Dr. A. Velumani’s Personal Blog

A Special Interview with Dr. A Velumani

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 15,000. Even when we charge INR 8000 we often get feedback from the consultants that “Not that every cancer patient can afford that”. We are laying the foundations of this business brick by brick. Now the market evolution will take its own course.

6. Nueclear has been spreading out in tier 2 & 3 cities. What are the reasons for targeting such locations over more urban areas where your competitors are focusing?

For us both markets are equally motivating. We are a low-cost player. So, in large urban markets like Mumbai and Delhi – where 20 plus machines are fighting for volumes, we find it easy to reach viability. In markets like Surat and Raipur, we are the first players and enjoy early mover advantage in terms of building lasting relationships and attention. Though taking the key consumable i.e. FDG to tier 2 and 3 towns is a big challenge – we own the Cyclotrons (which manufacture the FDG) and we can comfortably foresee 40 towns that can potentially run 800 scanners in 60 months from today.

7. Nueclear is the first company talking about a chain of imaging centers in India. Why hasn’t such a chain emerged in India till date?

The Imaging business is not one for the faint hearted. This business needs large capital expenditure (capex), and has a long gestation period. Contrary to pathology, which has low capex and high operating expenses (opex), Radiology has high capex and low opex. This creates a significant up-front cost to pay, and erects a tall entry barrier for CT and MRI operators – few can scale it. Only those who have 200 crores of free cash can even dream of pan India operations even though there are regional players with some scale. To think big the following are essential:

· Access to funds to set up centers and fund operations when they are subscale.

· Deep domain knowledge and stellar management skillsets to set-up multi city operations spanning multiple radiology verticals.

· Ability to understand and operate in local markets that can be very disparate. In India, every 100 kms, the market and its dynamics change completely.

· Ability to keep self-belief and commitment in the face of the fact that even when things are going well, it will take 5 years to report a net profit.

8. Why are you focusing on PET-CT and not traditional modalities like CT, MRI, Ultrasound, X-Ray etc.

You know, I find these questions deeply amusing. 15 years ago, I was asked similar questions – but a lot less politely. “Why are you focusing only on Biochemistry?”; “Why only Thyroid”; “Why aren’t you doing all tests. The future only belongs to full-service players”; and so on. I didn’t listen to them then, and went about marching to my own beat. Today, I get a deep sense of déjà vu when you ask me this – I am seeing Cancer in 2017 is at the same place where Biochemistry was in 1995. I am focused much on FDG in 2017 as I was focused on Radioimmunoassay in 1995. My driving philosophy is Focus – Do one thing – be the best at that. And then you move to something else – but focus on achieving mastery – and achieving perfection. That is why have I resisted doing anything other than FDG scans (PET-CT). I have a punch line and it goes like this “There are two kinds on this earth. 1. Focused and Succeeded. 2. Distracted and failed.” That thought keeps me focused.

9. Nueclear has a big franchisee network for imaging. How do you ensure quality in such a set-up?

Consistency, and not flashes of brilliance are what drive growth in a business like ours. We have gone to extreme lengths to ensure that when you walk into a Nueclear center – the experience and quality of reporting is the same. We use the same scanner everywhere – so the image quality is same everywhere. FDG goes from same cyclotron for all PETCTs and thus FDG quality to is uniform everywhere. NMPs report under the guidance of seniors in the organisation who have done already 20,000 plus scans for their first 5000 scans once they are in our network. Efforts are underway to do cloud reporting using senior NM doctors, so we can ensure consistency of care everywhere we go.

10. If someone wants to start a franchisee with Nueclear, how can they go about it?

It’s quite simple – They can write to us. If it is feasible to transport the FDG to the city in question within 10 hours from the cyclotron, we are willing to work with them. We already have 5 owned and operated scanners and 7 NHL owned and franchisee operated scanners as on Jan 2017. However, this opportunity is for those with unwavering commitment and discipline – It is a challenging business and hence it needs entrepreneurs who have a long-term vision.

11. What are your views on the status of digital imaging in India?

CT, MRI and PETCT are already digital. I feel the next big innovation will be remote reporting via cloud based systems. Standalone centers don’t necessarily need a cloud reporting setup, but as one scales up, and as more and more people imitate us, it would become an entry barrier. In 2030 I sense that 90% of images of CT, MRI and PETCT would be cloud reported. That said, I will advise you to not put your faith in this estimate. We always overestimate the impact of technology in the short term and massively underestimate its impact in the long term.

12. How can the current scenario be made better in terms of awareness, reach, affordability?

I think there are people working on these aspects. Key market players are working together to educate the doctors, the larger medical community and the patients to explain the superiority of PETCT scans in oncology – in diagnosing, staging and monitoring. Thus, the awareness is growing. Reach will improve with as medical infrastructure of our country improves. 5 years ago, there were only 80 scanners. Now we are at 200 scanners, and this velocity too, is increasing. We have made some progress, but there is a long way to go. Affordability would improve only when prices are competitive – I hope more and more people follow our lead – volumes, not margins drive profitability in Imaging.

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