Medical devices industry sees big business from rural areas

Rebooting the system

Mumbai-based start-up Biosense Technologies plans to start testing the market for a novel device that doesn?t need a needle to screen people for anaemia, a common deficiency that contributes to about 40% of the maternal deaths annually in India. The non-invasive device, called ToucHb, would initially be pitched to physicians and NGOs that conduct screening camps in villages, say the founders, who reckon it could find use as a home-user device eventually.

In India?s medical devices industry, whose size is estimated at nearly $2.5 billion and is growing at around 15% annually, several start-ups such as Biosense are looking to making their mark with innovative, low-cost devices designed to help detect ailments in rural areas by early-stage screening. And, investors are seeing big potential.

According to a report on private equity (PE) investments by Venture Intelligence, of the total $1,886 million investments during the first three months of this year, 31% went to healthcare and life sciences. Overall, the sector attracted $581 million across 14 investments during the period, followed by IT/ITeS and BFSI companies.

Experts say healthcare is, this year, one of the most attractive destinations for PE investors to park their funds.

?For investors, medical device companies offer large market opportunity. We normally look for players that can generate venture-type returns. This is an IP-driven business and if the model is successful in India, price points can be used for other emerging markets,? says IDG Ventures India managing director T Meenakshisundaram. Last month, IDG, along with Accel Partners, invested $5 million in Bangalore-based start-up Forus Health, which has developed an all-in-one device to screen eye ailments.

Forus, a two-year-old company, hopes its low-cost, portable device, called 3Nethra, will bridge the gap between India?s small number of ophthalmologists and its vast population. At least 80% of eye ailments in India, such as cataract, which can lead to blindness, are believed to be preventable or curable with timely check-up and treatment. Founder K Chandrasekhar spent two decades in the semiconductor industry before teaming up with Shyam Vasudev, a former director of technology at Philips Innovation Centre in Bangalore, to focus on innovations in the medical devices space.

In contrast, the founders of Biosense are fairly young in their career who began thinking of an easy-to-use device to monitor the haemoglobin count after witnessing the scale of anaemia-related problems on rural assignments while still in medical school. The start-up had received funding under the Technopreneur Promotion Programme of the ministry for science and technology in 2009 and later a grant from the Echoing Green Foundation in New York.

Last month, it raised an undisclosed amount as seed funding from Global Super Eagles, a newly formed angel network headed by Rajesh Sawhney. ?We are looking to pre-launch and after gauging the reaction of the market, we’ll go in for our Series A funding,? says Abhishek Sen, a co-founder of Biosense and its chief technology officer.

Sen says the medical devices space has been mostly nascent with emphasis in the medical sector still on biotechnology and drug discovery. ?Definitely, things are coming up because we have a cocktail of everything that is needed. We have an ecosystem coming up which is providing grants and angel and seed fundings. So, there’s no reason why more companies will not come up.?

Agrees Prem Pavoor, associate director at Fidelity Capital Advisors (India), an advisory team of Fidelity Growth Partners India, which recently invested in XCyton Diagnostics, a Bangalore-based firm that has developed technology to diagnose a patient’s samples for various infections much faster than conventional culture-based diagnosis.

?The sector is still very new. It’s not evolved like the generic pharma sector or the hospital sector. But we are seeing more and more of innovation happening in the country,? says Pavoor, whose firm is looking to invest around $100 million in India over the next couple of years across sectors and sees life sciences as a focus area. ?We are beginning to see it in hospital equipment, we are beginning to see it in devices you put inside the body like stents, pacemakers and catheters. Diagnostics is obviously the third bucket.?

To be sure, healthcare giants such as GE have been focusing on the potential for affordable, rugged and portable machines over the past few years. GE Healthcare’s India arm last year launched 11 products in its focus areas of cardiology, infant care and ultrasound imaging and hopes to accelerate the pace of innovation.

Analysts say margins in the medical devices business can be as high as 30% for the top players, besides the potential for exports to emerging economies. ?However, for startups the big challenge is getting the market share. Even top players in this space have realised that in the current environment it is more a volume game than margin,? says Amit Ghose, director – corporate finance, consulting, PwC India. He also notes that several startups in this space are driven by people who have worked with leaders like GE, Philips and Siemens for a long period of time and have the expertise to cash in on the market potential.

Meanwhile, the industry has been demanding a separate regulatory structure because the current regulation for drugs also extends to devices. ?We are asking for regulations because it can be harmonised with global norms,? says Gautam Khanna, executive director, 3M Healthcare India, and also the chairman of Ficci’s Medical Device forum. ?Many people are coming because they know there is a market in India, there is an opportunity and Indian manufacturing is good. But if we have the regulatory system to help it should be even better.?