Interviews

1. Please tell us about the genesis of Nueclear. What is the idea that led to the creation of Nueclear? For a very long time, I worked at the Radiation Medicine Center of BARC, where I was a Research Scientist. “Radiation Medicine Centre” is a unique facility which focuses on the uses of Radioisotopes in Healthcare. I learnt the science of “Radioimmunoassay” for Thyroid testing; which gave birth to Thyrocare – our Pathology vertical. During my 14 years of work at BARC, I also learnt how isotopes work in body when injected, in the form of Radiopharmaceuticals. Once the work of creating a pan-Indian leader in pathology was completed, I thought why not a Radiology vertical. Thus in 2011, we incorporated Nueclear Healthcare Limited to focus on Cancer Diagnosis. 2. You are looking at a 25% growth this year and have been vocal about the bright future of imaging. What are the reasons that underlie this confidence? India is a nascent and deeply underpenetrated market for PET-CT using FDG. The numbers speak for themselves. India has <200 PET-CT installations, while the US with third of Indian population has more than 1700 installations. Even a country like Japan with a population of only 130 million people (1/10th of India) has 2000 scanners. Now, while one can argue that Oncology is associated with old age, and that both US and Japan have older populations than India, the steady rise of lifestyle diseases, and the especially worrying rise in incidence of cancer creates a position where this industry will keep growing. Over the next five decades I feel this industry would grow at ~15-20% and organized players in the industry should grow at a faster rate of about 20 to 25%. 3. You have stated on public forums that making imaging affordable & reachable is your mission. How is Nueclear going about achieving it? From its very genesis, Nueclear was intended to help treat, and not exploit the sick. While entire country was doing PET-CT at ~INR 25,000 for an FDG scan, we priced these at INR 9999. This non-predatory pricing has helped us reach a 10% market share with a 5% of capacity in the country. There were many naysayers initially who were convinced that this price point is not viable. In Delhi and Mumbai, the rates have consistently trended downwards, as a direct result of our pricing. In the next phase of growth, we will be working at Rs.8000 as rate for next 5 years, which will push the mean rates in the country would come down to 12,000. The reduced rates will result in increased consumption and therefore volumes. Someone had to trigger this wave. I am happy that it has been NHL. 4. You have been a pioneer in driving low cost / high quality services. Most people can do only one or other. How do you make business sense out of it? I strongly believe that it is the strategy and clarity of thought that underpin successful efforts to drive volumes. The Industry average is less than 4 scans per machine per day – NHL consistently exceeds 10 scans per machine per day. In a fixed cost, near commodity business, it is It is the strategy to pick up volumes that makes all the difference. Already the industry average is only 5 scans per machine per day while NHL has already reached 10 scans per machine per day. The good news is that much like wind power the costs of running the PET-CT centers are fixed. The key to success lies in rapid scale up that increases the number of scans at a faster velocity. It makes more sense to do 10,000 scans per annum using a machine than just doing 1,000 scans per annum. Quality of Imaging depends upon the brand that is used since imaging is done by a machine that costs more than 7 crores. Be it GE or Siemens or Philips – all brands have global quality that is not changing from machine to machine. What differentiates a high-quality scan from a low-quality scan is the reporting and insight offered by the nuclear medicine doctors (NMPs) – experience and expertise can mean the difference between life and death. Fortunately, Nueclear’s NMPs have a cumulative experience of reporting more than 100,000 scans – there are few institutions globally who can rely on such leaders with this kind of a track record. At the overall level – our game-plan relies on scale – and I am comfortable with the Nueclear business making a loss till we reach a turnover of 100 crores per annum but when it touches 400 crores per annum turnover there would be a 60% EBIDTA. Over the last 2 quarters – as we hit a critical number of centers – we have reported positive EBITDAs in Nueclear – but I am is pushing my team to eschew profitability for growth and presence. This is long term investment that will deliver long term prosperity at the cost of short term discomfort. 5. Your aim is to have a fully functional, pan Indian network of 4 medical cyclotrons and 80 PET-CT centers by 2020. What groundwork is being done for meeting this target? The aggressive target is Dec 2020 for our 4/80 dream in this space. But the conservative target can go as late as Dec 2023. Thankfully, we are not constrained by financial resources, HR challenges or Logistical difficulties. We want to be the right size for the market as it exists today, and how it shapes up in terms of its growth over the next 10 years. Today – this is a supply driven market. By 2030 it would be a demand-driven market. As I earlier alluded, the demographic push for cancer is some time away, and will also eliminate the affordability limitations, even at our pricing given the low per-capita income in India. In developed markets, the cost of a PET-CT exceeds INR 80,000. In India, the average is ~INR

Dr. A Velumani has made Thyrocare a front runner in the healthcare industry by being a disruptive strategic player laboratory. A visionary in the field of clinical biochemistry, he has worked on volume more than the profit and has established a unique business model. Though he was a mathematician in his early academic life, he later did his Masters in Thyroid Biochemistry and PhD in Thyroid Pathophysiology. While working for the BARC, Dr. A Velumani in 1995, understood that the comfort zone of being a government officer could be a danger zone for growth. Hence, he quit his job and set up this unique and disruptive business in 1996. Being born and brought up in a low-income farmer’s family, Dr. Velumani’s early life experience fueled his desire to start an affordable enterprise for the vast populace. In a country like India with population in billions, reach of healthcare services especially in the remote parts of the country is poor. His focus is on the slice numbers 3, 4, 5 and 6 in the economic pyramid of 10 slices in India. With just an initial investment of 1 lakh rupees, which was also utilised to get the first gamma counter (ECIL) for thyroid testing, Thyrocare today is worth 3,000 crore and is the world’s single largest laboratory for thyroid testing, handling more than 50,000 samples and 2,00,000 tests a night. Thyrocare, the biochemistry focused laboratory as he differentiates it from pathology peers is known to be the trendsetter using IT, HR, logistics and automation. Having a mathematics background, he looked at pathology as “Numerical Pathology”. Thyrocare is the first Indian laboratory to have installed the Total Laboratory Automation from Siemens in its lab floor. Currently, the 2,00,000 sq.ft. lab space has a new Aptio automation, also from Siemens, which is a complete laboratory automation solution, the world’s longest, for preanalytical, analytical as well as post-analytical operations. Long back, Thyrocare was also the first lab in India to start the use of barcodes for samples. This year in April, Thyrocare came out with its IPO, which got subscribed 75 times. In this interview, we try and find out the reasons that makes Thyrocare this popular as a business brand. Excerpts… Why did you plan an IPO? We had a PE partner, who had come to an end for his fund period and wanted to liquidate his stock. We felt that IPO is an ideal route, since the company had completed 20 years and it was time to become public. It got subscribed 75 times. What is the reason for this popularity? It was a surprise to me too, indeed. There are a few reasons as outlined by our merchant bankers, which are: our business model, concept – focus on biochemistry, wellness (scalability), not too much is available in the diagnostic space for an investor’s appetite (scarcity value), we have had a 25% CAGR for pretty long 10 years (growth), also our balance sheet had an EBIDTA of 40 plus or minus 2% for a long time (profitability), the company was cash rich in its business, and had not had debt on it anytime (health). Thyrocare was looking to raise upwards of 451 crore. Your plans with this money? Thyrocare on paper was raising funds but actually it was a secondary deal (Offer For Sale, OFS), where no money comes inside the company. The outgoing PE partner took all the money and also it is important to note, company on its balance sheet had enough money for its expansion plans if it needed. We in fact declared dividend to our investors, pre and post IPO since the funds were lying idle on the balance sheet. Having said that, company has plans to establish 20 Regional Processing Laboratories (RPL), back-end kitchens, not front-end restaurants, in the country over a period of 4 years from January 2015. As of now, we have 6 of them working with full capacity at Delhi, Kolkata, Bangalore, Hyderabad, Coimbatore and Bhopal. This industry revolves around quality, cost and speed – as yardsticks and using RPL we are addressing speed improvements for tier 3 and 4 towns. Additionally, more than 30,000 specimens in a single floor gives no further advantages and hence we are working on multiple floors to process in our journey to 2,00,000 specimens a night. Thyrocare has grown from strength to strength in the last few years. What attributes helped the company achieve such a performance? It is uniqueness of the focus in metabolic disorders, chronic illness, preventive care, and wellness. In 1995, when I came into this industry, I did not see anything known as preventive care. I noted that in developed countries, preventive care was more than 50% and I knew in emerging India, it has to also become 50% one day. I focused on Aarogyam – a brand in wellness. For Thyrocare that has been an additional growth engine, and today in our balance sheet more than 50% of revenue is from Aarogyam. Neither our name, nor our core focus communicates us as a player in pathology or in sick care segment. In fact, the biggest strength of this model is – we removed two slices out of three – that is core pathology and microbiology from family of ‘pathology’ and focused only on one slice of ‘biochemistry’, which is an idiot proof, scalable, fastest growing cash cow. There is no such focused business model anywhere in the world. How do you fight competition? There are two kinds in business. One sees competition, other sees an opportunity. In a country of 1.25 billion population, there are only 4 national players – for the last 20 years. We need 20 national players to say there is a competition in real sense. Right now, it is a competition between the organised 100 players and the unorganised 1,00,000 players. Ironically, in a space where I am, biochemistry, the conventional advantages of quality, cost and speed do not really help much because it is pretty much the

One of the fast emerging Healthcare Company, IRIS Healthcare Technologies Private Limited, incorporated by an experienced and highly competent team from the Diagnostic Industry; its mission is to provide innovative solutions for the requirements of the Clinical Laboratories in the field of Clinical Chemistry, Haematology, ELISA, IFA, Quality Control, Microbiology and Critical Care. Their main focus is to source a host of high quality products, which are internationally acclaimed and provide appropriate back up with excellent service and application support along with continuous medical knowledge initiatives. (Following is a piece of an interview with Mr. Sreeram Gopal, CEO of IRIS Healthcare Technologies Private Limited reviewing his company, goals and objectives to Dr. A. Velumani, CEO, Thyrocare Technologies Pvt. Ltd, on the present diagnostics market, as well as vision and plans for the future) SG:       Good morning sir! It is my pleasure to introduce our company IRIS Healthcare Technologies Private Limited, a company that began its full fledged operations since April 2008 with a core group of six expert members, each with an average experience of about 15 years in the IVD Industry marketing quality products. AVM:  Quite impressing. But, there are so many companies in instruments and reagent business. Is it yet another to join the bandwagon or going to be different…. SG:       Well, let me try to impress you further. We are here with a mission ‘To professionally serve the healthcare & research community with innovative products and to provide high standards of service’. Elaborating on this further let me tell you that, we have either completed or working on the following important commitment of having adequate sales and service setup and distribution network in all major cities and towns in India. We also are looking for the after sales customer support and establish a long-term bond with our customers, which in turn, would increase our market value in future. AVM:  I have always compared companies on the basis of their strengths and strongly believe in that philosophy. Could you please highlight your fundamental strengths in brief? SG:       Any organization, which is newly setup can only grow if its team has all the right skills and the ability to self analyze continuously. I would hence define my team on three platforms: We have A powerful driving sales force, A dedicated engineering or service team, and A highly efficient technical application support. Let me also add that, all these teams are adequately trained in various diagnostic technologies and are passionate about giving sound quality products and service to our customers. AVM:  I am told, you have a good core team? SG:       Right, Sir. I am ably assisted by Mr. Lalit Chakravorty (VP-Operations), Mrs. Sarita Thadhani (GM-Sales), Mr. Sandeep Debroy (DGM-Engg Services), Mr. Sushanta Sen (DGM-North & East) and Mr. Srinivasan (DGM-South). AVM:  We, in the diagnostic market tend to think that oh! Here comes one more player in the market with the same goods. How do you see your company different in terms of the product line? SG:       Yes, that is a good question. I would like to highlight here the word IRIS- it stands for ‘INNOVATIVE REAGENTS, INSTRUMENTS AND SERVICES’. We believe in importing reagents and instruments of quality keeping in mind that, these products should be the latest in technology coming from strong research based companies, user friendly test formats, and aid in cutting down both time and costs to our customers. We are looking to bring unique products not just pertaining to the Biochemistry segment but also for Immunoassay, Hematology and Microbiology areas. For e.g. we have tied up with ADALTIS for their systems like ‘Eclectica’ and excellent range of ELISA kits and automated ELISA processors. Mr. Narendra Kumar who has recently joined as their Country Manager for India has assured us of complete backup support. AVM:   Which companies are you tying up with for importing your products SG:       We presently have tie-ups with companies that have the same philosophy of thought and practice, to name a few are ADALTIS for Immunoassay systems and ELISA products. WERFEN GROUP / BIOKIT for BQA Random access analyzer and specific protein reagents WERFEN GROUP / INOVA DIAGNOSTICS for Kits of Autoimmune diseases. DIALAB for Clinical chemistry reagents & Serology kits. DTN 410K for Semi-automated analyzer. CENTRONIC GmbH Dedicated reagents for Hitachi analyzers. CAROLINA LIQUID CHEMISTRIES CORP. Dedicated reagents or Synchron and Olympus analyzers. SYVA ® EMIT SIEMENS TDM and DOA kits. DIAMOND DIAGNOSTICS Electrolyte analyzers. MINDRAY Semi-automated analyzer. AVM:   Oh! That looks interesting and exhaustive. It would take some time to understand some of the special technologies like autoimmune diagnostics and drug testing. To end at a high note, who all would be your target customers and how are you going to reach them? SG:       Well, our target customers would be Government and Corporate Hospitals, Individual Pvt. Labs, Reference Labs, CROs and Pharmaceutical Research Labs. We have appointed distributors in key cities, with a committed support to us. Our endeavour is to expand our coverage and have sales, service setup and distribution network in all major cities and towns in India. We have already initiated with some initial operations in Mumbai, Chennai, New Delhi, Ahmedabad and Hyderabad, thereby covering some major metropolis. AVM:  What about your commitment to quality assurance? SG:       Thank you for reminding me on this important issue. We are in the process of tying up with Royal College of Pathol-ogists of Australasia (RCPA) to provide external proficiency testing, quality assessment and appropriate education programs to medical testing pathology laboratories. These programs are intended to continually improve the entire gambit of pathology services including Anatomical pathology, Cytopathology, Chemical pathology, Hematology, Immunology, Serology, Synovial fluid, Transfusion, Molecular biology, and Microbiology. The idea here is to cater to even smaller laboratories, by having flexibility in the number of samples and frequency so that the inherent thought process in our laboratories that quality assurance program is costly can be effectively dealt with. AVM:   Finally, one last question. What is IRIS Healthcare Technologies goal for the future? SG:       Our long term