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Asian Healthcare Sector
To Beat US
The combined incremental demand for healthcare, in dollar terms, in five Asian
countries - China, India, Japan, Korea and Singapore could exceed the US by
2015, led by rising income, increased medical tourism and ageing population in
some of these countries, says Credit Suisse.
In India, the investment bank feels that three Indian pharmaceutical companies -
Sun Pharmaceuticals, Lupin and Dr Reddy’s Laboratories are poised to benefit
from the boom in this sector.
“We like Sun Pharmaceuticals for its quality management, high margins and steady
growth in India and the US,” Credit Suisse said in a recent report on Asia’s
healthcare sector. The brokerage has picked Lupin for its exciting growth in
India and great execution in the regulated markets, and Dr Reddy’s Laboratories
for its technology capability and cheap valuation.
According to Credit Suisse, Dr Reddy’s Labs is an ‘under-appreciated’ stock even
after being the strongest globally in API (active pharmaceutical ingredient)
supply. “We believe the earnings impact so far has been driven more by supply
issues than regulatory changes - these should be corrected by March 2008 as 25
products (accounting for 60% of revenue) get moved back to India. This will
significantly reduce costs, and also allow the company to bid for upcoming
insurance contracts,” the report says.
The investment bank expects a 18.4% compounded growth in the branded formulation
business and a 16% compounded growth in the API business.
India’s healthcare expenditure was $35 billion in 2004 (equivalent to 5.2% of
India’s GDP), and had grown at a 15%, on a compounded basis, in the previous ten
years, Credit Suisse estimates.
Although India’s absolute healthcare spending is comparable to other developing
countries, per capita healthcare expenditure (adjusted for purchasing power
parity) comes to only $28 — among the lowest in the world, the report says.
“Increasing prosperity has also raised the incidence of lifestyle diseases such
as diabetes and heart ailments to epidemic proportions. Rapid urbanisation is
also improving accessibility to medical care,” the investment bank estimates.
Credit Suisse believes hospitals will take another 3-5 years to turn profitable.
“Hospitals in India are currently in the investment phase, and much of the
upside from service provision currently goes to doctors,” the report highlights.
A joint study by the Confederation of Indian Industry (CII) and McKinsey
estimated Indian medical tourism at $350 million in 2006 with the potential to
grow into a $2-billion industry by 2012. Credit Suisse estimates that medical
tourism in India is growing at about 25-30% annually, and about 1.80 lakh
medical tourists were treated at Indian healthcare centres in 2004.
“Healthcare costs in India are significantly lower than those of developed
economies, and though there is no paucity of Indian demand, high-paying foreign
patients can get more prompt service from the higher-end Indian hospitals.
Availability of superspecialty hospitals, trained doctors and medical staff
contribute to 25-30% annual increase in medical tourism,” the investment bank
says.
(Ref : The Times of India dated January 20, 2008)
IIM-A To Attract Healthcare Innovations
The Centre for Innovation Incubation and Entrepreneurship (CIIE) at the Indian
Institute of Management, Ahmedabad (IIM-A), will offer a ‘Piramal Prize’ to
encourage and support bold entrepreneurial ideas, which have a profound impact
on access to higher standards of health for India’s rural and marginalised urban
communities.
The award consists of a cash prize of Rs 10 lakh for the winning entry,
incubation support at CIIE and a possible additional venture capital funding.
The 2008 Piramal Prize evaluation process involves three stages, culminating in
a finalist workshop and selection weekend in May 2008. Finalists will have a
chance to work closely with a mentor, network with potential investors, and make
a final presentation to the Piramal Prize Selection Committee.
The award recognises high-impact and scalable business models that propose
innovative solutions, which directly or indirectly address India’s healthcare
crisis. Entries may include innovations in service delivery, technology
applications, health-related products, or mechanisms to address public health
necessities such as potable water.
CIIE has been supporting several healthcare related innovations like Inflow
meter, an infusion flow rate monitor to measure the flow of intravenous fluids
into the human body; Save The Environment, which, provides arsenic filters to
arsenic-poisoning prone areas of West Bengal and Bihar; and Flexinails, a
cost-effective orthopaedic nail to treat unstable fractures of femur (hip-thigh
joint and around) in elderly and long bones in children among others. All these
innovations have received commercial support.
(Ref : The Business Standard dated December 24, 2007)
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