‘We want to be relevant to the Indian market’

Kimberly-Clark spun off its healthcare business to create a new entity, Halyard Health in order to sharpen its focus on the healthcare sector. As an emerging market, India has been identified as one of the key growth drivers for the new company, which focuses on surgical & infection prevention and medical devices. On a recent visit to Halyard Health India’s Pune head office, Stephen Campbell, VP, Asia Pacific Region and Girish Joshi, Business Head – India talk to Viveka Roychowdhury on the company’s aggressive expansion plans

Kimberly-Clark spun off its healthcare business to create a new entity, Halyard Health in order to sharpen its focus on the healthcare sector. As an emerging market, India has been identified as one of the key growth drivers for the new company, which focuses on surgical & infection prevention and medical devices. On a recent visit to Halyard Health India’s Pune head office, Stephen Campbell, VP, Asia Pacific Region and Girish Joshi, Business Head – India talk to Viveka Roychowdhury on the company’s aggressive expansion plans

What was the rationale for the spin off of two businesses – surgical and infection prevention (S&IP), and medical devices – from Kimberly-Clark Health Care, into a separate company, Halyard Health?

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Stephen Campbell

Stephen Campbell:  This was the smallest business of the Kimberly-Clark (KC) Corporation and the way it was being managed – as a small part of a larger organisation – was not optimal for a healthcare business. We are looking to accelerate innovation, grow faster and we felt that the investment strategy of a larger corporation, was not optimal for a healthcare business.

So Tom Faulk (CEO) and the board made a good decision to separate the healthcare division and allow it to breathe its own life. It has turned out to be a successful spin off. As an independent company, Halyard Health opened pretty strongly on the New York Stock Exchange and has continued to do so, showing an optimism from the current shareholders. KC shareholders initially became shareholders in Halyard Health, through a 1:8 allocation. We’ve managed that transition well over the last four to five months.

And now that the spin off process is through, we have redefined our global strategy for Halyard Health.

Firstly, we are going to more than double our spend on innovation. Secondly, we want to spend on acquisitions. Robert Abernathy, CEO Halyard Health has announced to Wall Street that we have a goal  to acquire $500 million worth of new business in the next five years. Thirdly, we are going to bring a stronger focus to emerging markets. We’ve already identified India as one of these markets, but we are also looking at China and Brazil. The traditional KC businesses are already present in these markets, and Halyard will follow with the evolution of these markets. So, we wanted to be clear and focused about increasing our investment in the Indian market.

These are three strategic statements from our CEO, defining the way we want to go forward. We are not there yet but my presence here in India and the investment in the new company is singularly focused on this strategy and to grow Halyard in India in a much more dynamic way.

What role do you see Halyard Health play in India’s healthcare  sector? What is its USP?

Our areas of business make us a unique organisation. We are in surgical and infection prevention, which makes us a fairly large proportion of our revenue stream. We are trying to bring better patient care, better outcomes and better worker protection to India. Our S&IP segment has products like surgical drapes and gowns, sterilisation wraps for surgical instruments, gloves for medical examination, etc. The market for these products is largely unpenetrated in India; they are relatively small and just starting to evolve. So, we see an opportunity as well as a role for Halyard to evolve this market and bring better patient outcomes to India’s healthcare sector.

All these products are manufactured as per global standards outside India and thus attract high import duties, etc. So will these be at a price point acceptable to the India market?

As a global company with proven products across the world, we have a wealth of information to prove the benefits of these products. It’s a very strategic selling proposition to make and requires focused attention and resources and importantly education. Not every competitor has the capacity to do that. The challenge for us is that we do that work and then the competitors follow us!

But Girish and his team have been able to establish our brand very successfully in India. We are recognised globally as a high quality producer. Yes, we are not the cheapest and the tariff structures in India make it very difficult. But we’ve spent the last couple of years establishing our brand and a modest base of business in the India market. Our team is now in place and we believe we are ready to see what we can do to accelerate growth.

What was the revenues and CAGR of Kimberly Clark’s heathcare business in India?

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Girish Joshi

Girish Joshi: The healthcare industry in India has had a CAGR of 14 per cent in the last few years and Halyard (formerly Kimberly-Clark) Healthcare  has been growing beyond 20 per cent, much faster than the industry growth. We closed last financial year at more than Rs 25 crores.

What is the targeted revenues and CAGR for Halyard Health going forward and what is the strategy to achieve this growth?

Joshi: We want to bring in more products because we know that the market needs more products to meet patient needs. The market dynamics are different so we are optimising our product portfolio and getting in products which are suitable for our market. Halyard has a lot of products globally but not all products are needed in India. So, we will have the same standard of quality but the product portfolio will be for this market’s customer needs, both from a clinical need as well as price point perspective.

For instance, we have a huge range of surgical drapes and gowns meant for various clinical needs at different price points, rather than just one product.

Campbell: Our strategy is not that different from any other med tech company, in that we have to select the right products for each market and innovate. They have to be affordable. We have to get them to customers efficiently. We need to grow and develop our distribution network in India.

We want to be relevant to the market. That’s the key. Part of the spin off was to ensure we can do that in a much more targeted way.

What is Halyard doing to increase awareness about the need for such products because the use of such products needs a behavioural change?

Joshi: We are in the business of infection control and prevention. This happens at various touch points in a hospital set up. The patient could be in an Intensive care unit (ICU), OPD or operating theatre (OT). That’s where we as a company bring in a lot of value and solutions. Besides offering products of international standards, we bring in best global practices of use of such products. This is the value add we bring to customers. We have internationally recognised education programmes, called Knowledge Network Programmes. We have extended all these programmes to healthcare providers in India as well. We have a network of clinical educators who are qualified from a nursing perspective or a CSSD perspective, etc. We use their services to conduct regular programmes in hospitals using our products to reduce infections, which improve clinical outcomes and in turn improve efficiencies of hospital staff as well. We conduct such programmes not just in corporate hospitals but government hospitals as well as nursing homes where there are no formal avenues or funds for training. Our Halyard programmes thus become on-the-job training for these attendees.

None of our products are advertised in these programmes, hence they may attract CME credits in many geographies.  In India, CME credits are mandatory for accreditation of only clinicians.

Campbell: In some countries, these programmes would become part of the evidence that would feed into the quality management procedures that there is knowledge and understanding of international procedures which bring about an improvement in clinical and health outcomes through a reduction in infection. It is very hard to identify the source, cost and impact of infection. It is a nebulous issue but one that clinicians worry about.

So if you look at the various segments of the India healthcare market. In a Tier 1 hospital, which could be a medical tourism destination, we want to reduce the risk to those patients and prove that infection control protocols are in place not just in OTs but across the hospital. We’ve seen this evolution in other markets over time and we at Halyard Health are sure it will happen in India as well.

Joshi: We see it not just as a business but as our contribution to the larger social cause of preventing infections.

Moving forward, with India identified as a focus country within the emerging markets strategy, are there plans to manufacture in India?

Campbell: We will have to look at manufacturing in India because besides the tariffs, our products are bulky as well. We manufacture in 11 countries and one of the things we can do is optimise where we source our products from. But clearly, the tariff structures tell us that India wants us to invest more in this market and that is what we will do. We’ve had a strong CAGR in the last five years and we want to accelerate that. Globally our CEO has said he wants to double our total global revenues from emerging markets within the next five years. I think we are going to be far more aggressive than that in the India market. If we look at the investments coming into the India healthcare market, the higher incomes that will drive more people to spend on healthcare, I think this is very doable. We are going to put in place an infrastructure to support our growth.

We are also looking to grow Halyard’s other business which is medical technologies like pain management, respiratory assistance devices and digestive health. We are looking at partnerships with like-minded companies with interests in our areas of business, or with strong distributor networks to increase the reach of our products.

What is the strength of your field force and are you looking to expand this? How well do you cover far out regions like the North East?

Joshi: We have a field force of around 22 and will expand this as the business grows. Post the spin off, as an independent company, Halyard now has all support functions and staff in place to handle logistics etc. We cover all important markets across India with our sales force as well as distributorships in far flung areas.

viveka.r@expressindia.com

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