered as an invaluable tool for isolation wards/icus. Fujifilm Sonosite provides specialised point of care ultrasound (POCUS) machines which are extensively used in Covid wards across the globe for lung scanning, focused echo and for several other varied clinical applications. The strong reason behind the wide adoption of Sonosite color doppler Ultrasound system is its excellent image quality, intuitive user interface, sanitisable console for easy cleaning, light weight compact design and long hours of battery backup.
Nitin Gupta
Country Manager Fujifilm Sonosite India Pvt.ltd.