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2019 Healthcare and Life Sciences Outlook for India

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Our Heatmap for India Healthcare and Life Sciences Investments for 2019

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2019 Healthcare and Life Sciences Outlook for India

  1. 1. Print Close Healthcare and Life Sciences outlook 2019: Is the heat still on? Kapil Khandelwal�����January�2,�2019� The�year�2018�started�with�a�bang�and�a�positive�outlook�on�healthcare�and�life�sciences� sector.�While�in�US,�the�S&P�500�Healthcare�index�outperformed�to�add�nearly�5�per�cent� versus�6.23�per�cent�fall�in�broader�S&P�500�in�2018.� Closer�home,�BSE�Healthcare�Index�underperformed�losing�6�per�cent�versus�6�per�cent� gains�on�Sensex�during�the�year.�These�are�just�broader�market�indices�and�public�market� indicators�of�investment�activity�in�healthcare�and�life�sciences�sector.�The�other�side�of� the�coin�has�private�markets.�The�activity�there�remained�subdued�in�terms�of�number�of� deals�and�investments�in�Q3FY18.�This�is�because�older�post�Lehman�Era�vintage�is�still� looking�for�exits.�So�what�is�the�outlook�for�2019? Our�investment�heatmap�for�2019�shows�a�much�cautious�mood�across�the�healthcare� and�life�sciences�sub-sectors�with�opportunities�in�some�hot�spaces.�Is�the�heat�still�on�in� 2019? As�compared�to�the�2018�heatmap,�the�heatmap�for�2019�has�some�fire�being�doused�by� caution�due�to�what�transpired�in�2018.�When�compared�to�the�heatmap�of�2018,�the�2019� map�still�has�some�areas�that�will�continue�to�remain�hot�for�the�sector�on�a�selective� basis.�The�first�half�of�2019�will�see�the�political�heat�of�the�general�elections�in�India� leading�to�the�uncertainty�around�investment�in�the�sector.�Largely,�2019�will�be�positive� socio-politically�but�may�cause�some�dent�on�the�margins�and�valuations�of�the�sector. Healthcare financing Medical�cost�inflation�after�the�rupee�devaluation�in�2018�and�emerging�price�controls�on� procedures�and�implants�will�continue�to�be�in�the�range�of�20�per�cent�to�24�per�cent�in� 2019.�As�the�'India�Stack'�builds�up�to�bring�the�next�500�million�into�its�fold,�the�consumer� financing�of�healthcare�events�will�still�attract�many�operators�leveraging�fintech�tools.� Innovation�into�financing�products�and�services�for�consumer�financing�of�healthcare�will� see�a�few�more�players�emerge.�Incumbents�of�the�likes�of�Bajaj�Finserv�will�expect�to� increase�the�coverage�throughout�India�in�2019.�However,�subvention�will�be�under� pressure�from�the�healthcare�operators�due�to�margin�pressures. 2019�Outlook:�Very�hot What's�going�wrong:�Regulation,�maturity�to�scale What's�going�right:�India�stack�digitisation,�consumer�spending�on�health�and�wellness Medical education Healthcare and Life Sciences outlook 2019: Is the heat still on? : Business Today Page 1 of 4 https://www.businesstoday.in/storyprint/306331 03-01-2019
  2. 2. The�regulatory�regime�to�open�up�different�skills�for�healthcare�has�been�playing�catch�up.� The�recent�regulatory�reforms�that�started�will�not�see�much�action�on�the�ground�in�2019.� The�new�age�digital�medium�to�skill�in�bulk�is�still�balked�by�the�respective�skill�councils� and�regulators.�Don't�expect�a�single�medical�center�of�excellence�on�ground�in�2019�in� any�state�from�the�policy�announced.�Many�of�the�debt�servicing�issues�of�the�sector�will� still�persist�in�2019�with�a�few�NCLT/bankruptcy�cases�coming�up.�M&A�activity�may�heat� up�from�here. 2019�outlook:�Moderate What's�going�wrong:�Regulation,�corruption,�no�vision,�skill�shortages,�alignment�to� new�age�care,�increasing�debt�burden,�new�age�skills�certification What's�going�right:�Skill�demand Med tech innovation and life sciences discovery and clinical development The�pipeline�for�moving�into�clinical�development�in�2019�is�very�negligible.�Various� initiatives�over�the�last�4�years�under�various�schemes�to�build�the�innovation�pipeline� have�not�resulted�in�serious�players�being�recognised�to�take�on�global�scale.�We�will�see� 5�IP�either�going�through�attrition�or�being�a�global�scale�innovation�from�India.�On�the� clinical�development�front,�the�sector�has�maintained�status�quo�since�2018.�Investments� will�be�muted. 2019�outlook:�Low What's�going�wrong:�Innovation�pipeline,�IP�regulation,�global�collaborations,�health� research�culture;�regulatory�bottlenecks�on�clinical�development What's�going�right:�Talent�supply;�cost�advantage Pharma and therapeutic solutions Story�of�2018�to�continue.�Expect�M&A�consolidation�activity.�No�mega�stories�expected�in� 2019.�Although�growth�may�pick�up�further�post�GST�issues�are�sorted,�markets�to�remain� bearish�on�the�sector.�Election�year�populism�may�kick�in�a�few�more�price�controls�in� India.�Digitisation�will�be�a�key�driver�in�2019. Healthcare and Life Sciences outlook 2019: Is the heat still on? : Business Today Page 2 of 4 https://www.businesstoday.in/storyprint/306331 03-01-2019
  3. 3. 2019�outlook:�Moderate What's�going�wrong:�Price�controls,�US�generics�policy,�Indian�generics�versus�Jan� Aushadhi What's�going�right:�Cost�advantage,�distribution�infrastruction Healthcare Providers The�hectic�policy�actions�on�all�fronts�in�2018�will�result�in�some�consolidation�in�the�sector� on�account�of�margin�pressure�due�to�price�controls�and�heady�valuation�expectations�on� exits.�Expect�only�one�major�blockbuster�IPO�in�2019.�Funding�crisis�to�continue.� Expectations�of�a�few�innovative�delivery�models�to�emerge�as�costs�build�up�and�prices� will�remain�under�pressure.�Surprise�could�be�in�store�in�terms�of�further�regulatory� changes.�Expectations�of�Rs�50000�million�being�further�invested�will�be�reviewed�post� Q3. 2019�outlook:�Hot What's�going�wrong:�Margin�pressure,�price�controls,�NCLT�recoveries,�GST�slabs� rationalisation�on�inputs,�execution�of�programs�on�the�ground,�PPP�in�healthcare What's�going�right:�Ayshman�Bharat,�Jan�Aushadhi Healthcare insurance Expect�to�see�some�innovative�models�for�healthcare�payers�emerge�in�India�for�the� middle�bulge�of�India�Stack�for�the�middle�500�million�that�are�paying�out�of�pocket.�As� loss�ratios�mount,�insurance�rate�will�go�northwards.�Innovative�products�and�pricing�still�a� distant�reality�with�the�regulator�in�India. 2019�outlook:�Moderate What's�going�wrong:�margin�pressures,�product�and�new�business�models�innovation,� product�approvals,�loss�ratios What's�going�right:�Consumer�demand Health retail India�will�still�not�get�its�first�unicorn�in�healthcare�in�2019�as�many�of�the�series�B�and�C� players�will�fail�to�reach�profitability.�Valuations�will�be�a�key�issue.�Consolidation�and� acquisitions�expected�for�some�to�survive�and�grow.�Expect�two�very�large�PE�funded� players�to�close�shop�or�merge.�Regulatory�puzzles�of�2018�will�not�be�solved�till�Q4�2019.� Digital�business�models�will�be�the�key�drivers�for�private�and�VC�investments. 2019�outlook:�Very�hot What's�going�wrong:�Regulation,�maturity�to�scale What's�going�right:�India�stack�digitisation,�consumer�spending�on�health�and�wellness Wellness Expect�the�investment�buoyancy�from�2018�to�continue.�No�major�blockbuster�IPOs� expected�in�2019�from�this�sector.�We�may�see�newer�business�models�emerge�as� tourism�and�wellness�merge.�Digital�wellness�is�yet�to�prove�itself�in�2019.�Who�comes�to� power�in�the�centre�will�decide�what�happens�to�Yoga�after�2019. 2019�Outlook:�Hot What's�going�wrong:�Regulation,�maturity�to�scale Healthcare and Life Sciences outlook 2019: Is the heat still on? : Business Today Page 3 of 4 https://www.businesstoday.in/storyprint/306331 03-01-2019
  4. 4. What's�going�right:�India�stack�digitisation,�consumer�spending�on�health�and�wellness Alternative therapies The�Babas�promoting�alternative�therapies�will�continue�their�journey�northbound�in�2019� as�well.�However,�unlike�Chinese�alternative�therapies,�the�Indian�alternative�therapies�will� still�not�gain�global�mainstream�in�2019. 2019�Outlook:�Moderate What's�going�wrong:�Regulation,�maturity�to�scale What's�going�right:�India�stack�digitisation,�consumer�spending�on�health�and�wellness The writer is Managing Partner of Toro Finserve LLP, and Director EquNev Capital Pvt Ltd Print Close URL for this article : https://www.businesstoday.in/opinion/columns/healthcare-and-life-sciences-outlook-2019-is-the-heat-still- on/story/306331.html @�Copyright�2018�India�Today�Group. Healthcare and Life Sciences outlook 2019: Is the heat still on? : Business Today Page 4 of 4 https://www.businesstoday.in/storyprint/306331 03-01-2019

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