Swaminathan Jayaraman, Chairman, Vascular Concepts, in an interaction with Viveka Roychowdhury, elaborates on the turning points of Vascular Concepts and how it has helped form the foundation for the growth of the medical devices sector in India
Congratulations on Vascular Concepts receiving the 2017 Asia-Pacific Coronary Care-Drug Eluting Stent Growth Excellence Leadership Award this March from Frost & Sullivan. Vascular Concepts will be completing two decades in 2018. What have been the major turning points in these two past decades?
Thank you very much for the wishes.
The two significant turning points have been the introduction of the Drug Eluting Stent (DES) (ProNOVA) in the Indian market and bringing in regulation in the medical devices sector in the last two decades.
Vascular Concepts has played a significant role in the growth of the DES market in India when the market was duopoly with restricted pricing with the MNCs in India. When the DES was launched in India, the Maharashtra FDA passed an order that only US FDA approved products should be sold in the state of Maharashtra. Vascular Concepts challenged the decision in Mumbai High Court and the court ordered the DCG(I) to include medical devices into the Drugs and Cosmetics Act. These have been very significant turning points in the last two decades for Vascular Concepts, which have helped form the foundation for the growth of medical devices sector in the country.
What do you see as the possible inflection points in the next five years, both for your company as well as the endovascular devices sector in general?
The recent decision by the National Pharmaceutical Pricing Authority (NPPA) to restrict the pricing of stents (both bare metal and drug eluting) is a monumental decision to help Indian companies compete with MNCs in India. This decision is quite similar to the decision taken by the Chinese Government to help the local Chinese manufacturers to garner up market share (today Chinese companies have 98 per cent of the market share of the stents in that market). It is to be seen in the next several years whether Indian manufacturers can really compete maturely to garner the market share in this business. Secondly, there is little or no capital available for growth in this industry. The traditional startup capital shuns this sector due to the challenges in regulation and also the challenges with the marketing practices in the country.
Given that India has recently put in place regulations for the medical devices sector, what is Vascular Concepts’ strategy to cope with the new market dynamics?
Vascular Concepts has a basket of innovations in the endovascular space which it plans to introduce in the next few years. The medical devices industry is a fast changing sector with newer technologies finding new clinical need. While we await the details of the universal healthcare (coverage) unveiled by the government, this could be a real game changer for this industry. I foresee the launch of the Universal Health to do for the medical devices sector what Y2K did for the information technology sector. The focus on attention to personal health and well-being (which exists with less than five per cent of the population) in the middle class due to the government policy will lead to more screening, more prevention and more curative methodologies. This will contribute to the growth of the medical devices sector enormously.
Currently, Vascular Concepts uses Germany as a manufacturing base to ensure quality control. Are there plans to start manufacturing in India, in line with the government’s push to Make in India for India as well as the world?
Vascular Concepts certainly has plans outlined to move ‘value based manufacturing’ to India. When stents are highly automated and India does not have a manufacturing or a cost edge to manufacture these, there are delivery systems like catheters etc. that can be competitively manufactured in India. Our focus in India has been to develop new technologies and then outsource manufacturing overseas where it makes economic sense. This will indeed change in the future with the emphasis of Make in India combined with a market growth strategy.
Your company has an extensive patent portfolio exceeding 35 US/EU technology patents. What percentage of revenues is allocated for R&D?
We have consistently spent six to eight per cent of our revenues towards development related activities. R&D in this industry is mainly development combined with preclinical and clinical studies to prove safety and efficacy of the devices under development.
Could you give us a brief idea of the technologically innovative products already in the market as well as those in research and clinical studies like the aortic valve (transcatheter aortic valve implant) for angioplasty, which is currently undergoing clinical studies?
There are two main areas for the launch of innovative products in the future. With angioplasty and stenting extending lives of the patients, the heart needs to be taken care of any structural issues. The valves in the heart need to function normally for the rest of the heart to support the bodily functions. We have launched a slew of structural heart products in the last couple of years and will continue this with the new transcatheter heart valve where the aortic valve can be replaced with a catheter. There is also considerable initial efforts to look at whether the mitral and the tricuspid valve replacements can also be done percutaneously specifically for heart failure patients. We are also developing a device to prevent strokes in patients that suffer from irregular heartbeats.
The second area of focus is the peripheral endovascular technologies, focusing on the treatment of debilitating diseases in the lower abdomen of the body. There are a number of patients (diabetics, etc.) who suffer from reduced mobility due to irregular or improper blood flow in the limbs which lead to claudication and eventually amputation. Newer technologies like drug-eluting balloons, self-expanding stents and stent grafts can potentially tackle these diseases in future which are the focus of vascular concepts.
Vascular Concepts is today a Rs 150-crore company having a global presence. What is the percentage of revenue from India and other geographies? Which countries are you seeing maximum growth?
India continues to be the major revenue engine for the company in Asia. Our presence in Thailand, Vietnam, Philippines, Myanmar, Cambodia and other Asian markets is through our associate company in Thailand. The sale of the products in Europe is done through a marketing associate company out of the UK.
What has been the company’s average year-on-year growth (actual figures or percentage) over the past five years? What is the targeted growth for the next two years?
In the last two years, while not many companies have seen value growth in the cardiovascular device segment due to the decrease in pricing, Vascular Concepts has seen a single digit volume growth which is in line with the market growth. Moving forward, we expect to see double digit volume growth which will also contribute to the increased revenues for the company.
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