Sahajanand Medical Technologies clock a hearty growth
Sahajanand Medical Technologies scored a major victory in 2019. The cardiovascular medical-devices-intervention company proved that India’s medical devices are on par with, maybe even superior to, global standards.
Before 2019, the underlying concern was that Indian-made stents, used to unblock clogged arteries, were not up to the standard of foreign products. That was, of course, until randomised, single-blind, multi-centre trials of SMT’s Supraflex, a drug-eluting stent, was unveiled in The Lancet. The findings in the peer-reviewed and one of the prestigious medical journals were remarkable.
The study proved that Indian-made stents were safe and effective. The randomised trial involving 1,435 patients from seven countries (UK, Netherlands, Poland, Spain, Italy, Hungary, Bulgaria) compared the Surat-based stent manufacturer SMT’s Supraflex with the US-based Abbott’s Xience, considered the standard in efficacy.
Supraflex is a sirolimus-eluting stent with a bio-degradable polymer coating and ultra-thin struts, while Xience is an everolimus-eluting stent with a durable polymer coating. Drug-eluting stents are coated with medicines to lower the chances of arteries narrowing after the intervention to unclog them. The result? At 12-months, the primary endpoint occurred in 35 patients (4.9 per cent) in the Supraflex group and in 37 patients (5.3 per cent) in the Xience group.
“The Supraflex stent was non-inferior to the Xience stent for a device-oriented composite clinical end-point at 12 months in an all-comer population. Supraflex seems a safe and effective alternative drug-eluting stent to other stents in clinical practice,” noted the report published in The Lancet.
It was a major milestone for Indian-made drug-eluting stents and changed the narrative from also-rans to becoming high in global standards. It also strengthened India’s medical-device company SMT, now very important on the global intervention cardiovascular therapies market. Thus, began a new chapter in SMT’s growth.
“We have endeavoured to improve our stents and have invested in research and development. We have always strived to strengthen our product portfolio, and introduce new products. Our aim is to provide quality products at affordable prices,” says Dhirajlal Vallabhbhai Kotadia, 64, chairman, Sahajanand Medical Technologies (SMT).
Global phenomenon
The global prevalence of cardiovascular diseases nearly doubled from 271 million in 1990 to 523 million in 2019 and heightened awareness of diagnosis and treatment have triggered growth in the global vascular-device market. This market includes all products used for cardiovascular and peripheral vascular procedures, including implants and accessories used to treat arrhythmias, aortic diseases and other vascular conditions. According to Frost and Sullivan analysis, the global cardiovascular-devices market is expected to touch $23 billion by 2026.
Even while the global vascular-devices market is swelling, intervention cardiology, which deals with blocked or narrowed arteries ferrying blood, is also growing rapidly. One of the procedures which involves minimally invasive, catheter-based and specialised imaging techniques involves placing a stent in the arteries.
Interventional cardiovascular procedures are performed largely by interventional cardiologists who have expertise in using devices such as catheters, stents, balloons and guiding tools. Sahajanand is a major operator in the stents market, and has a market leading position in intervention cardiology.
Besides, the procedure is gaining prominence due to the shift from coronary artery bypass graft surgery. In fact, intervention technology that uses a catheter has been driven by the need to reduce hospitalisation, the greater suitability of non-invasive devices, particularly in elderly patients who are at high risk and generally have co-morbidities, as well as the lower prices of stents. All this is boosting increased adoption of these procedures from governments in countries such as Thailand, China and India.
SMT’s journey to a global quality company began when Dhirajlal, who came from a humble background, noticed the plight of a poor man whose eyes welled up when he saw the bill for his wife’s medicines. Kotadia witnessed the episode with compassion, paid for the man’s medicines, and decided that he had to do something to reduce the cost of medicines.
Kotadia later read about the advancements in stents in interventional cardiology. Stents need precision manufacturing processes with laser-cutting tools. His engineering studies proved instrumental. After dabbling with various businesses including repairing projectors and even selling pens, Kotadia started a laser-machine cutting venture in Surat. The experience proved handy when he began with the venture to manufacture stents with only four employees back in 2000.
Driven by research and pioneering efforts, long hours, and continuous investments, SMT-developed stents were soon widely accepted among the Indian medical fraternity. Over the years, through acquisitions and further medical research, SMT increased its penetration in the Indian market, ramping up quality at market-appropriate prices, supported by strong clinical data.
Unsurprisingly, the efforts paid off. SMT has increased its market share to a handsome 31 per cent of the total drug-eluting-stents sale volume in India, rising steadily from about 21 per cent in FY19. Not only did SMT cement its position in the Indian market in the last few years, it has also made rapid strides in the global stents market. The firm is among the five top companies in terms of market share (by sales volume of DES) in Germany, the Netherlands, Italy and Poland, as of March 2021, as per the report by Frost & Sullivan.
Powered by its mission statement: ‘Pledge to save millions’, SMT is on course to build on its premise of making medical therapies affordable to the masses. It has come a long way since releasing its first stent in the market. Growing from strength to strength, and laying the foundations of what proved to be its winner, SMT’s journey has been remarkable.
Among the first employees, Chhaya Engineer, 42, recalls how she started her journey with SMT back in 2000. “It was campus selection in the year 2000 when my batch mates were preferring to make their career in the IT industry, I heard from our professor about SMT, a start-up company working towards a noble cause with a very innovative product concept. The mission in itself and the challenges hidden behind the mission impressed me the most, and that’s when I took the plunge as the first female employee of SMT. On the very first day, our technical director had placed a tiny stent in my palm and told me: ‘This is not a stent, this is someone’s life. You have to always remember this.’”
“At that time, infrastructure was small (1,500-2,000 sq ft), there were not many resources and my salary was barely Rs2,000 but the satisfaction was priceless. We celebrated each and every accomplishment enthusiastically, such as the first success in a research project, the first clinical implant, a first European regulatory approval, new product launches, and many more. Today SMT is my second identity and my second family,” says Engineer, now AGM, research and development.
Research driven
Research and development have been the cornerstone of its growth. SMT has continuously striven to become world class through investing in research and development. Its product development is aided by its three research and development centres, in Surat, India; Galway, Ireland; and Nonthaburi, Thailand.
Such R&D efforts have led to developing several key technologies in the vascular device segment, including its bio-degradable polymer in 2005 and its ultra-thin stent, with a 60-micron strut thinness. In fact, the Supraflex Cruz coronary stent is considered to be the most deliverable stent, according to a report by Frost & Sullivan.
Not resting on its laurels, the firm continues to develop new technological products and introduce innovative ones. By March 2021, it has been granted 67 patents globally, and has a pipeline of 17 patents and four design registrations in India.
SMT became the first company in the world to receive CE certification for a drug-eluting stent (DES) with a bio-degradable polymer. While the development of any new product or enhancement of existing product requires significant investment in research and development, SMT has not shied away from making these huge investments. In FY21, the total expenditure towards research and development was R86 crore, accounting for 14.67 per cent of its revenues from operations, which also includes expenses towards USFDA approvals.
“We are constantly investing in research and development to enable us to continue to develop innovative and technologically-advanced products while our operational scale helps us produce products affordable to the masses. We constantly seek to enhance our existing products and portfolio while optimising our manufacturing processes,” says Bhargav Kotadia, managing director, SMT and the only son of Dhirajlal. The thirty-one-year-old Bhargav has been SMT’s managing director since December 2017.
SMT’s two manufacturing plants in India, Surat and Bengaluru are where the firm manufactures interventional-cardiology and peripheral-intervention products for India and the overseas markets. The firm uses various technologies for manufacturing the devices, including laser cutting, electro-polishing, drug coating and crimping. It has expertise in handling different kinds of specialised materials and also developing customised manufacturing equipment which provides CMS with a greater control on both cost and quality, such as equipment for laser cutting, electro polishing, drug-coating and quality control.
SMT’s overseas facility at Nonthaburi, Thailand, manufactures products for structural heart therapy. “Our manufacturing infrastructure is a huge competitive advantage for us as it allows us to keep product costs down while expediting the design and development of products, reducing our launch time of products. Our manufacturing infrastructure is our competitive advantage and it helps to keep costs low through in-house research and manufacturing efficiencies, while expediting design and development of new products,” says Bhargav.
The new growth chapter
SMT’s growth playbook took an important turn in 2020. The firm expanded its product range and entered the structural heart-therapy segment through acquiring Vascular Concepts and Vascular Innovations in 2020. The acquisition brought into its fold Hydra Tavi, a unique trans-catheter heart-valve implant to treat severe aortic stenosis in high-risk patients.
This new category is expected to speed up SMT’s growth rates. The Frost & Sullivan report states that the global structural heart-devices market was valued at $5.67 billion in 2020 and is expected to touch $10.11 billion by 2026, registering a 9 per cent CAGR over 2021-2026. In addition, the structural heart-device market in India, estimated at $12.4 million in 2020, is expected to record a 31 per cent CAGR from 2021 to 2026, to $71.1million in 2026. In fact, even while the stent market is growing rapidly, the structural heart-device market has immense potential and can deliver even faster growth rates for SMT.
To tap into the potential, SMT has been on an acquisition spree. SMT acquired Imex Clinic Salud in June 2019 to get a foothold in the markets of Spain. In September 2019, SMT acquired Zarek Distribuidora, a sales and marketing company with a portfolio of interventional cardiology and endovascular products based in Brazil. And back in 2018, SMT entered into a strategic partnership with Cardinal Health Medical Products India Limited, through which it got the right to distribute Cordis products, which has helped SMT provide a complete suite of products in the intervention cardiology space.
“We have benefited greatly from our acquisitions as a result of which our operations and cash flows have increased,” says Bhargav adding that “we intend to continue to evaluate strategic partnership and acquisition opportunities that have the potential to fast-track our entry into advanced products with high growth potential, or strengthen our R&D and manufacturing capabilities or provide us with an entry into a large vascular device market.”
Strong financials
Following the strong foundation built over the years, SMT’s revenues and profitability have sharply increased. Its revenues from operations have clocked a 34.4 per cent CAGR in the two years to FY21, driven by a huge increase in sales of products as well as acquisitions.
In fact, the share of revenue from structural heart therapy has jumped from 0.68 per cent in FY20 to 5.87 per cent thanks to its acquisitions.
While the new structural heart therapy segment will offer additional levers for growth, SMT’s clinical trial expenses for its drug eluting stents increased by 24 per cent from Rs11 crore in FY20 to Rs13.7 crore in FY21. The firm had to incur additional expenses on sales and marketing, primarily due to Covid-19 in the last fiscal even as marketing expenses for overseas businesses rose. All this additional expense and provisioning resulted in a Rs72.33 crore loss in fiscal 2021 while the firm recorded a profit after tax of Rs25.43 crore in FY20.
“One should consider the fact that we started direct operations in Germany, Poland, Russia, Switzerland and France through our subsidiaries. We have also seen an increase in employee costs, which are our strengths, while we have incurred additional expenditure on account of Covid-19. We have also spent on research and development,” says Nitin Agrawal, CFO at SMT.
The future beckons
With demand mounting, the firm is setting up a new research, development and manufacturing campus in Hyderabad, India. Already, its Surat plant is running at full steam. SMT is coming out with an IPO to repay debt taken to fund its acquisitions and to fund its Hyderabad plant expansion. Construction at Hyderabad is on, and the plant is expected to be commissioned next year.
SMT plans to raise about Rs410 crore through the IPO, from which it will repay Rs255 crore of debt. This should help reduce financing costs, which rose from Rs7 crore in FY20 to Rs20.3 crore in FY21.
On the other hand, it is eyeing one of the biggest markets, the US. It is in the process of obtaining US FDA approval to market one of its products and is now in the pre-submission phase, conducting pre-clinical studies and engineering tests. Its expenses for the US FDA approval have risen from Rs11 crore in FY20 to Rs13.7 crore in FY21.
“We are in the process of obtaining US FDA approval for one of our stents and the procedure is at a pre-submission phase. As you know, approvals can take a long time and require significant investments. Our endeavours, hopefully, will pay off, and we can enter the US and other regulated markets,” says Bhargav.
All this should pave the way to further accelerated growth rates in regulated markets. SMT is also looking at expanding its structural heart therapy, where the revenue-pie is huge and growth rates are higher than in the stents category.
With its extensive distribution network and direct operations in 10 countries of Asia, Europe and Latin America and distributors in 59 countries, SMT could see accelerated revenue growth in overseas markets. It is also investing heavily in product distribution in India and has a widespread distribution network.
“We constantly seek to grow our product reach to under-penetrated regions, deepen penetration of our products in markets where we currently operate and widen the range of our products,” says Bhargav.
SMT’s technology and capabilities have already been proven through clinical efficacy tests. With the future of heart care and minimal therapy increasing, there’s huge potential in its business categories waiting to be tapped, where SMT has built capabilities and natural advantages.