Mumbai: After pharmaceutical firms, it’s now the turn of Indian diagnostics service providers to set up shop abroad.
Leading Indian diagnostics service providers such as Metropolis Health Services India Ltd and SRL Ranbaxy Ltd are close to finalizing deals that will help them foray into the lucrative US market. Both companies are negotiating with local players in the US and expect to have operations there in the next few months.
Metropolis is likely to start out with joint ventures in four states—North Carolina, Pennsylvania, Illinois and Florida.
“We have opted to go through a joint venture route because in our industry it makes good business sense to have a local presence and a local face,” says Ameera Shah, Metropol’s executive director.
SRL Ranbaxy, the diagnostics firm owned by the promoters of Ranbaxy Pharmaceuticals Ltd, has a different strategy. It plans to go solo and will tap the hospitals segment and offshore all the tests to India.
Metropolis plans to cater to a wide spectrum of clients—individuals, private hospitals as well as insurance companies. “We will conduct some of the routine tests in the US and will offshore the more high-end tests to India,” says Shah.
Routine tests would include blood counts, examining cholesterol levels and may even extend to tests for hormone levels. The high-end tests are based on molecular biology and used to detect cancer or the levels of vitamins or even the extent of progress of HIV. Both companies believe the US market offers them significant potential. Estimated to be worth $50 billion (over Rs2 trillion), the US diagnostics market has about 10 big players that control over 90% of the market. Quality, faster turnaround time and lower costs will be the key focus points for Indian players hoping to get a foothold in the market, says Ravi Desai, director, international business and strategic growth at SRL Ranbaxy. “It’s a known fact that our services are among the most cost competitive,” claims Desai.
And as Indian diagnostics firms typically have a high volume of tests, they are able to run many of the specialized tests more often than those in the West. “Laboratories in the US or in Europe do some specialized tests only once a week or maybe even once a fortnight. In comparison, we do most of our specialized tests about three times a week,” says Shah. This not only enables the laboratories to provide results faster but also helps to make the tests less expensive.
Though both companies have a presence outside India, industry observers point out that their entry into the US market may just be their biggest gamble yet. “No doubt there are positives of entering into the US market, but on the flip side this is already a mature market. I’m not sure if Indian players can create as much value from this market as they might be able to in India itself which is currently in a high growth phase,” says Aluri Srinivas Rao, director, investments, ICICI Venture. Last year, ICICI Venture invested Rs35 crore in Metropolis.
The Indian diagnostics firms say they already have a logistics framework in place, which will collect samples and ship these to the central diagnostics labs in Mumbai. Transportation usually takes a maximum of 24 hours. The samples are analysed in the central labs and the reports are dispatched by email. This means that the entire process can be completed in less than four days, as against a week or two weeks it might take some labs in the US, the Indian firms claim.
Shah says Metropolis’ expansion into international markets will enable it to more than double its revenue from these markets in a year’s time. SRL’s Desai also says the growth will be “big”, but both declined to provide details.