Tag: Diagnostic business

Rising competition and falling COVID cases puts diagnostic sector under pressure

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Dr Lal PathLab” isinid=”INE600L01024″ bseid=”539524″ nseid=”LALPATHLAB” sector=”Pharmaceuticals” exchange=”nse”]

Dr. Lal Pathlabs is down 44 percent from its 52-week high with rising competition remaining the key talking point. Several brokerages have also sounded a word of caution with Antique saying that hyper-competition across categories will keep a check on revenue per patient and that margin is expected to correct to 24-25 percent. Nomura reflects the same, saying that the changing competitive landscape presents significant medium-term headwinds for the sector.

Speaking to CNBC-TV18, Om Manchanda, Managing Director at Dr Lal Pathlabs said that the entire diagnostic industry is facing a decline due to falling COVID cases.

“What is probably happening in FY23 is the entire industry is fighting the decline of COVID compared to last year. So a lot of sales comparison is happening because starting this financial year, COVID sales are badly down nearly about 80-90 percent. I think the first task for the industry is really to offset those losses with non-COVID,” he said.

The company, however, is concentrating on medium to long-term growth in this industry and trying to take the short-term quarterly variations due to COVID decline in their stide.

Read Here: COVID-19 in India: Over 6,000 fresh infections reported but active cases decline

According to Antique, the post-pandemic growth rate accelerated resulting in the entry of new competition but now, with things returning to normalcy, the growth per patient realisation is going to remain under pressure for the considerable future. However, Manchanda is looking at this from a different perspective.

“The comment about the rising competitive intensity and price war happening at some level, I do believe that this will definitely aid the growth of the market, especially in the area of wellness or screening. In my view, this competition really is not disrupting the cost structure it is mainly disrupting the price. So that means some of these price points may not really be sustainable,” said Manchanda.

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Diagnostics firms say top 50 laboratory health tests could become 30% cheaper

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Stocks of diagnostic companies have corrected sharply over the past few months, with falling around 40-50 percent from their 52-week highs. This is reflected in their valuations, which have halved from their peaks over the past year.

Some reasons for this selling is the fear of disruptive pricing. For example, Tata 1mg advertisements indicate they offer popular lab tests at just Rs 100 versus the Rs 500 to 650 earlier.

Additionally, we are also seeing rapidly rising competition. Several pharma companies have entered the space, while hospital chains have increased investments.

Read Here: Why diagnostic stocks have corrected around 50% from their 52-week highs

Speaking to CNBC-TV18, Gaurav Agarwal, co-founder of Tata 1mg, said as the firm continues to innovate, it can drive the prices down further. “Today, we can offer 30-40 percent cheaper prices than what exists in the market,” he said.

Devendra Rajput, National Head & Director at Apollo Diagnostics, said, “With the competition as well as the pricing pressure, there will be a definite price correction in a top 50 or 30 tests where the utilisation is more, there we will be able to pass on the additional margins to the consumer. Definitely, it will be competitive going forward.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Dr Lal PathLabs Q3: Diagnostic biz likely to see consolidation in next few years, says Om Manchanda

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Diagnostic services provider Dr Lal PathLabs on Thursday, February 10, reported a 39.3 percent year-on-year (YoY) decline in net profit at Rs 58.2 crore for the third quarter ended December 31, 2021.

In an interview with CNBC-TV18, Om Manchanda said that margins in the industry augur well for the next wave of consolidation.

“This is a learning that one has seen from global diagnostic players and I won’t be surprised if next 5-10 years you have a wave of consolidation happening and that is primarily going to put a lot of pressure on the unorganized segment and yes, I do see that there will be some amount of consolidation in times to come.”

Elaborating on his company’s margins Manchanda said, “Our margins are in line with what they used to be during pre-COVID times and this time you are seeing slight softness because of onetime transaction cost that has come on account of Suburban acquisition.”

Also Read: Dr Lal PathLabs Q3 results: Net profit dips 39.3% YoY to Rs 58.2 crore, revenue up 10% to Rs 497 crore

On expansion, Manchanda said that the company is not looking at organic opportunities as of now.

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For a ball-by-ball commentary on how the markets are faring on Feb 11, please click here

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Max Healthcare says India biz revenue higher than pre-COVID levels in Q2

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Max Healthcare posted a steady set of Q2 earnings. Revenue has seen a rise both sequentially, and on a year-on-year basis as the non-COVID business appears to have normalised. The company’s quarter-on-quarter (QoQ) gross revenues were up at Rs 1434 crore versus Rs 1385 crore. It had reported gross revenues of Rs 944 crore in the same period a year ago. The company reported a multi-fold jump in its consolidated net profit to Rs 144.65 crore for the quarter ended September 30. It had posted a net profit of Rs 16.65 crore for the corresponding period of the previous fiscal. In an interview with CNBC-TV18, Abhay Soi, CMD, Max Healthcare, shared details of the quarterly performance and the outlook.

He said, “If one were to look at the overall occupancy, while we did 73-74 percent pre-COVID, now it stands at about 75 percent with about 1 percent coming from COVID. So in any measure, this can be looked at as non-COVID. This is, in spite of the fact that international business is only one-third of pre-COVID levels. So that is something to look forward to in the coming quarters.”

He also confirmed that as far as revenue is concerned, the India business, at the end of Q2, was higher than FY19, FY20 levels.

On diagnostic business, Soi said, “Organically if you see, the number of partners, franchisees that we have, we have actually increased them by 25 percent. So we increased our 140 channel partners in the last quarter itself to a base of about 450. So that is a massive sort of investment in the organic part of things but we also looking at inorganic opportunities for consolidation and enhancing this business.”

On digital channels’ contribution to revenue, Soi said, “We have invested in phases and from very low numbers sequentially, it has moved up to about 11 percent of our total revenues and we are seeing significant growth in this.”

Click here: For latest news and updates on earnings

He further mentioned, “What it is enabling us to do at this stage is reaching more and more patients, our patients as well as the first-time patients, more effectively and efficiently; we are able to service their requirements. Right now, it’s at the outpatient department (OPD) stage. So, what it really does is as far as the margins are concerned, it helps us convert these patients to our in-patient department (IPD), which is really where the commercial benefit lies at this stage. So at this point in time, it’s about reach, it is about customer acquisition and less about profitability from the digital channel.”

For the full interview, watch the accompanying video.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Diagnostic space takes centre stage; experts discuss heating competition in sector

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The diagnostic sector has been in focus throughout the COVID-19 pandemic. Om Manchanda, MD, Dr Lal Pathlabs and Anmol Ganjoo, pharmaceuticals research analyst, JM Financial Institutional Securities discussed with CNBC-TV18 how the business has been for the diagnostic companies in FY21 and how the competition is heating up in the sector.

Manchanda said that the market is very large and there is space for a lot of players to come in. “I have always been saying that it is good that industry attracts some organised players so that the standards of quality and service go up so there is a level-playing field,” he said.

Pointing to the presence of a large unorganized market, he said some of the countries that are entering the market will further accelerate the shift from unorganized to organized players.

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While the pharmaceutical companies have the advantage of medical science to be successful, one needs to fire on many accounts, Manchanda noted. “While entry barriers in this space are very low, the barriers to scale are very high,” he explained. According to him, the best way to grow the business organically is to expand in continuous markets.

Manchanda believes diagnostics space has always been highly fragmented and unorganized.

“If you trace the history of some of the large global players, they have also taken the route of inorganic plus organic. Our historical trail has been more organic and we have built one single brand and that is how you will see a little bit of lopsidedness in our growth rate,” he stated.

Also Read: Merck’s oral COVD-19 drug on the anvil; Indian partners will price drug post-approval, says MSD India’s Rehan Khan

Meanwhile, Ganjoo said in the last 18 months, the diagnostic companies have moved forward in their growth journey by close to a decade. COVID-19 has pushed the growth trajectory and accelerated it meaningfully, he said, adding that as a consequence, the attractive quotient of these businesses has been noted by the market valuations as well. 

“When companies command such rich value multiples and such high return on invested capitals (ROIC), it is bound to be taken note of multiple players and that is where some form of disruption emerges,” he explained.

For the entire discussion, watch the accompanying video.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Amid buzz on Lupin foray, are diagnostics stocks a good place to be?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of pure-play diagnostic labs Dr Lal PathLabs, Thyrocare Technologies and Metropolis Healthcare have rewarded investors with returns to the tune of 51-92 percent in in the past one year. A boost in demand for the industry — among the few beneficiaries of the pandemic — has rendered stock valuations expensive, say analysts.

Some say the sudden spike in profitability may not last long for such players as it is strictly due to the coronavirus situation.

Easing concerns about a third wave of Covid-19 are already rendering the diagnostics space less attractive, AK Prabhakar, Head of Research at IDBI Capital Markets, told CNBCTV18.com.

Though the absence of a third wave of infections may rid the country of a slowdown across sectors sooner, it may be bad news for an industry riding the increased demand for diagnostic tests.

Prabhakar warns of 50 percent correction in diagnostics shares if a third wave of the pandemic does not happen. “Currently, valuations are just too expensive,” he said, referring to shares of diagnostics companies.

How diagnostics stocks have fared in the recent past:

Surajit Pal, Pharma Analyst at Prabhudas Lilladher, also feels valuations in diagnostics are mostly due to the assumption that pandemic-related revenue will continue for some time. The valuations are “probably much ahead of growth expectations”, he said in an interview to CNBC-TV18.

ALSO READ: Prabhudas Lilladher analyst says diagnostic firm valuations far ahead of growth expectations

For now, things look hunky-dory for diagnostics players.

“Even if a patient recovers from COVID, multiple tests keep happening… Such is the demand for these services. Everything has run up too much,” said Prabhakar.

On a trailing price-to-earnings basis, the valuation of Dr Lal PathLabs is at 80 times and that of Metropolis at 61 times, he said.

Much of the growth registered by these companies is concentrated in the past 18 months. If you take away the business of the last 18 months, there is not much left. In the past five years, growth has been at 15 percent,” said Prabhakar.

To Pal, Metropolis Health and Dr Lal appear to have the ability to create assets given the cash on their books, a task that could take Pharmeasy and Thyrocare 1-3 years.

Drug maker Lupin is looking to enter the diagnostics business, sources told CNBC-TV18 last week. Describing the move as “baffling”, Pal said the company might be looking to create an asset.

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3 Mins Read

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow