 "Nandakumar S")
Walking through the corridor to the operation theatre, Jayaraman, a physician who treats cancer, is confident. He has planned the procedure well in advance - he knows the size and mass of the tumour to be removed, the target depth and the orbital angle, thanks to Maxio, a robotic equipment to support clinicians in interventional cancer treatment.
Maxio, which helps radiologists and clinicians plan and execute tumour ablation (a minimally invasive treatment to destroy cancer cells using thermal or electrical energy), is the latest product from Chennai-based Perfint Healthcare. The company develops robotic solutions to support biopsy (taking tissues from a tumour or growth for medical tests), interventional oncology (a minimally invasive treatment that directly targets cancer tumors using advanced image-guided technology) and pain management.
Perfint Healthcare was started in 2005 by three entrepreneurs - Nandakumar S, Guruswamy K and Puhazhendi K, colleagues at GE Healthcare earlier. Named Perfint Engineering Services, it was a research and development (R&D) services firm catering to medical equipment manufacturers. The following two years, it operated as a services company and developed an equipment to prove its R&D capabilities. Subsequently, it planned to run a services, as well as a product business. In 2007, it attracted the first round of funding from IDG Ventures India and Erasmic/Accel Partners. "The investors asked us to focus on the product business," says Perfint's chief executive Nandakumar.
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"There was limited scope for an R&D services company to create intellectual property (IP), especially in a field with major players. The team had enough capabilities and potential and we wanted it to take a little more risk and develop IP, which would be more rewarding," says an investor.
After the first round of funding, the company changed its name to Perfint Healthcare Corporation. It launched its first product PIGA (precise interventional guide arm), now renamed Robio, in July 2009. Robio is designed to work with CT-scanning machines, assisting clinicians to place needles accurately for interventional procedures such as biopsy. While this supports a single-needle procedure, Maxio allows multiple needle procedures, which increased the scope of the product in tumour ablation.
A venture capitalist with experience in the healthcare sector says Perfint Healthcare is one of the most innovation-driven firms in the medical equipment sector in India.
The market
These products enable more clinicians to use tumour ablation, which reduces the treatment period from 60-90 days to around four hours, resulting in significant cost cuts. It also reduces the chances for recurrence of a tumour due to imperfect ablation, says Nandakumar.
So far, the company has sold about 150 Robio and Maxio units to hospitals and cancer therapy centres across the world; the domestic market accounted for a third of this. Commercial shipments of Maxio started in June this year and so far, 25 units have been sold. The company expects the US regulator's approval for the product by the end of this year and plans to start exporting it in January 2014.
Currently, it exports its products to Malaysia, Vietnam, the Philippines, Singapore, Australia, Kuwait, Saudi Arabia, Jordan, Dubai, Italy, Russia and Brazil. The company is awaiting a regulatory clearance in China.
The global interventional oncology market is estimated at about $1 billion. Opportunities in matured markets such as the US and Europe are high, says Jed Palmacci, vice-president (US commercial operations), Perfint Healthcare.
"They appreciate the technologies that can help create value and reduce cost per procedure, as this could have an effect on capital budget," he says.
However, the company faces two primary challenges - regulatory hurdles and product-specific constraints. In many countries, regulatory approvals take a long time and this could delay entry into new markets. The company i s at least two years behind schedule in terms of entering various markets, says Nandakumar.
Interventional oncology is not applicable in all cancer forms; it is restricted to colorectal, liver, lung and renal cancer. "We can only grow faster if the technology of ablation is growing," he adds.
Another challenge is biased mindsets in the domestic market. People doubt the quality of Indian products in the segment, as these are cheaper than imported equipment. To scale up, the company has to overcome this mindset and establish a brand among clinicians, says a venture capital expert on condition of anonymity.
PE investments
The first round of funding by IDG Ventures and Accel Partners (Erasmic) was followed by three additional rounds. Norwest Venture Capital joined the funding brigade in June 2010. Together, the funds invested about $30 million into the company. The investments were used in the scientific advisory board, technology development, engineering, patents, regulatory, clinical trials and market development.
Mohan Kumar, partner, Norwest Venture Partners, says lung and liver cancer treatment is a huge market across the world. The disease is growing fast in countries such as China, Japan and Korea. The market would run into billions, he said.
On criticism a single-product company has growth limitations, Kumar said this was a generic statement, adding the company could grow better, considering the market size it addressed.
Growth and exit
Typically, a medical technology firm takes four-five years to develop, test and launch products and reach the market, provided it doesn't face any undue delays. Nandakumar says the company is expecting break-even in 2013-14 itself. Kumar added Perfint, along with Accuray (which has products such as CyberKnife) and Intuitive Surgical (a medical robotic technology firm), was one of the few medical technology companies in the segment for which innovation was key to growth. Perfint could also explore interventional drug delivery solutions, as this would help it address a larger market, he said. If the company captures substantial market share in the lung and liver cancer segment, there are possibilities of a merger and acquisition through which a large company could buy Perfint.
Major entities in the medical technology sector, including GE Healthcare, Philips and Siemens, could avail of Perfint's technology. Kumar said if the company decided to grow on its own and gain scale, an initial public offering could be an option.
"We expect the exit to happen somewhere around 2015-16. It could also happen before that, but we think 2015-16 would be a better time to think about it," he added.
Looking ahead
"Our first milestone is to become a Rs 100-crore company by June 2015," says Nandakumar. Last year, the company clocked a revenue of Rs 40 crore, and Rs 15 crore the previous year. Currently, about 80 per cent of the business is accounted for by foreign countries, as advanced procedures that require Perfint products are adopted more abroad.
The company is also developing its next product, Sonio, to be ready for launch in a year. The product would enable working with ultrasound scanning machines. As these machines are widely used, Sonio is likely to see greater scalability.
G S K Velu
It is a good initiative to bring innovation into the country. The company is working in cancer therapy and from where it started, it is growing very well. Such initiatives should be encouraged.
In the US, such initiatives are encouraged, with many seed capitals working there. Now, Perfint Healthcare has secured funding and I think with that, it is scaling up. There is potential for the company to scale up its business globally. The company's growth cannot come from by the Indian market alone.
Any innovation has its own challenges. However, it is a frugal innovation and even if there are others are there in the segment, competition might not be a major challenge for now.
Considering it is in a niche area, it has to make a presence and this would be the initial challenge. Once it crosses that, there would obviously be a certain critical mass. Once you have proven the model, there is a possibility for a deal with a large company or finding some other way to grow.
Single-products companies can obviously grow only to a certain extent. For Trivitron, the model is multi-product. Also, it is more market- and brand-oriented, looking at innovation, manufacturing, distribution and services. So, we are looking at a larger composite play. At Perfint, it is about innovation play; it has its own advantages and disadvantages. The advantage is it is quite focused and can play globally in that particular product. But from a longer-term perspective, it needs to find some partnerships and mergers and acquisitions to grow to the next level…expanding the product or joining a larger company. It takes a lot of time to bring out a new product.
G S K Velu,
managing director, Trivitron Healthcare
