India Healthcare and Medical Device industry Analysis

Divya Kumar, Neel Mehta, Kavita Tangirala, Jared MckeeHSM502WP Carey MBA –Class of 2014Tempe Campus

Introduction

Republic of India: Facts and Figures

• Location: South Asian country. • 1.2 billion population, 2nd most populous country• 3rd largest economy in Asia and expected to be 3rd largest in the

world by 2050. • Steady GDP growth rate of 8.5% in last 5 years.

Demographics

• 28 states and 7 union territory • 30 official languages + English is widely spoken • World’s largest democracy • Currency is rupees 1 USD = 54.47 INR (www.xe.com @ 12/7/12)

Foreign Direct Investment

• 1991 brought the economic reforms• 3rd Most favorite nation for Foreign Direct Investment (FDI)• $58 Bilateral Indo-US trade (2011)

Healthcare/Medical Technology Market

• $80 billion Healthcare market (KPMG, 2012)

• Expect to reach $280 billion in 2020

• Steady growth of approx. 15%

• $11 billion Pharma market• Expect to reach $74 billion in

2020 (Ernst & Young)

• $5 billon Medical Device market

• Expect to reach CAGR of 15% (KPMG)

Why India?• 2.3% medical device excise Tax in US from 2013• India increases its government share of healthcare expenditure to 2.5%

by 2017 (12th 5 year plan)

http://www.emergogroup.com/files/2012-medical-device-industry-survey.pdf

SWOT AnalysisStrength Weakness

• Hugh market opportunity• English speaking population • World’s largest democracy, stable

democratic govt.• Low cost manufacturing• currency restrictions and reduce tariffs• SEZ (Special Economic Zones)• Tax break holiday • Second largest pool of scientist and

engineer• IFRS Based Accounting practice • Medical tourism

• Slow Reforms Process• The Long List Syndrome• The No Follow –through Syndrome • Lack of infrastructure • Political corruption • Trade barriers • Poor productivity record, FDI, Economic

reforms• Delay in dispute resolution

Opportunity Threats• Rapidly growing market • Small Distributorship Advantage• Middle class disposable income • Change in lifestyle of urban Indians• 1 billion+ market • Foreign Direct Investment Entry

• Fraud and Reliability Checks • Corruption and bribery• Poor copyright law• Foreign relations • Piracy • Social blunders • Macroeconomic concerns (inflation, etc.)

CGMS

• Continuous Glucose Monitoring System

New Class III deviceEffective management of blood glucose levelsComponents: Sensor, transmitter & a wireless

monitorAlerts the patient Downloadable data

National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK) http://diabetes.niddk.nih.gov/dm/pubs/glucosemonitor/index.aspx

• IndiaPatient base of 63 millionCauses for prevalence:

• Insulin resistance• Abdominal adiposity• Low adiponectin • Higher C-reactive protein• Diet and lifestyle

• Major impediments: Cost and affordability

International Diabetes Federation http://www.idf.org/sites/default/files/IDF_SEA_5E_Update_FactSheet.pdf

Mohan, V., Sandeep, S., Deepa, R., Shah, B., & Varghese, C. (2007). Epidemiology of type 2 diabetes: Indian scenario. The Indian journal of medical research, 125(3), 217-30.

Indian Human Development Surveyhttp://ihds.umd.edu/incomeRU.html

CGMS

Recommendation

• Invest in Indian Market– Medical Device Market growth rate of 15%– “We can expect 12%–16% annual growth over the next 10 to 15 years. All the risk factors

put together are just irritants, which at most can bring growth to 8%–9%. This is still significantly higher than the 2%–3% growth that developed, Western markets are currently experiencing.”

Annaswamy Vaidheesh - Johnson & Johnson

– Emergent Middle Class• Additional 580 million customers

– Growth of Insurance Market

Recommendation Investment Strategy

• Short-Term Strategy – Develop local distribution to distribute Tier 1 products

• Minimize fixed investment • Maintain flexibility • Utilize local sales force

• Long-Term Strategy – Invest in Manufacturing facilities

• Initially produce Tier 2-3 products• 100% Foreign Direct Investment• Utilize Indian facility to supply Asian markets• As markets mature manufacture Tier 1 products