“PRICING IT AT RS 8,000, WE WILL BE ABLE TO DISRUPT THE NIPT MARKET IN INDIA”July 5, 2019
Non-invasive Prenatal Testing or NIPT — which analyses DNA in the mother’s blood to pinpoint an unborn baby’s risk for a number of genetic disorders such as Down Syndrome, Edwards Syndrome and Patau Syndrome — has been one of the most advanced and crucial diagnostic techniques that use Next Generation Sequencing (NGS) technology. It helps parents take an informed decision, or at times even treat the disorders. But this genetic diagnostics technology is yet to become widely used in India due to lack of affordability and awareness.
Thyrocare Technologies Ltd, which disrupted India’s biochemistry tests and general diagnostics scene with rock bottom prices more than a decade ago and grabbed a sizable share in the Rs 40,000 crore market, has now entered the NGS segment. This comes on the heels of the company’s successful initial public offer and listing on India’s main stock exchanges. In an exclusive interview with FM Editor CH UNNIKRISHNAN, Thyrocare Founder and Chairman DR A VELUMANI says that the NGS play, though small in volume at present, is definitely going to be a big opportunity in the country in the next five years and he wants to replicate the company’s earlier success in it using a similar, low cost and big volume strategy. Edited excerpts:
You had mentioned on many occasions that you disrupted the Indian diagnostics market with two unique strategies: First, by making the test cheaper than the reagent cost, and second, by the introduction of the business-to-business (B2B) model in the market to grab volume. Do you think these strategies will work in your new areas of focus — molecular imaging and NGS?
My philosophy has been always to focus on the lowest margins for the biggest volume. This will obviously cause market disruption. Though the strategy will remain the same for new generation diagnostics, including NIPT, as well, the model needs to be different, as a franchise scheme will not work in this case. In this business, hospitals are going to be my partners. As per the negotiation we had with the technology provider, which has been our vendor for many other technologies as well — to source it at a lower cost in order to match my price, we need to achieve a specific volume. There will be pressure on me to deliver the same. We are experimenting our low-profit strategy in this business too and I am hopeful of achieving the scale.
The average cost of NIPT in India is around Rs 25,000 currently, that too after some of the technically competent labs started doing the tests within the country and were able to lower the cost. Otherwise, it was costing about Rs 50,000 to Rs 60,000 ($700 to $1000) when the samples were being sent abroad. How will you be able to afford to offer it at Rs 8000 as you claim?
As you know, I am a hard bargainer and our discussion with the technology partner had been a long process. We took about fifteen months to close it. Since we have now mutually agreed on the rates based on a specific volume of tests that we can get, we can very well offer this price. We had 100 samples in the first month when we started in April, and we need to scale it up to 100 samples a day to make this viable. It will become costly if we don’t get the number of samples as specified in the technology deal. So, I need to deliver that volume and the pressure is on me. Also, we don’t have to send the samples anywhere outside as we have already set up the NIPT lab within our infrastructure by investing about Rs 10 crore. This lab will be assisted by by vendor’s personnel till we complete 1000 investigations and during this period they will improve the expertise of our own personnel. We are known for packaging good profiles for “Value for Money” and here also we have bundled all pregnancy-related tests, including pregnancy markers and cytogenetics. In fact we call this unit as ‘Maternity’, a brand focused in pregnancy – within Thyrocare Technologies. So, there are also synergies as far as overhead costs are concerned.
Therefore, I am pretty sure that pricing it at Rs 8000, which is less than one-third of the prevailing market price, we will be able to disrupt the NIPT market in the country. After all, there are only three or four players in the market actively with capabilities to do the tests locally. Though the market is still small in size, increased accessibility and the rising awareness will also ensure that it grows multi-fold in the next four to five years. If everything goes as expected, we hope Maternity will overtake Thyrocare in terms of turnover by 2030. This is not only because of the growth of the market, but also due to higher value here compared to the general category.
You entered into molecular imaging (nuclear medicine) around seven years ago, launching a separate company under Thyrocare. Could you make any significant market impact there as well?
We have so far done about a lakh scans in the nuclear medicine unit, which is a separate company—a wholly owned radiology subsidiary of Thyrocare Technologies, branded as ‘Nuclear’. We need to scale it up to 1,000 scans a day. We have crossed 120 scans a day now as against a capacity of 400 scans per day. But we want to do 1,000 scans daily to reach the optimum level. We have done an investment of some Rs 130 crore there and we haven’t yet started making a profit there. See, here (in the new areas of business), I didn’t have the advantage as I had in the area of biochemistry, where, as a biochemist, I knew the cost dynamics exactly and since we knew COGS of COGS, we were never wrong. The pricing comforts helped us to successfully introduce the franchise model to reach out to the entire market. We have around 1,200 outlets and collection centers across India and parts of Nepal, Bangladesh and the Middle East.This had helped making it a cash cow, creating a lot of employment opportunities and helping our partners also to make money and ultimately building an industry-changing business model. It will take a while to replicate the same in the new areas, but I am confident that it will happen once you are in control of the cost, which is the ultimate secret of any successful business.