Tag Archives: Emerging Markets

Signify Premium Insight: Made In India – Population and Policy

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Recently, Indian modality manufacturer Trivitron Healthcare announced that it will launch an Indian-made CT system and MRI system in FY2022-23.

The move adds to a growing trend for medical imaging vendors, both domestic and international, to increasingly focus on producing products in the country. GE HealthCare, Siemens Healthineers and Philips are among the vendors typifying this trend, with each of them having recently expanded manufacturing and other operations in the country.

The Signify View

India has represented a considerable sales opportunity for health tech vendors for a long time. An enormous and growing population, with a burgeoning middle class, whose members increasingly have the means to spend more money on healthcare, as well as a recently offered public health insurance fund, means the country has featured heavily in the growth plans of many vendors for some time. There are, however, several essential considerations that need to be factored in to maximise this opportunity.

Among the most significant is a policy which grants domestic firms preferential market access, which stipulates that one third of tenders should be awarded to a local company, provided it meets certain requirements. As a result, vendors which do not conduct any manufacturing processes in India could be at a distinct disadvantage compared to those that do, causing them to miss out on lucrative deals as healthcare spending in the country increases. This could impact different vendors in different ways, with some choosing to establish facilities outright in the country, while others, such as GE HealthCare, have chosen to form joint ventures with domestic players, in GE HealthCare’s case, Wipro, to gain local expertise and resource.

Enabling Access

Beyond determining which vendors will be able to secure tenders, the regulations around market access are also likely to influence the complexion of the market. Foreign companies, for instance, will still be able to win 50% of tenders valued at over five million rupees, on the condition that they are able to offer the lowest bid. They are then able to win the remaining balance of the tender, provided no local supplier can match the lowest bid. Such conditions elevate the importance of price in tenders, a move which will hinder those whose manufacturing facilities are in areas with higher costs, or who face higher costs for logistics, for instance, while making devices more affordable for the country’s providers.

Increased affordability can have a dramatic impact on the adoption of high-end imaging technology. Trivitron compatriot Innvolution, for example, has focused on increasing the affordability of catheterisation laboratory systems. This has paid dividends for the vendor, which has seen sales of its cath lab solutions increase from 179 units in 2019, to 550 units in 2022. A dramatic growth curve that could be replicated by a vendor offering more affordable CT and MRI systems.

Focusing on affordability also marks a sensible strategy for India. When the providers in many other countries have looked to expand their install base, they have frequently turned to Chinese vendors. This has been particularly true for more price-sensitive modalities such as X-ray and ultrasound, although increasingly, with the likes of United Imaging, more advanced modalities such as CT and MRI are also widely available from Chinese suppliers. This presents a number of barriers. The two nations have a broadly amicable economic relationship despite turbulent border relations. However, India, like many other countries, is also concerned by an overreliance on Chinese-made products, lest it become overly beholden to the country.

More pragmatically, as the healthcare spend increases within India, and healthcare provision is extended to hundreds of millions of people, the economic opportunity is sizable. A reliance on products from China, or indeed, any other nation, sees capital leaving the country rather than being reinvested into India, providing employment, supporting domestic technological innovation and being returned in the form of taxes. Furthermore, a stipulation for a greater proportion of tenders to be fulfilled by Indian companies, also means that foreign vendors are being forced to invest in the country. Spending money on infrastructure, creating jobs and bolstering other smaller local vendors offering business services.

The benefits can also extend to product specifics. In India, some software vendors tailor products to meet the needs of Indian clinicians. The same could be true of hardware, with Indian manufacturers able to make products that are particularly suited to the Indian hospitals which will buy them. This is a strategy adopted by other vendors in other parts of the world. One of the reasons Canon Medical and Shimadzu do so well in their domestic market of Japan, for instance, is their willingness to tailor solutions to their local customer base.

Vendor Value

While such a ‘made in India’ strategy promised (but, depending on how the strategy is appraised, hasn’t necessarily delivered) clear benefits to the country, it has for the most part also proved attractive to vendors.

Often one of the highest costs a company faces is its wage bill. While there are numerous countries around the world that can offer cheap labour, non can offer vendors this cheap labour alongside such an enormous domestic market. According to The World Bank, India’s population is around 1.38 billion. China, the only country with a higher population, has around 1.41 billion citizens. So, although domestic potential is similar, wages are much cheaper in India than China, a well-established manufacturing hub. What’s more, India is set to overtake China as the world’s most populous country, as soon as 2023, according to the UN.

Focusing on manufacturing sites in India will allow vendors to better compete with domestic companies on price, while facilitating better sales networks and closer relationships to the rapidly growing Indian customer base. These centres will also allow a vendor to produce systems at scale, enabling them to enjoy the economies of scale when selling to other countries where price is the central concern.

A further benefit, which is arguably increasing in importance, is that the focus on Indian manufacturing centres will allow imaging vendors to diminish their reliance on production and sales in China. Given current obstacles in Western relations with China, such as disputes around Taiwan, bilateral sanctions and fears of security risks, this will offer reassurance to Western vendors.

United 2.0?

Despite these advantages, there are still risks for international imaging vendors. Trivitron, spurred on by made-in-India policies and propelled further by the upcoming launches of its MRI and CT systems, could, along with compatriot vendors like Allengers and Innvolution, for example, grow into major international vendors, or, at least, grow to be painful thorns in the side of GE HealthCare, Philips and Siemens Healthineers. They could hope to follow in the footsteps of some rapidly growing Chinese vendors, including United Imaging. Founded in 2011, the vendor made its ambitions clear from the outset by tempting countless engineers and technicians away from its better-established international competition. Such a move enabled it to grow rapidly, with the vendor now bringing in around $1bn in revenue annually, and challenging more established competitors in several markets.

Trivitron could aspire to a similar growth trajectory. The company and its domestic peers would naturally look to grow, with global scale essential over the longer term to be able to compete with larger rivals, both on price, but also on its ability to innovate, offer new products and secure new deals. If Trivitron, for example, rather than long-established Western vendors is better able to capitalise on the vast opportunity its domestic market presents better than its rivals, it or its peers could grow into medical imaging heavyweights.

Aside from these competitors, there are also other risks, with, for example, occasional volatility of the rupee, poor transport infrastructure in parts of the country, the relative prevalence of corruption in India, and even corporate espionage and IP theft. However, these are challenges that must be faced.

India is among the clearest opportunities for imaging vendors, both international and domestic, to grow. These companies need to focus on growing their Indian footprints and increasing production in the country to best capitalise on the country’s rising tide. Against this backdrop, Trivitron’s new launches are essential, allowing the vendor to, for the time being at least, grow alongside its much larger rivals.

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Signify Premium Insight: The Enviable Problem Facing Siemens Healthineers

This Insight is part of your subscription to Signify Premium Insights – Medical ImagingThis content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify ResearchTo view other recent Premium Insights that are part of the service please click here.

Siemens Healthineers has enjoyed a run of very strong results over recent quarters, even accounting for the disruption caused by the coronavirus pandemic. The Healthineers business, a market leader in many of its core segments, has exceeded most industry expectations since it announced its IPO from Siemens AG. This however leaves Siemens with a problem, albeit a rather good one: where can it go from here?

In its recent Capital Markets Day and Shape 22 presentations, Siemens Healthineers laid out its answer to this tricky question, and emphasised the technologies and strategy that it was going to rely on to power the next phase of its growth. This plan, which it has dubbed the New Ambition will focus on three areas, Patient Twinning, Digital, Data and AI, and Precision Therapy, and is hoped to bring together the different sides of Siemens Healthineers’ business to accelerate growth.

The Signify View

Siemens Healthineers’ imaging business has been very successful of late. Its most recent results (Q4 2021) showed revenues 12.7% higher than Q4 2020, and 6.2% higher than Q4 2019, before the Covid pandemic took hold, while its steady stream of product releases highlights its technical leadership in some market segments (most notably first to market with photon counting CT – see below). These successes are predominantly found in markets where there are well established mature healthcare customer groups, both in global terms, with the vendor performing strongly in mature markets, and in clinical terms, with Siemens being one of the go-to-vendors in radiology and general imaging.

However, if Siemens is going to achieve its new growth target of 6-8% per annum in the period between 2023-25, it will have to rely on growth from other areas. It is after all, according to its own figures, the market leader in CT, MRI, X-Ray and Molecular Imaging, so establishing strong footholds in new markets will be essential to build on this position. This will involve targeting less mature geographic markets, or less premium tiers of mature markets. This shift was illustrated by some of the products announced at the Shape 22 event, including the Magnetom Free.Star. This new 60cm bore MRI scanner with a field strength of 0.55 Tesla will offer a total cost of ownership around 30 percent less than comparable scanners. The new scanner is being positioned by Siemens to make the modality more accessible to the 50 percent of the global population that currently has no access to MRI.

The Magnetom Free.Star is the second product in the Magnetom Free line-up, following the Max, which was unveiled a year ago. Siemens Healthineers expects these products to expand MRI’s reach geographically, but also in targeting new clinical segments. Instead of MRI being focused only on radiology departments, Siemens hopes to derive revenues by selling into other care settings, such as orthopaedics, paediatric and emergency medicine for example.

Expanding Imaging

In addition to seeking new customers from outside its current core markets, Siemens also hopes to be able to use its innovation to drive new sales, and more lucrative sales at existing customers. The vendor was proudly promoting its Naetom Alpha scanner at the events. This, the world’s first photon-counting CT system, is indicative of how the vendor hopes to be able to drive increased spend at providers. It is an innovative new system which offers greater capability than other top end scanners. This will encourage providers to replace older systems for the new PCCT system, which will, initially at least, be sold at a significant premium (see FDA Approval Lets Siemens Make CT Count). Furthermore, photon counting CT produces a huge volume of data, which Siemens also hopes will encourage providers to also use more of its software portfolio, founded on the new Syngo Carbon interoperability platform.

Data will also form a key part of Siemens Healthineers’ New Ambition in other ways too. AI will play a major part in this strategy, and Siemens, arguably has the upper hand compared to some of its key competitors, which are increasingly looking to partner with third parties to add AI capabilities to their ecosystems. Siemens has instead predominantly been focused internally. The vendor now claims to have more than 60 AI enriched offerings, 1.3bn curated data sets and aims to provide solutions for anatomies covering 85% of imaging procedures by 2025, up from 35% today. This could be a real differentiator in supporting providers in tackling the challenges of today, with imaging volumes continuing to increase and a dwindling pool of clinician resource to interpret scans. Additionally, Siemens advances in AI are also set to help facilitate the targeting of new customers, who may not have the same training and experience as those in established imaging departments. Advanced clinical decision support tools will somewhat offset that lack of expertise and should smooth the transition of imaging modalities to new areas and new markets.

New Challenges Will Come

It won’t all be plain sailing for Siemens Healthineers, however. The vendor has been very successful in many markets, but it has really made its name in premium segments. Striving to deliver growth in value-orientated segments and a greater focus on emerging markets will provide several stern challenges. One of these will be selling the systems. While the product might be attractive, if Siemens doesn’t have the right operational sales and service support, it could still flounder. Other vendors have better established sales channels in emerging markets today, with sales teams and distributor networks better connected to providers and teams more experienced in selling value-focused products. In these markets, loyalty to other lower-cost brands will also play a part, as too will aggressive price competition.

Siemens could also find itself increasingly competing with Chinese vendors, which are becoming increasingly capable despite being more affordable than their western counterparts. This is evident in the growing presence of vendors such as United Imaging, both in the Chinese market but also in mature markets where Siemens holds a leadership position. China is also becoming more focused on AI, with multiple vendors having secured sizeable funding rounds and many solutions already deployed for clinical use in the domestic Chinese market. Despite Siemens’ best effort, the value proposition provided by these vendors could prove too appealing for less premium customer tiers and the German vendor could miss out.

Siemens may also face competition from vendors willing to adopt innovative business models. In emerging markets, smaller challenger vendors which are looking to offer their products on pay-per-scan basis, or in other innovative ways, could grant cash-strapped providers additional imaging capability for a lower upfront cost than Siemens. This alone could be enough to tempt providers away.

A Problem that Must be Solved

While these obstacles are tangible, they are not insurmountable. What’s more, regardless of the challenges they offer, if Siemens is to achieve its growth target laid out in its New Ambition, they must be faced. Siemens Healthineers is uniquely placed to achieve this though, with the vendor’s scale bringing with it opportunities that would be out of reach for almost all other vendors.

Siemens can afford to invest heavily in technologies like CT, MRI and AI, it should also invest in the growing service side of the business which will help grow stable revenues in markets where it is strong, and it can invest in market education and sales in new markets. Further, we expect Siemens to continue to leverage its new market positions in Oncology (via the Varian acquisition) to support cross-sell of imaging competency into Oncology, while also moving the needle further towards more personalised, precise care provision in mature markets.

The business does have areas where it is less strong such as Ultrasound, in which it is according to Siemens, ranked fifth, and in some specialities. But on balance these gaps are relatively few and far between. Digital competence will also play an increasingly important part in the future success of the business. While the firm has a legacy of technical hardware innovation, its digital record in imaging has been patchier. To address this the firm has clearly laid out its roadmap plans in imaging for improved interoperability between its portfolio, under the Syngo Carbon brand. As deals with providers increasingly focus on digital assets as well as hardware assets, the success of Carbon will become more and more important to underpin its New Ambition strategy. Mid-term, Carbon is also expected to play a central role in underpinning Siemens’ broader digital precision medicine play too, especially in bringing data from its Imaging, Oncology and Diagnostics divisions more closely together.

Siemens Healthineers’ recent events detail how the vendor will combine strengths from across its business to solve its enviable problem and indicates where its growth will come from next. Now all that remains for the firm is the hard yards – the realisation of this ambition.


About Signify Premium Insights

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify ResearchTo view other recent Premium Insights that are part of the service please click here