Indian Medical Devices Sector Report

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Indian Medical Devices Sector
Sector Report
January 2014
Indian Medical Devices Sector
J anuary 2014
Disclaimer and Confidentiality Clause
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2 Private and Confidential
Methodology and List of Abbreviations Used
3
Term Description
SME Small and Medium Enterprises
CY Calendar Year
FY Fiscal Year
FDA Food and Drug Administration
CDSCO Central Drugs Standard Control Organization
ISO International Organization for Standardization
GMP Good Manufacturing Practices
FDI Foreign Direct Investment
FIPB Foreign Investment Promotion Board
WHO World Health Organization
CLAA Central Licensing Approval Authority
IVD In Vitro Diagnostic
ECG Electrocardiogram
CT Computed Tomography
MRI Magnetic Resonance Imaging
GDP Gross Domestic Product
Private and Confidential
Market sizes and company revenues across the report are
presented in USD (mn/bn) assuming a USD/INR exchange
rate of 60 – for all historical, current and projections
Source for the data points provided in the report includes
Espicom Medical Devices Report Q4 2013, Medical
Buyer, other industry reports and o3 Capital‟s primary
research
Market sizes for all the segments of Indian medical devices
sector, except IV Diagnostics, were presented at ex-factory
prices in the source report which have been converted into
market retail prices using suitable assumptions
1
2
3
4
Executive Summary
Private and Confidential
 The Indian medical devices industry forms about 8% of the Indian healthcare sector and is expected to be worth USD 6.3 bn in 2013. It has
grown at a CAGR of 17.2% for the period 2008 – 13 and is expected to grow to USD 10.2 bn by 2016 with a CAGR of 17.4%
 The industry is highly fragmented with 65% of the manufacturers falling in the SME category. The higher-end of the market is dominated by
foreign manufacturers, many of whom have established their subsidiaries in India
 The industry is highly dependent on imports with 77% of the demand being delivered through imports. Low or no customs duty have also
encouraged imports rather than manufacture
 Ambitious expansion plans of corporate hospitals coupled with increased outsourcing of manufacturing by foreign companies, which are under
pressure to reduce costs, are expected to fuel the growth of the industry. The increased focus of the Government on healthcare,
increasing incidence of lifestyle diseases and rising proportion of senior citizens are also expected to boost the demand for medical
equipments in the country
 Several Indian medical device companies have enhanced their competitiveness by tying up with international companies for research and
development and technical innovations
 In terms of product segments, diagnostic imaging is the largest segment and is expected to contribute 30% of the overall market in 2013.
Patient aids segment, consisting of portable aids and therapeutic appliances, is the fastest growing segment, having grown at a CAGR of
35.6% for the period 2008 – 13
 Medical consumables, ophthalmic instruments and orthopaedic implants are the segments expected to witness high growth and attract private
equity as well as strategic interest
– Sutures India and Lotus Surgicals have recently got funded. Adler Mediequip was acquired by Smith & Nephew; Optics India was acquired
by Essilor, TTK Healthcare acquired the orthopaedic implants business of Invicta Meditek
 Indian medical devices industry remains unregulated with only a few products regulated through the provisions of Drugs & Cosmetics Act 1940
& Rules 1945. Such regulated products are classified as „drugs‟
 Indian medical devices sector has witnessed increasing deal activity in the recent past as the Indian players try to gain access to foreign
markets and consolidate their position at home. The activity is expected to increase in future with foreign players taking more interest in the
industry and Indian companies making acquisitions abroad
– Around 31 private equity investments have been made in the sector with a combined deal value of USD 265 mn (from 2005 – till date).
Investments have picked up in the last 2 years with CY12 and CY13 accounting for 18 such investments with total deal value of USD 226
mn
5
Table of Contents
Private and Confidential
Title Slide No.
Section 1: Industry Overview 6 – 11
Industry Overview 7
Market Evolution 8
Growth Drivers and Key Trends 9
Industry Landscape –Key Indian Players 10
Key Industry Segments 11
Section 2: Growth Drivers and Trends 12 – 18
Growth Drivers 13 – 15
Key Trends in the Sector 16 – 18
Section 3: Key Industry Segments 19 – 25
Diagnostic Imaging Segment 20
Medical Consumables Segment 21
In-Vitro Diagnostics Segment 22
Patient Aids Segment 23
Orthopaedics and Prosthetics Segment 24
Dental Products Segment 25
Other Medical Devices Segment 26
Section 4: Regulatory Environment 27 – 29
Section 5: Transactions in the Segment 30 – 32
Private Equity Investments 31
M&A Transactions 32
Contact Details 33
Section 1
Industry Overview
7
Industry Overview
Private and Confidential
Indian medical devices is a high growth industry currently dominated by imports
 The Indian healthcare sector is estimated to be valued at
USD 77.8 bn in 2013, with hospitals forming the largest
share of the market at c.75%
 The medical equipment and supplies industry is expected to
be 8% or USD 6.3 bn of the Indian healthcare sector in
2013. The market is growing at a CAGR of 17.2%
 The industry is very fragmented with more than 65% of
Indian manufacturers falling in the SME category
 Majority of domestic manufacturers focus on low
margin, low technology products like disposables and
medical equipment
 High quality products are sought after, particularly in the
private sector, and the high tech end of the medical device
market is dominated by multinationals with extensive
service networks
 The market is still highly import dependent with 77% of the
market consisting of imports
 Like most of the developing low-cost countries, India is also
predominantly a manufacturer of Class I & II devices
(categorization as per US FDA), i.e. devices which are not
considered to be high risk and do not need extensive
clinical trials before receiving FDA approval
 Indian manufacturers of good quality mid tech products
struggle with a stigma for unreliability
Key Highlights Chart 1: Indian Healthcare Sector, 2013E
Source: ‘Indian Brand Equity Foundation’ (IBEF) Healthcare Report, News Articles, o3
Analysis
Note: Pharma includes only domestic formulations market
Chart 2: Indian Medical Devices Sector, 2013E
2.8
3.1
3.6
4.2
5.4
6.3
7.4
8.7
10.2
2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E
CAGR: 17.2%
Source: Espicom Q4’2013 Indian Medical Devices Report, Medical Buyer, o3
Analysis. Figures in USD bn. Assumed USD/INR - 60
CAGR: 17.4%
Hospitals
75%
Pharma
14%
Medical
Devices
8%
Diagnostics
3%
Total Market Size =USD 77.8 bn
8
Market Evolution
Private and Confidential
Emergence of Indian
Players Both in Hi-Tech
and Low-Tech Medical
Devices Segments
Moving Towards a Well
Established and Regulated
Sector
Domination of Foreign
Medical Device
Companies
Timeline
Growth
Post 2013 - Boom Phase? 1980s - Current Before 1980s
– Many Indian companies such
as Opto Circuits, RFCL,
Sahajanand, Sutures India,
Poly Medicure, Kanam Latex,
etc. emerge
– Foreign players establish
subsidiaries as well as enter
into JV arrangements for
R&D, manufacturing and
marketing their products
– Increased M&A (both inbound
and outbound) and private
equity deal activity
– Sector remains weak on
regulatory front with medical
devices falling under the
definition of „drugs‟ and only
sterile devices regulated
– High growth expected through
various factors contributing to
the growth of overall Indian
healthcare sector –
underpenetrated market,
increase in government
healthcare spending, etc.
– Commissioning of new
hospital beds in tier-2 and
tier-3 locations a key trigger
for growth
– Government puts proper
regulatory system in place –
Drugs and Cosmetics Bill
2013 has been sent to the
Parliament which proposes a
separate chapter on medical
devices and setting up of a
Medical Devices Technical
Advisory Board
– India becomes a preferred
R&D and manufacturing hub
for world‟s leading medical
device companies
– Foreign medical device
companies sell products
through distributors
Figure 1: Evolution of Medical Devices Sector in India
Source: o3 Analysis
9
Growth Drivers and Key Trends
Private and Confidential
 Increase in healthcare facilities:
Increase in healthcare facilities encourages the demand for medical equipments as about 29% of the cost of setting up a
hospital/clinic is contributed by medical equipments
 Increase in outsourcing:
Outsourcing of laboratory trials, R&D as well as manufacturing to India spurs demand for medical equipment
 Government initiatives:
Various initiatives taken by government such as increasing public investment in healthcare, promotion of health insurance
and setting up health care centers are expected to boost the demand for medical equipment
 Rising proportion of senior citizens:
Increasing proportion of senior citizens adds to the use of medical devices and is also boosting the home healthcare market
 Rising Prevalence of lifestyle diseases:
Lifestyle diseases spurs demand for cardiovascular, orthopedic and other such devices
 Medical tourism:
Evolution of India as a medical tourism hub leading to demand for world class equipments
Growth Drivers
 International collaborations:
Indian players are placing more and more importance on technology by entering into technical collaborations with their
foreign counterparts. Also, a lot of instances of R&D, marketing and manufacturing JVs are observed in the sector
 Refurbished equipments:
Usage of refurbished medical devices, which are sold at a discount of 40-50% when compared to new ones, are gaining
prominence. Around 5% of the overall market is accounted for by refurbished medical devices
 Healthcare facilities in tier 2/3 locations:
Hospitals in tier 2/3 locations are driving the demand for medical devices market. In addition to new hospitals being set
up, existing hospitals, which earlier did not have adequate equipments, are sourcing new/refurbished equipments
 Increasing M&A and PE deal activity:
Industry experiencing consolidation with a rising number M&A transactions – both inbound as well as outbound – and
private equity investments
 Medical equipment financing services:
Various medical equipment manufacturers are providing financing services to the healthcare delivery providers. Some such
companies operating in India include – GE, Siemens, Phillips, amongst others
Key Trends
10
Industry Landscape – Key Indian Players
Private and Confidential
Figure 2: Indian Medical Devices – Key Indian Players
SEGMENT GROWTH RATE (2008-13)
Cardiac Stents,
Pacemakers, Implants
Growth – 34.4%
F
Y
1
3

R
E
V
E
N
U
E
S

(
U
S
D

m
n
)
Medical Consumables
Growth – 17.4%
In a market dominated by
exports, medical consumables
is the only trade surplus sub
segment
10
20
50
150
Hospital Furniture
and Others
Growth – 14.6%
Source: Espicom Q4’2013 Indian Medical Devices Report, Medical Buyer, Market Research. Revenues have been converted at an exchange rate of USD/INR - 60
Note:
1. Opto Circuits derives only c.4% revenues from India
2. ‘Hospital furniture and others’ segment include hospital furniture, wheelchairs, ophthalmic instruments, dental products, amongst others
3. ‘Cardiac stents, pacemaker and implants’ segment includes orthopaedics & prosthetics devices and patient aids segment
4. Revenue figures are approximate and have been sourced from public sources
Diagnostic Imaging
and IV Diagnostics
Growth:15.3%
11
Key Industry Segments
Private and Confidential
All the sub segments are delivering a double digit growth rate (for the period 2008 – 13)
30%
16%
10%
9%
7%
3%
24%
Diagnostic Imaging Consumables IV Diagnostics
Patient Aids Ortho & Prosthetics Dental Products
Others
Chart 3: Indian Medical Devices Sector, 2013E
Total Market Size =USD 6.3 bn
Source: Espicom Q4’2013 Indian Medical Devices Report, Medical Buyer, o3 Analysis
Assumed USD/INR - 60
 The Indian medical devices sector can be broadly classified into 6 key
segments:
– Diagnostic imaging
– Consumables
– IV diagnostics
– Patient aids
– Orthopaedics & prosthetics
– Dental products
 Diagnostic imaging sector, consisting of electro-diagnostic
apparatus, radiation apparatus and imaging parts & accessories forms
the largest sub segment with 33% market share
 Consumables sector, forming 18% of the overall sector, is growing at a
healthy rate of 17% (2008-13E). This is the only segment with a positive
balance of trade
 IV diagnostics segments, including instruments and reagents, forms
c.10% of the overall market, having grown at a CAGR of 21% for the
period 2008-13E
 Patient aids is the fastest growing segment, having grown at a CAGR of
36% for the period 2008–13E. The market consists of portable aids and
therapeutic appliances
 Orthopaedics and prosthetics market, forming 8% of the overall
market, is the second fastest growing segment
 Dental products primarily include „capital equipments‟ – dental
drill, dental chairs, etc. and „instruments & supplies‟ – dental
cement, teeth & other fittings etc.
 Other medical devices segment includes wheel chairs, ophthalmic
instruments, hospital furniture, medical & surgical sterilizers ultra violet
apparatus
Section 2
Growth Drivers and Trends
13
Growth Drivers
Private and Confidential
Chart 4: Cost Structure for a 250 Bedded Hospital Set-Up
Medical
Equipment
29%
Building and
Utilities
31%
Land
33%
Other
Equipments
7%
Chart 5: Growth of Indian Hospital Sector
 The average real household disposable income of
Indians is expected to grow at a CAGR of 5.3% in the
period from 2005 to 2025. This is causing increased
demand and ability to pay for quality healthcare,
leading to expansion of corporate hospitals
– Leading chains like Apollo, Fortis, Narayana
Healthcare, Manipal and HCG are setting up new
hospitals, thus investing in high-end medical
equipment
 Due to the Government thrust on healthcare
reform, the public health delivery system is also
expected to grow. The Planning Commission has
allocated USD 50 bn under the 12
th
Five-Year Plan
(FY13 - FY17) to the Ministry of Health and Family
Welfare
 The emergence of India as a preferred destination for
medical tourism is also encouraging the expansion of
hospitals. Medical tourism is expected to grow at a
CAGR of over 25% for the period from 2012 to
2015E
 Medical equipment accounts for 29% of the total cost
incurred in setting up a hospital (250 bedded).
Hence, the growth of the hospital sector will
simultaneously ensure the growth of the medical
equipment sector
Source: Industry Reports
Increase in
Healthcare
Facilities
Emerging Trends
Growth Drivers
22
26
32
38
46
55
58
2007 2008 2009 2010 2011 2012 2013E
CAGR: 17.5%
Source: Industry Reports. Figures in USD bn
Please note in the 2007 – 2013 period, INR has depreciated at a CAGR of 6% against
USD, and hence growth rates measured in INR terms will be 20%+
14
Growth Drivers (contd.)
Private and Confidential
Increase in
Outsourcing
 Global medical equipment outsourcing market is forecasted to reach
USD 40 bn by 2016 growing at a CAGR of 16.3%
– Regions such as Latin America, India and China are expected to
attract increased interest from MNCs due to their competitive
benefits – low cost and highly qualified specialists
 Multinational device makers are outsourcing or relocating their
manufacturing operations to India
– Philips Healthcare plans to make India production hub to serve the
emerging markets in Asia Pacific. GE, Siemens,
Toshiba etc are also ramping up their operations in India
 Outsourcing of laboratory trials and R&D will lead to growing demand
for diagnostic equipments
– About 70 multinational companies including Eli Lilly, GE and
Delphi, have R&D facilities in India
 Indian companies have started to comply with ISO and GMP standards
to increase confidence levels of foreign companies and promote
outsourcing interest in manufacturing in India
Outsourcing
to India
Engineering
expertise
Location
advantage to
penetrate
Asian markets
Quality
product
development
Lower wages
Experience in
long distance
project
execution
Highly
qualified
medical
specialists
Emerging Trends
Growth Drivers
Government
Initiatives
 Welfare programmes and policy measures of
the Government are indirectly supporting the
medical equipment industry
 The government is currently working towards
establishing a medical regulatory agency, in
addition to new legislation around medical
devices, in order to create a fair and legitimate
marketplace
 The government is taking steps to collaborate
with the private sector to offer quality services at
a subsidized cost
Driver Action taken
National Rural Health
Mission (NRHM)
Mobile healthcare delivery outlay in
2012-13 budget further increased
Rashtriya Swasthya Bima
Yojana (RSBY)
Launch of health insurance coverage
for Below Poverty Line (BPL) families
National Health Policy
(NHP)
Aims to increase public health
expenditure to 2.5% of GDP by 2017
Government contracts &
grants
Setting up of hospitals and
Community Health Centers both in
urban and rural areas
Table 1: Government Initiatives Driving the Sector
Source: Industry Reports
15
Growth Drivers (contd.)
Private and Confidential
Rising
proportion of
Senior Citizens
Chart 7: Age Wise Population Distribution
35%
25%
58%
65%
7%
11%
2001 2012
0-14 15-59 60+
 India‟s average life expectancy over the
past two decades has significantly
improved from 57 years to 64 years (as
per WHO statistics) and is likely to
increase further
– The %age of population above 60
years of age is increasing
 A rise in the aged population will
increase the demand for medical devices
like blood pressure monitors,
glucometers, wheelchairs etc
Source: Industry Reports
Emerging Trends
Growth Drivers
Rising
Prevalence of
Lifestyle
Diseases
3.3%
2.8%
2.5%
1.3%
0.2%
4.9%
3.7%
2.7%
2.6%
0.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
CHD Diabetes Asthma Obesity Cancer
2005 2015E
 Unhealthy dietary patterns, lack of physical exercise and rising
stress levels have led to an alarming increase in the incidence of
lifestyle disorders such as cardiovascular
diseases, diabetes, cancer etc
 These are expected to spur the demand for orthopaedic
devices, cardiovascular devices, ophthalmic devices, diagnostic
imaging products and in-vitro diagnostics
– Diagnostic imaging market is expected to grow at a rate of
17% annually till 2018
– Orthopaedic products market, valued at USD 443 mn in
2013E, has grown at a CAGR of 33.0% for the period 2008 –
13E
 Medical devices companies have launched various products to
address fast growing lifestyle diseases segment – Roche’s
‘Accu-Check’ Go blood glucose monitors; J&J has recently
launched ‘One Touch’ diabetes reading monitor in India
Chart 6: Percentage of Population with Lifestyle Diseases
Source: Industry Reports
16
Trends in the Sector
Private and Confidential
International
Collaborations
 There have been several instances where international companies have tied up with their Indian counterparts for
R&D, technical innovations and marketing arrangements
Trivitron – DiaSorin
On July 30, 2012, DiaSorin, an Italian clinical diagnostics company, entered into a
joint development agreement with the Indian firm Trivitron Healthcare. The
agreement would provide an entry to DiaSorin in the Indian IVD market
Manipal Group –
Everist Genomics
On May 23, 2012, Everist Genomics (EGI), a US based manufacturer of monitoring
and cancer diagnostic products, formed a JV with Manipal Group in India to tap the
market primarily for sales of its mobile monitoring devices
Garuda – Welch Allen
On Sep 6, 2011, Welch Allen, a US based manufacturer of diagnostic products and
medical devices engaged Garuda Med Equipments as its exclusive marketing and
distribution partner in India
Trivitron – Hitachi
On Aug 25, 2011, Trivitron Healthcare entered into a partnership with Hitachi
Medical Systems to market latter's high-end medical imaging solutions in India
Emerging Trends
Growth Drivers
Demand from
Tier 2/3
Location
Hospitals
 Hospitals in tier 2/3 locations are driving the demand for medical devices market. In addition to new hospitals being
set up, existing hospitals, which earlier did not have adequate equipments, are sourcing new/refurbished
equipments
 Domestic players, which supply products at lower cost as compared to MNCs, will benefit here
– Companies such as Mysore-based Skanray Technologies, have taken advantage of such gaps in medical
treatment and brought out products that cheap but effective. For instance, Skanray's USB-based ECG unit
called „Cardiskan‟ converts laptops, or personal computers, into a 12-channel electrocardiogram system. As a
result, rural diagnostic centres can now offer ECGs for as low as 20% of the cost they earlier used to charge
– Skanray is also planning to launch a highly cost effective ultrasound machine, which would offer similar cost
benefits to diagnostic chains and customers
 Tier 2/3 locations become all the more important with a number of diagnostic centres coming up, thereby creating a
market for medical devices
17
Trends in the Sector (contd.)
Private and Confidential
M&A /
Consolidation
in the Sector
 The Indian medical devices industry is witnessing consolidation as Indian players try to gain access to foreign
markets and consolidate their positions at home and at the same time, foreign companies enter India through
acquisitions
 Some recent instances of domestic and inbound M&A include:
– India based Skanray acquired Pricol Engineering and L&T Medical & Systems
– Purple Medical Solutions acquired MIV Therapeutics
– Smith & Nephew acquired Adler Mediequip
– Essilor International acquired Optics India
 Instances of recent outbound acquisitions include:
– Transasia Bio Medical acquired Maxmat, Drew Scientific and JAS Diagnostics
– Trivitron acquired Labsystems Diagnostics
Emerging Trends
Growth Drivers
Usage of
Refurbished
Medical
Devices
 India is an established market for refurbished medical devices. Key product segments in India include - diagnostic
imaging devices such as CT and MRI scanners, C-arms, patient monitoring devices, anesthesia
equipment, laboratory equipment
 Small hospitals operating in tier 2/3 cities of the country are struggling to meet the cost of new imaging
equipments, resulting in increased opportunities for low-cost medical devices. Refurbished medical devices are
sold at 40–50% discounts compared with the cost of new equipments in the country
 The market in India is growing at over 15% per year. About 5% of the overall revenues generated from the sales of
medical devices in the country are accounted for by refurbished medical devices. Japan serves as the key supplier
of refurbished medical devices to India
 GE has invested in setting up a facility in Bangalore to overhaul about 150 refurbished medical imaging units for
sale in India
18
Trends in the Sector (contd.)
Private and Confidential
Emerging Trends
Growth Drivers
Private Equity
Investments
 Private equity community has shown increased interest in the Indian medical devices sector. Around 9 private
equity investments have been witnessed in the CY 2013. Investment targets primarily include medical
consumables and diagnostic equipments companies
 Some of the well known brands in India have witnessed multiple rounds of funding in the recent past –
Trivitron, Sutures India and Perfint Healthcare
 Some of the recent PE investments in the space include
– IVFA invested in Trivitron Healthcare, Norwest invested in Perfint Healthcare, Ascent Capital invested in
Skanray, Goldman Sachs invested in BPL Technologies
– Samara Capital invested in Lotus Surgicals, TPG invested in Sutures India
Medical
Equipment
Financing
 Healthcare equipment financing is picking up in India and is making setting up of a healthcare facility affordable
and effective. It is an option available to the growing healthcare facilities as they plan to grow their patient care
capabilities. Such facilities can lead to greater levels of penetration, making medical technology accessible to
smaller hospitals, medical practitioners and pathological laboratories
 Financing services provided by medical equipment manufacturing companies turns out to be cheaper as compared
to bank debt financing. Some of the such manufacturing companies providing financing services in India include
GE Capital, Siemens, Phillips, amongst others
Section 3
Key Industry Segments
20
Diagnostic Imaging Segment
Private and Confidential
Key Highlights Chart 8: Indian Diagnostic Imaging Segment Breakup, 2013E
Electro-
diagnostic
Apparatus
40%
Radiation
Apparatus
26%
Imaging
Parts &
Accessories
34%
Total Market Size =USD 1,885 mn
995
1,048
1,166
1,312
1,619
1,885
2008 2009 2010 2011 2012 2013E
CAGR: 13.6%
Source: Espicom Q4’2013 Indian Medical Devices Report, o3 Analysis. Figures in
USD mn. Assumed USD/INR - 60
 Diagnostic imaging is the largest segment of the Indian medical devices
sector, constituting c.30% of the overall segment
 The segment is also the largest contributor to the overall imports for the
Indian medical devices sector, c.33%
– Majority of the higher-end diagnostic equipments such as MRI, CT
Scanners, etc. are imported
 The segment can be broken down into:
– Electro-diagnostic apparatus: Includes ECG, ultrasound, MRI,
amongst others
– Imaging parts and accessories: Includes contrast media, medical X-
ray film, X-ray tubes
– Radiation apparatus: Includes CT scanners and other medical X-ray
apparatus
 Due to the large capital expenditure and high level of competition,
equipments are generally leased out. In this way, hospitals and
laboratories save on capital expenditure
 Strong growth is expected in the low-end and mid-range systems
purchased by small hospitals and facilities in rural areas
Overview
Diagnostic Imaging
Chart 9: Indian Diagnostic Imaging Segment Growth
 GE Healthcare
 Philips Healthcare
 Siemens Medical Solutions
 Hitachi Medical
 Schiller Healthcare
 Toshiba Medical Systems
 Trivitron
 Cura Medical Equipment
Table 2: Key Players in the Segment
21
Medical Consumables Segment
Private and Confidential
Key Highlights Chart 10: Indian Medical Consumables Segment Breakup, 2013E
Syringes, Need
les, Catheters
70%
Bandages and
Dressings
11%
Suturing
Material
6%
Other
Consumables
13%
Total Market Size =USD 1,033 mn
463
560
576
706
887
1,033
2008 2009 2010 2011 2012 2013E
CAGR: 17.4%
 Medical consumables is the second largest segment of the Indian medical
devices sector, constituting c.16% of the overall segment
 The segment is the only trade surplus segment of the Indian medical
devices sector
 The segment can be broken down into:
– Syringes, needles and catheters: Largest subcategory of the
consumables market (70%, USD 723 mn). Key Indian player engaged
in the segment is 'Hindustan Syringes and Medical Devices'
– Bandages and dressings: Forms c.11%, USD 114 mn of the
consumables market. Due to the existence of a sizeable local
manufacturing base producing basic dressings, only around a third of
the market is supplied via imports
– Suturing material: Forms c.6%, USD 62 mn of the consumables
market. Around a third of the market is supplied via imports. Key
foreign player is Ethicon, a Johnson & Johnson brand. Indian players
include Sutures India, Lotus Surgicals, Centennial Sutures
– Other consumables: Forms c.13%, USD 134 mn of the consumables
market. The market consists of products such as blood-grouping
reagents, first-aid kits, ostomy products and surgical gloves
Overview
Consumables
Chart 11: Indian Medical Consumables Segment Growth
 Hindustan Syringes
 Ethicon
 B Braun
 Sutures India
 Kanam Latex
 Stericat Sutures
 Lotus Surgicals
 Centennial Sutures
Table 3: Key Players in the Segment
Source: Espicom Q4’2013 Indian Medical Devices Report, o3 Analysis. Figures in
USD mn. Assumed USD/INR - 60
22
In-Vitro Diagnostics Segment
Private and Confidential
Key Highlights Chart 12: Indian Diagnostic Imaging Segment Breakup, 2013E
Immuno-
chemistry
44%
Bio-
chemistry
21%
Hematology
13%
Microbiology
10%
Others
12%
Total Market Size =USD 660 mn
252
312
366
421
542
660
2008 2009 2010 2011 2012 2013E
CAGR: 21.3%
Source: Medical Buyer, o3 Analysis. Figures in USD mn. Assumed USD/INR - 60
 In-Vitro Diagnostics segment forms c.10% of the Indian medical
devices sector and is estimated to be worth USD 660 mn in 2013E
 The segment includes both instruments and reagents
 The segment can be broken down into:
– Immuno-chemistry: Forms c.44% of the overall IV diagnsotics
segment and is estimated to be worth USD 291 mn in
2013, growing at a CAGR of 30% for the period 2008 – 13
– Bio-chemistry: Forms c.21% of the overall segment and is
estimated to be worth USD 137 mn in 2013, growing at a CAGR of
16% for the period 2008 – 13
– Hematology: Forms c.13% of the overall segment and is estimated
to be worth USD 88 mn in 2013, growing at a CAGR of 17% for the
period 2008 – 13
– Microbiology: Forms c.10% of the overall segment and is estimated
to be worth USD 69 mn in 2013, growing at a CAGR of 18% for the
period 2008 – 13
– Others: Includes Blood gas and electrolyte, coagulation
instruments, molecular diagnostics and urinalysis instruments and is
estimated to be worth USD 75 mn in 2013
Overview
IV Diagnostics
Chart 13: Indian Diagnostic Imaging Segment Growth
 Transasia Bio-Medicals
 CPC Diagnostics
 Roche Diagnostics
 Siemens
 Accurex Biomedical
 Beckman Coulter
 Span Diagnostics
 Tulip Diagnostics
Table 4: Key Players in the Segment
23
Patient Aids Segment
Private and Confidential
Key Highlights Chart 14: Indian Patient Aids Segment Breakup, 2013E
Portable Aids
72%
Therapeutic
Appliances
28%
Total Market Size =USD 582 mn
127
192
263
322
473
582
2008 2009 2010 2011 2012 2013E
CAGR: 35.6%
 Patient Aids segment forms c.9% of the overall India medical devices
sector and is estimated to be worth USD 582 mn in 2013E
– Fastest growing segment within the Indian medical devices
sector, having grown at a CAGR of 36% for the period 2008 – 13E
 Segment can be broken down into:
– Portable aids: Includes hearing aids and pacemakers. Forms
c.72%, USD 419 mn of the overall segment
– Over 90% of the market is supplied by imports, which are
primarily sourced from Ireland and the USA, with Australia,
Denmark and Singapore additional sources of supply
– Therapeutic appliances: Includes mechano-therapy and artificial
respiration apparatus. Forms c.28%, USD 163 mn of the overall
segment
– Imports supply the majority of the market with China, the USA
and South Korea the leading suppliers
Overview
Patient Aids
Chart 15: Indian Patient Aids Segment Growth
 St Jude Medical
 Phonak India
 Medtronics
 Shree Pacetronix
 Medi Safe International
 MediVed
Table 5: Key Players in the Segment
Source: Espicom Q4’2013 Indian Medical Devices Report, o3 Analysis. Figures in
USD mn. Assumed USD/INR - 60
24
Orthopaedics and Prosthetics Segment
Private and Confidential
Key Highlights Chart 16: Indian Orthopedics & Prosthetics Segment Breakup, 2013E
Other Artificial
Body Parts
57%
Artificial
Joints
26%
Fixation
Devices
17%
Total Market Size =USD 443 mn
107
143
193
245
352
443
2008 2009 2010 2011 2012 2013E
CAGR: 32.9%
 Orthopaedics and prosthetics segment forms c.7% of the overall India
medical devices sector and is estimated to be worth USD 443 mn in
2013E
– Segment has grown at a high rate of 33% for the period 2008 – 13E
– Imports account for around 90% of the market, with the USA being the
leading supplier of imported products
 Segment can be broken down into:
– Fixation devices: Forms c.17%, USD 75 mn of the overall segment
– Switzerland was the leading supplier of imported fixation devices
in 2012 with a 40% share, followed by the USA and Germany
– Artificial joints: Forms c.26%, USD 115 mn of the overall segment
– Over 90% of the market is supplied by imports, the majority of
which are sourced from the USA
– Other artificial body parts: Largest subcategory within the orthopaedics
& prosthetics market forms c.57%, USD 252 mn of the overall
segment
– Majorily import driven with US being the key supplier to the
market
Overview
Orthopaedics
Chart 17: Indian Orthopedics & Prosthetics Segment Growth
 Smith & Nephew
 Johnson & Johnson
 Zimmer Holdings
 Stryker Orthopaedics
 Narang Medical
 Atlas Surgical Company
Table 6: Key Players in the Segment
Source: Espicom Q4’2013 Indian Medical Devices Report, o3 Analysis. Figures in
USD mn. Assumed USD/INR - 60
25
Dental Products Segment
Private and Confidential
Key Highlights Chart 18: Indian Dental Products Segment Breakup, 2013E
Instruments &
Supplies
84%
Capital
Equipments
16%
Total Market Size =USD 198 mn
76
82
101
117
163
198
2008 2009 2010 2011 2012 2013E
CAGR: 21.0%
 Dental products segment forms c.3% of the overall India medical devices
sector and is estimated to be worth USD 198 mn in 2013E
– Segment has grown at a high rate of 21% for the period 2008 – 13E
 Dental products segment can be broken down into:
– Capital equipments: Forms c.16%, USD 32 mn of the overall dental
products segment. Includes products such as dental drills, dental
chairs and dental x-ray
– The majority of the market is supplied by imports. In terms of
principal suppliers, dental drill engines are primarily sourced from
South Korea, X-ray apparatus from Finland and dental chairs
from China
– Instruments & supplies: Forms c.84%, USD 167 mn of the overall
dental products segment. Includes products such as dental
cement, teeth & other fittings, artificial teeth and other dental fittings
– Majority of the market is supplied by imports with Germany and
USA being the main suppliers
Overview
Dental Products
Chart 19: Indian Dental Products Segment Growth
 Danaher Corporation
 Midmark Corporation
 Confident Dental
 Medi Ray Healthcare
 Meditech India
 Mectron India
Table 7: Key Players in the Segment
Source: Espicom Q4’2013 Indian Medical Devices Report, o3 Analysis. Figures in
USD mn. Assumed USD/INR - 60
26
Other Medical Devices Segment
Private and Confidential
Key Highlights Chart 20: Indian Other Medical Devices Segment Breakup, 2013E
Ophthalmic
Instruments
19% Hospital
Furniture
4%
Medical, Surg
ical Sterilisers
4%
Wheelchairs
2%
Other
71%
Total Market Size =USD 1,499 mn
783 765
922
1,050
1,321
1,499
2008 2009 2010 2011 2012 2013E
CAGR: 13.9%
 'Other medical devices' sector is estimated to be worth USD 1,499 mn in
2013E, having grown at a CAGR of 14% for the period 2008 – 13E
 Key segments included in other medical devices include:
– Ophthalmic Instruments. Includes cataract and refractive surgery
devices. Forms c.19%, USD 285 mn of the segment
– Hospital Furniture. Forms c.4%, USD 60 mn of the segment
– Medical, surgical sterilisers. Forms c.4%, USD 60 mn of the segment
– Wheelchairs. Includes mechanically propelled and not mechanically
propelled wheelchairs. Forms c.2%, USD 30 mn of the segment
– Other. Includes blood pressure monitors, endoscopy
apparatus, dialysis apparatus, anaesthetic instruments, amongst
others. Forms c.71%, USD 1,064 mn of the segment
Overview
Other Medical Devices
Chart 21: Indian Other Medical Devices Segment Growth
 Fresenius Kabi
 Midmark Corporation
 ASCO
 Medi Ray Healthcare
 Atlas Surgical Company
 Narang Medical
Table 8: Key Players in the Segment
Source: Espicom Q4’2013 Indian Medical Devices Report, o3 Analysis. Figures in
USD mn. Assumed USD/INR - 60
Section 4
Regulatory Environment
28
Regulations Governing the Segment
Private and Confidential
Act regulating the medical devices segment in India
In India, medical devices industry remains unregulated, however, only certain
equipments are regulated through the Drugs & Cosmetics Act 1940 & Rules 1945
A list of medical devices notified under the Drugs and Cosmetics Act and hence regulated includes:
The latest amendments bill, the Drugs and Cosmetics Bill, 2013, has been sent to the Parliament, after
being cleared by the Union Cabinet in July 2013 and aims to replace the Drugs and Cosmetics
Act, 1940, which was amended in 2008. It is expected to have separate chapter on medical devices. The
new bill also aims to establish a Medical Devices Technical Advisory Board, in line with the existing
Drugs Technical Advisory Board.
Once the Bill is passed, the definition of medical device will no longer be read in the light of the definition
of „drugs‟ as specified under the Drugs and Cosmetics Act.
1
Source: CDSCO, News articles, Espicom Q4’2013 Indian Medical Devices Report
 Disposable Hypodermic Syringes
and Needles
 Disposable Perfusion Sets
 In-vitro Diagnostic Devices
 Cardiac Stents
 Drug Eluting Stents
 Catheters
 Intra Ocular Lenses
 I.V. Cannulae
 Bone Cements
 Heart Valves
 Scalp Vein Set
 Orthopaedic Implants
 Internal Prosthetic Replacements
Foreign Investment Promotion Board (FIPB) approvals
India permits 100% FDI in pharmaceutical sector through automatic approval route in
the new projects but the foreign investment in the existing pharmaceutical companies
are allowed only through FIPB's approval
Given medical devices falls under the category of pharmaceuticals in India, FIPB approval
process applies to any foreign investment in the sector
2
Indian medical devices
industry remains
unregulated with only a few
products regulated through
the provisions of Drugs &
Cosmetics Act. Such
regulated products are
classified as ‘drugs
Foreign investments in the
Indian medical devices sector
have to adhere to FIPB
guidelines
29
Requirements for the Manufacture, Import and Sale of Devices
Private and Confidential
Source: CDSCO, www.icac.in
 In Feb 2009, the Drug Consultative Committee (DCC)
and the Drug Technical Advisory Board (DTAB)
approved new formal regulations for India's medical
device sector
 An Expert Committee consisting of experts of relevant
fields of the devices constituted by the Government
shall assist the Central Licensing Approval Authority
(CLAA) in evaluation of application of devices
 Under these guidelines:
– Medical devices shall be classified as per their risk
level and intended use
– Medical devices sold in India should bear the ICAC
mark to indicate their conformity with the provisions
of this schedule to enable them to move freely
within the country and to be put into service in
accordance with their intended purpose
– Once a medical device is placed on the market in
India, the manufacturer shall adhere to
requirements of post-marketing surveillance (PMS)
to systematically monitor the performance of the
device during use
Table 9: Conformity Assessment for Medical Devices
Class Risk Level Device Examples Conformity Assessment Procedure
A Low risk
Thermometer,
tongue depressor
Sole responsibility of manufacturers,
no need of manufacturing license from
CLAA
B
Low-moderate
risk
Hypodermic needle,
suction equipment
Notified body should assess and
certify the manufacturing facility quality
management system, manufacturer
must register with CLAA
C
Moderate-high
risk
Lung ventilator,
bone fixation plate
Certification by notified body is
required with regard to the design and
manufacture of the device,
manufacturers must apply for a license
from CLAA
D High risk
Heart valve,
implantable
defibrillator
Devices manufacturing facility will be
inspected jointly by CLAA and state
licensing authority, certification by
notified body is required with regard to
the design and manufacture of the
device, manufacturers must apply for
a license from CLAA
With the increased emphasis on safety and quality standards, these regulations are expected to improve the
opportunities for India’s medical devices sector. At the same time, due to the high level of conformity and
approvals required, smaller players may find themselves at a disadvantage, thus encouraging consolidation in
the market
Section 5
Transactions in India Medical Devices Sector
Private Equity Investments in Indian Medical Devices Sector
31
Table 10: Private Equity Investments in Indian Medical Devices Sector
Private and Confidential
Private Equity
Transactions
Date Investor Target Deal Value
2013 India Value Fund Advisors Trivitron 25.0
2013 Samara Capital Lotus Surgical Sutures 25.0
2013 New Enterprise Associates Panacea Medical 5.8
2013 TPG Growth Sutures India 24.2
2013 Ascent Capital Skanray Technologies 15.0
2013 Goldman Sachs BPL Medical Technologies 18.3
2013 Norwest Venture Perfint Healthcare 10.0
2012 CX Partners Sutures India 33.3
2012 Fidelity Growth Partners India Trivitron 29.2
2012 India Innovation Fund and Indian Angel Network Consure Medical NA
2012 Peepul Capital CURA Healthcare 16.2
2012 Accel Management; Norwest Venture; IDG Ventures Perfint Healthcare 6.0
2012 Accel Management; IDG Ventures Forus Health 5.0
2010 Accel Management; Norwest Venture; IDG Ventures Perfint Healthcare 8.4
2009 Evolvence Life Sciences Sutures India 7.0
Source: Capital IQ, vccedge.com, Industry research; Deal Value in USD mn. Assumed USD/INR – 60
Around 31 private equity investments have been made in the Indian medical devices sector with a combined
deal value of USD 265 mn. Investments have picked up in the last 2 years with CY12 and CY13 accounting for
18 such investments with total deal value of USD 226 mn.
Segments which have got funded primarily include diagnostic imaging and medical consumables.
39
102
124
13
9
9
0
2
4
6
8
10
12
14
0
20
40
60
80
100
120
140
Prior CY2012 CY2013
Deal Value (USD mn) # of Deals
M&A Transactions in Indian Medical Devices Sector
32
Table 11: Inbound / Domestic M&A Transactions in Indian Medical Devices Sector
Private and Confidential
Date Buyer Target Deal Value
2013 Skanray Healthcare Pricol Engineering NA
2013 Smith & Nephew Adler Mediequip NA
2012 Skanray Healthcare L&T Medical & Systems NA
2012 Purple Medical Solution MIV Therapeutics (India) NA
2012 Essilor International Optics India NA
2011 Siemens Ltd Siemens Healthcare Diagnostics 31.2
2011 The Barwale Group John Fowler Ocular Lenses NA
2011 Trivitron Healthcare Kiran Medical Systems Limited NA
2010 Marck Biosciences Ravish Infusions 1.2
2010 Opto Circuits India NS Remedies 1.5
2009 TTK Healthcare Orthopaedic implants business of Invicta Meditek NA
2008 Philips Healthcare Meditronics NA
2008 Trivitron Healthcare Vision Engineering 1.7
2008 Philips Healthcare Alpha X-Ray Technologies NA
2008 Siemens Medical Solutions Dade Behring Diagnostics 9.6
Table 12: Outbound M&A Transactions in Indian Medical Devices Sector
Date Buyer Target Deal Value
2012 Transasia Bio Medical Maxmat NA
2012 Trivitron Healthcare Labsystems Diagnostics 20.3
2012 Transasia Bio Medical Drew Scientific and JAS Diagnostics NA
2010 Opto Circuits Cardiac Science 54.8
2010 Opto Circuits Unetixs Vascular 9.7
2008 Opto Circuits Criticare Systems 70.0
2006 Opto Circuits Eurocor 13.0
M&A
Transactions
Source: Capital IQ, vccedge.com, Industry research; Deal Value in USD mn. Assumed USD/INR – 60
Indian medical devices
sector has witnessed a
mix of domestic,
inbound and outbound
acquisitions.
Opto Circuits – India’s
largest medical devices
company – has made
some big ticket
acquisitions in the US
and European markets.
Contact Details
Mumbai
Bangalore
New York
o3 House
No. 27, Magrath Road
Bangalore – 560025
Tel: +91 80 4241 0000
[email protected] www.o3capital.com
635 Madison Avenue
15
th
Floor
New York, NY – 10022
Tel: +1 212 826 0303
[email protected]
o3 Capital is the exclusive Indian member of IMAP (www.imap.com) – Global M&A Advisory
901, Piramal Tower, Peninsula Corporate Park
G.K. Marg, Lower Parel
Mumbai – 400013
Tel: +91 22 6111 5700
[email protected]
Shiraz Bugwadia
[email protected]
+91 98205 53003
Prashant Jain
[email protected]
+91 99723 91391
Gawir Baig
[email protected]
+91 98335 95806
Arun S
[email protected]
+91 98200 55097
Saurabh Soni
[email protected]
+91 97315 22278
Private and Confidential
33

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