Friday, June 6, 2014

Perfint, Skanray and Panacea represent a new generation of Indian Medical Technology Companies

The Indian Healthcare Challenge

Providing high quality yet affordable healthcare to our 1.3 Billion citizens is one of our biggest challenges. Several distinctive characteristics of our existing healthcare system are well known. It is city-centric, with the availability of medical support poor in rural India. Qualified doctors and other manpower are rarely willing to serve in rural locations. As a result, the government network of Primary Health Centres set up across the country rarely functions effectively. There has been a large shift to private doctors and hospitals, even though patients can ill afford their services in the absence of a widespread health insurance infrastructure. Just one major health setback in a family can drive that family into a financial catastrophe. India is at the top of countries when it comes to “out-of-pocket” payout for medical services.

New Initiatives

In recent years, this problem has been well recognized and a whole slew of initiatives have been launched by the government as well as the social entrepreneurs. These include the National Rural Health Mission of the Government of India, low cost medical insurance schemes by state governments, new models of affordable healthcare provision (e.g. Aravind Eyecare, Lifespring Hospitals, Narayana Hrudayalaya, etc.) and the use of information technology and traditional practitioners to provide primary healthcare services (e.g. Sughavazhvu Healthcare).

Medical Devices

Contemporary healthcare provision is strongly dependent on the use of powerful diagnostic and curative methods. Medical devices, drugs and vaccines are at the core of this. While India has made a name for itself in the pharmaceutical industry thanks to the reverse-engineering and process-engineering capabilities of our local drug companies, the medical devices sector has received relatively less attention. At the high end, medical devices are predominantly imported. And, the cost of imported devices pushes up the cost of healthcare.

In recent years, given the size of the market and the obvious need, there has therefore been a lot of interest in building a local medical devices industry. The focus has been on affordability and ease-of-use, with a particular focus on making the devices usable by people without sophisticated medical education. In the diagnostic field, efforts are being made to put intelligence into the system using heuristics and algorithms so that detection is less dependent on the skills of the user of the equipment.

At one end, programmes like Stanford India Biodesign seek to create the next generation of medical equipment designers who will build devices ground-up based on an identification of needs and creative solutions to these needs. At the other, several major multinational companies including GE, Siemens and Philips have major initiatives to develop low-cost devices out of India (and China). Prominent areas of such devices include ECG machines, ultrasound scanners, patient monitoring systems and infant incubators.

Somewhere in-between is a new set of Indian enterprises. These have attracted investor interest and industry bodies like FICCI have tried to kindle interest in them. In this post, I look at three of the prominent enterprises to get a picture of where this activity is headed.

Perfint Healthcare

Perfint has a nice niche, it specializes in solutions for image-guided cancer therapy. For example, one of its new products called Maxio, is a CT accessory that “helps a physician see, plan, treat and verify during CT guided procedures like tumour ablation.” Perfint was recently in the news for this product getting the approval of the US Federal Drug Administration (FDA). That’s an important milestone for being able to sell the product globally, particularly since India lacks a strong and transparent mechanism for the testing and certification of medical devices.   

Several things about Perfint are noteworthy. First, the core team that set up Perfint came out of GE. This has always been one of the hopes of encouraging MNCs to invest in India – that these MNC subsidiaries will be incubators for Indian entrepreneurs. Second, the company has been able to raise a fair amount of capital – more than $30m in four rounds so far. This shows the faith of investors in the company, considering its revenues are reported to be only in the region of $6-7 m and raises some questions about our usual assumption that it’s difficult to raise capital for high tech startups out of India. Third, the company has been granted three patents so far, with more applications pending. Fourth, the company already has a global footprint with more than 2,000 patient procedures being conducted on its equipment across the world last year.

Perfint appears to be more in the advanced technology game than in the affordable healthcare arena. While it’s safe to assume that Perfint’s development costs would be lower than its foreign competitors since its R&D is predominantly based in India, clearly it is competing in the global healthcare market based on the quality of its solution. In fact, when I was reading recent accounts of its achievements, the company sounded more like a typical Israeli technology company than an Indian one!

Clearly, at this point, the major challenge before Perfint is commercialization. Press reports indicate that the topline goal is in the region of $100m. Such a sales number will have to be achieved fairly quickly in order to justify the quantum of investment that has gone into the company. While the sales challenge is obvious, interestingly the company sees talent (particularly in product engineering and management) as a possible obstacle to its future success. Interestingly, this echoes some of our findings in the pharma sector where we found that the absence of certain specialized skills is a barrier to new drug development out of India.


Skanray Technologies was founded in 2007, and is based in Mysore. It focuses on high frequency X-ray systems and some other critical care products. Interestingly, the Skanray team is also ex-GE. Like Perfint, Skanray has a host of international certifications including FDA approval for some products.
Skanray is more focused on affordable healthcare. The company’s dream is to provide healthcare to Indians at a cost of Rs. 100 per person per month.

Skanray has made a few interesting strategic moves. In 2009, they tapped into the support available from the government of India by obtaining low cost funding (a loan for Rs. 4.7 crores) for commercialization of technologies from the Government’s Technology Development Board. Earlier, in 2008, they integrated backwards through a joint venture with CEI of Italy to manufacture X-ray tubes. The company sees this backward integration as important to fulfilling its promise of “Advanced Techology and Affordability.”

But, by far, the most interesting move by Skanray was to acquire the medical instruments business of Larsen & Toubro in November 2012. (Under AM Naik, L&T decided some years ago to hive off some of its non-core businesses.) Fortuitously for Skanray, L&T’s medical business was also located in Mysore. The acquisition of this business gives the company a broader product range, and an established distribution and service channel.

Skanray has also attracted private equity investment. I couldn’t find Skanray’s financial numbers, but it’s safe to assume that Skanray’s investors will also put pressure on the company to scale up rapidly. Recent reports point to entry into the Brazilian market, and the creation of an Advanced Technology Centre in Europe.


Panacea Medical Technologies is another interesting company in this space that has received investor interest. Their main focus is on Digital X-ray machines. They have also launched a Digital Telecobalt machine (called Bhabhatron), in collaboration with the Bhabha Atomic Research Centre of the Department of Atomic Energy. Panacea’s goal is to offer complete solutions for oncology centres.

They received the Technology Development Board’s award for technology commercialization in 2010. Unfortunately, the founders seem to be quite media-shy: there is no mention of their names on the company’s website and they have very little web presence. But their website suggests that they have machine installations across the country.

Wrapping Up

Companies like Perfint, Skanray and Panacea constitute the core of a newly emerging medical device industry. It looks like they have chosen appropriate strategies – if you are trying to be at the edge of technology, you need to internationalize rapidly (like Perfint), but if you want to pursue the affordability plank, you need to focus more on lowering costs through the supply chain, distribution and service like Skanray. It’s good to see these companies attracting capital, I only hope that they are able to retain the interest of investors by sustaining growth. But, I suspect we still don’t have enough local players to constitute a critical mass of companies in this sector. I hope I am proven wrong!

[All information in this post has been obtained from sources in the public domain, including company websites. The views expressed by the author are personal.]

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