Today, in this article we will talk about the Diagnostic Sector in India, and how does this sector look so attractive for other players, especially Pharma.
Introduction:
The diagnostic Sector is now looking more lucrative sector for many players where some new players may also emerge. So Let’s discuss on what ground this sector looks attractive for other players like Pharma Companies.
Entry of Pharma Player in Diagnostic Business:
- Pharmaceutical major Lupin is entering into diagnostics to leverage its ‘doctor connect to tap a sector that has low entry barriers, gives high returns on capital employed, and is witnessing double-digit growth.
- Lupin Diagnostics will be a part of Lupin Healthcare, a 100% subsidiary of Lupin
- The company is in the process of recruiting the team where Lupin has already hired an Experienced Team with a background in the diagnostics sector and work experience in firms like Apollo Diagnostics, Dr. Lal’s Pathlabs, SRL, and Reliance Life Sciences.
- In the context of Distribution, the Company is finalizing franchise partners.
- Also, the company is setting up a 45,000 sq. Ft. Laboratory in Navi Mumbai. Besides this, the company plans to focus on the West, Central, and South parts of India.
Reasons of Lupin to enter into Diagnostic Business:
- Generally, the Pharma Players have a good relationship with the Doctors and Medical professionals via Medical Representatives (MRs) and others.
- Also, there are low entry barriers in this sector, where Low Capital is required to set new labs.
- Also, these sector involves high Return on Capital Employed (ROCE) of more than around 35%.
- Besides this, Diagnostics Sector is a fast growth profile sector where there is a presence of double-digit figure growth.
Diagnostic Sector- Industry Size:
- Currently, the Pathology Diagnostic Market in India is worth around $6 Billion which is around Rs. 45,000 Cr. in Indian Rupees.
- Out of these markets of Rs. 45,000 Cr., around Rs. 22,000 Cr. or $3 Billion markets are covered by Hospital Laboratories which counts to 50%.
- Whereas the rest 50% market worth $3 Billion is covered by External Diagnostic Players.
Key Growth Drivers:
- Increasing Awareness
- Increasing Per Capita Income
- Benefits of Developing Country becoming Developed Countries.
- Large scale implementation of Ayushman Bharat can alter the growth trajectory.
- Inflation in Diagnostic Business.
- Increase in health insurance coverage
Conclusion:
The diagnostic Sector by default is a fast-growing sector which got benefited from this pandemic. There is a presence of secular growth in this sector. Lupin, a big pharma player is planning to enter into this market, where the other companies can also follow in the coming period. This discussion is not direct advice to invest in Lupin and exit from other existing Diagnostic Players, and hence one should follow due diligence before making any stock market decisions
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