Agree with your views …our export oriented generic players seem to be facing three main issues…
#Price erosion due to competition among Indian players in same export market for similar products
#USFDA issues
#Dependency on China for key raw material and API…if raw material price is increased by china as happened in recent months, our generic players are hit.
Our domestic focus generic players are protected from first two issues , but the 3rd issue may still be a worry to some extent since they may not be able to pass on the cost to end consumers
But our established API players with substantial backward integration and least dependency on China for Key raw material are protected to a great extent as far as their business is concerned
#Divis- "In terms of logistics,shipping cost have not only soared but also
increased unavailability of containers due to increased crude oil prices,empty containers congestion in US ports and blank sailings causing
longer waiting time."
#Laurus- "During the last quarter,industry has faced interim challenges due to logistics,RM availability & higher prices, especially for solvents"
#Strides- “Logistics cost continues to be high despite moving to sea shipments as sea freight rates witnessed significant jump during the quarter. Logistics cost during the quarter were up
20% quarter-on-quarter and 135% year-on-year.” (Nov 2021)
The point I’m trying to make is, we may witness some rise in freight costs in near term because of Russia- Ukraine war and rise in crude oil prices.
“Freight disruptions are emerging in Europe and Asia as the impact of Russia’s invasion of Ukraine ripples across the region, causing delays to the movement of goods and sparking warnings of higher shipping costs.”
Seattle-based logistics giant Expeditors International of Washington Inc. said it had shut down most of its operating systems in response to a cyberattack disclosed Sunday, raising fears of further stress on already fragile global supply chains.
“Severe imbalance between capacity and demand continues to heavily impact our industry. There is simply not enough carrier capacity in the air or on the oceans to accommodate the heavy demand for cargo space.”
It seems like we may witness higher freight rates in the coming days and this in turn can cause margin erosion of API exporters. Innovators having multiple sources may prefer near sources than far ones due to supply chain constraints and higher freight costs.
Counter view from Baltic dry index is that shipping costs are on downtrend after peaking in Oct 21 and will continue to go downward in near future as well,
You can see that Freightos baltic container index is around 6.5 times higher than that it was on April 2020.
We had seen the implications & consequences of that in earnings commentary of multiple API exporters.
We had also seen weaker demand of so many API molecules from Indian API manufacturers. Most of the manufacturers attributed that to destocking. May be customers in EU & US have preferred near sources than far ones due to this supply chain constraints & higher freight charges. (Most of them have 2 or more sources for same molecule) This is only an assumption. If it was really due to destocking, we may see rise in demand of molecules in next quarters. Otherwise we may see weaker demand going forward. (Let me remind you once again this is only an assumption and we can know more about this only in coming quarters.)
Diagnostics market is becoming more crowded day by day, here is the latest update from Krsnaa
From the end user perspective what has changed ?
Are these players offering any integration with health apps ? These test results are stored in digital format where all the stake holders (Doctors / Hospitals / Customer themselves ) can view the data ?
The culture in many places, Doctor always refers the tests to be undertaken in the lab that he /she prefers, even if you one has latest results they refuse to look into them (most of the times this is the case in small towns )
One way too much competition is good for the end users but what kind of value addition these new / existing players bringing
For example , for a patient the average blood sugar is X for the past 365 days and the recently it has shot-up
I don’t have any specialized knowledge of this. Anecdotally at least, nothing much has changed post Covid from the end user perspective, except that the people are asking for home pick up of samples and online delivery of reports. This is just a channel change but doesn’t create incremental demand. I haven’t heard of doctors insisting on a particular Lab’s report or prescribing more tests than before. Are people taking more tests? Depends on whom you ask. A nutrition company would say people have become more health-conscious post Covid, which means more attention to diet, exercise and hygiene and less sickness! I don’t know whom to believe but we should take management’s lofty claims with a pinch of salt.
I had a tracking position in this sector last year but exited soon as I thought there was too much hype and valuations were sky high. Last year’s numbers were all distorted due to Covid and using them for any analysis would be misleading. Even though companies reported Covid & non-Covid revenues separately, last year even the costs (e.g. solvents, equipment, rent, manpower etc.) would have got distorted, for which there was no break-up. I had thought of revisiting the sector again this year but there are many other issues as well.
Firstly, businesses are flush with funds and making acquisitions. Acquisitions almost always lead to sub-optimal capital allocation and year-on-year comparisons become difficult. Secondly, business models are changing – the so called “asset light” model of growing through the franchise mode is becoming popular. Even though this may sound attractive, one must remember that for this model to sustain in the long run, the franchisee has to make money. Underlying business viability cannot improve just by shifting the burden of rent & equipment to someone else. Thirdly, there are the new generation start ups entering the space. While I am not very gung-ho about the threat posed by them, some with deep pockets like the Tatas will have a lot of nuisance value.
Overall, the whole sector is in a state of flux, and it is difficult to visualize how the industry will look 5 years from now. Somewhere I saw a Tweet by Thyrocare ex-promoter boasting that he exited at the right time! So, I thought better to stay away from this sector for now.
Sorry if I exceeded my brief here but writing this down just helped me clarify my thoughts. If I am proven wrong, I will change my mind and enter again!
@Rafi_Syed am not expert in to diagnosis sector and learner in stock market. However I have good working experience in Healthcare IT and services.
Healthcare service sector (Hospital + Diagnosis etc) is very poor in adoption of technology. You can differenciate the vast adoption of tech on banking, travels, ecommerece etc. however same is not true for healthcare. We just have good infrastructure (Hospital building), IT is just mainly used for accounting purpose. Even leading hospital is not using data like other industries is using.
Ehealth, Telemedicine, Remote care is still concept and not going anywhere even in USA and other developed nations. Main reason is complex nature of sector (Dr need to judge patient and for that he needs to be with patient) and as community Dr’s good earner and don’t want to change status co easily.
Coming to diagnosis sector; it’s highly profitable segment for private hospital which is not accessable for 3rd party diagnosis player. Hence most are in to B to C. Listed big players are slow in taking market share from unorganised player due various reason including high capex. Due to competition patient is king, like earlier I was playing 1500-2000 for vitamin B & D tests, now same can be done in less than 500. Due to less adoption of technology they are not able to give differenciate value addition. As example you book test and say vitamin B is low than you need to consult Dr for medication / treatment etc. Dr has high influence with patient hence if Dr suggest X lab patient just choose the same.
Are these players offering any integration with health apps ? These test results are stored in digital format where all the stake holders (Doctors / Hospitals / Customer themselves ) can view the data ? NO. Results are in PDF.
The culture in many places, Doctor always refers the tests to be undertaken in the lab that he /she prefers, even if you one has latest results they refuse to look into them (most of the times this is the case in small towns ) - Answered.
One way too much competition is good for the end users but what kind of value addition these new / existing players bringing - Nothing much. More reliability of machine etc. but not able to communicate effectively.
For example , for a patient the average blood sugar is X for the past 365 days and the recently it has shot-up - No way.
Not really, in UK Babylon is very popular, many private insurance providers provide access to this consultation, this is first line of treatment , you can speak to a real Doctor on Video call and discuss all your symptoms and then they send prescription (if needed) electronically to your choice of medical store near by. This is quite popular in UK. Even people who doesn’t have private health insurance can also use this virtual GP with nominal charge (very nominal ) .
I beg to differ here, there are many private diagnostics center all over India , it takes in excess of 5CR to setup a CT scan center , they charge 7k per CT scan in these centers , and most of these devices are leased where the supplier makes money on consumables.
The things we discussed about maintaining records digitally etc… and allow the patients to track their own results and compare with the past is not a very difficult thing. I am sure there must be some of these available already in India, my search is more on which player is thinking about seriously to offer such tools to the patient .
I think there is some initiative from government on national health care policy etc… .if that is going to focus on standard framework, where each citizen health record should be maintained in digital format then we can expect all these offerings very soon by all the players in the industry
Technology is and will be embraced by big players, and I believe this will increase with time. To be able to talk to a doctor and get medicines prescribed, for non-emergency and ordinary problems, without visiting a hospital is wonderful. Of course, this is purely the doctor’s decision. Apollo 24X7 app has helped in such situation before. It is one thing to take paracetamol by one’s own knowledge, it is another thing when the same is done under a doctor’s guidance. I don’t know if such other apps exist.
Looking at the changes technology is bringing and the things happening in different industries and different areas of life, I am sure health sector too will bring in some changes, when and where applicable and necessary. So I do believe the adoption of technology in health sector will grow with time, cannot imagine the rate at which it grows.
Health care as a business, as with any other business, when viewed from the perspective of management is about profits too, along with a service element embedded in it, and if technological advancements however costly will bring in more profits, they will adopt these advancements, and will naturally pass the charges forward. Rich people always afford, and if health insurance is also gaining momentum, insured can also pay. So I believe technology will gain more space when and where it can.
I have neither the knowledge nor the interest in making money from this, except the wish that whatever helps a patient is always welcome, and if its affordable, it will be a boon to one and all.
I was about to post this. Some how I am getting this feeling that Indian drug regulator is not doing it’s job. I now even think twice before buying generic medicines.
I think Doctors dictating or influencing where to get a test done is not very widespread as reported. Going forward it is going to reduce further as well when you have private medical insurance footing the bills. Private insurers usually have caps on test charges. Overseas they also have a panel of approved labs. Plus thanks to google people can start comparing charges and questions will crop up if certain lab charges are out of whack.
I can see diagnostics chains tying up with private medical insurance companies in the near future.
