On Monday, one of India's leading healthcare diagnostics chains Metropolis Healthcare announced the acquisition of Delhi-NCR-headquartered Core Diagnostics, which offers over 1,300 high-end tests with a primary focus on cancer. Founded in 2012, Core Diagnostics operates in 200 cities in India and caters to more than 6,000 speciality prescribers, including 1,600 plus top cancer specialists. Core Diagnostics registered revenue of ₹110 crore in FY 2023-24 and the acquisition is for ₹246.8 crore.

In October last week, Manipal Group promoted Manipal HealthMap acquired a 100 per cent stake in iGenetic Diagnostics, a specialised diagnostics chain based in Mumbai. iGenetic Diagnostics started in 2013, focuses on high-end molecular diagnostics and critical care services.  Manipal HealthMap is a specialist in testing areas like oncology, infections and fertility.

Experts say these kinds of deals are a harbinger for big deals likely to happen in India's emerging high-end speciality disease testing sectors and consolidation in the country's highly unorganised diagnostics market.

A highly fragmented market

The India Diagnostics Market was valued at $2,128.7 million in 2023 and is projected to reach $7,847.9 million by 2030, is poised to grow at a CAGR of 19.9% from 2024-2030, says research firm Precision Business Insights. The pathology lab landscape in India is very fragmented with a total estimated of 1.32 lakh labs and of this, more than 60% are standalone labs.

''The diagnostics industry in India is marked by a high degree of fragmentation, with standalone centres accounting for 46%, followed by private hospital-based labs at 28% and national chains at only 6%. While this fragmentation presents challenges in terms of capabilities and scalability, it also offers opportunities for consolidation and the emergence of new business models'', says Aryaman Tandon, Managing Partner and Cofounder, Praxis Global Alliance, which a few months ago brought out a study on the growth of diagnostics sector in India. Praxis says the Indian healthcare ecosystem is a $216 billion market in FY23 and diagnostics forms only 6% of that overall ecosystem. The sector is expected to grow at a compounded annual growth rate (CAGR) of 14% to reach $25 billion by FY28.

The diagnostic industry is highly competitive and fragmented in nature due to the low entry barriers, and the market share of organised players is only limited to around 17% the major chunk of the market share is with the unorganised players, according to a sector report from Care Edge Ratings.

That is why leaders like Metropolis are trying to consolidate by acquiring high-end specialised diagnostic companies, whether standalone or chains. ‘’With approximately 1.4 million new cancer cases and nearly a million deaths annually in India, there is a critical need for advanced cancer testing nationwide. By integrating Core’s expertise and infrastructure with Metropolis’ established strengths, we aim to reinforce our leadership in advanced cancer testing and establish a Centre of Excellence in Cancer Diagnostics. Ameera Shah, Promoter and Executive Chairperson, Metropolis Healthcare reasons for the Core Diagnostics acquisition.

Some of the other major M&As in recent years include Metropolis Healthcare’s ₹636 crore purchase of Dr Ganesan's Hitech Diagnostic Centre (Hitech) along with its subsidiary Centralab Healthcare Services (Centralab), PharmEasy’s majority stake buyout in Thyrocare Technologies for ₹4546 crore, Dr Lal PathLabs’ ₹925 crore acquisition of Suburban Diagnostics, and the merger of Chennai-based Healyst Wellness Laboratory with Neuberg Ehrlich Laboratory.

High-end diagnostics

Speciality or high-end diagnostics is an emerging phenomenon. The pathology market in India was worth $7.5 billion in FY23. Of this, clinical chemistry - basic blood tests like cholesterol levels, sodium, and potassium levels, renal and liver function etc. constitute 35% of the market. This largest segment is worth about $2.6 billion.

Immunology tests or tests for antibodies and allergy, infectious diseases, viral load, immunoglobulins, vitamins and minerals etc constitute 23% of the market with a size of $1.7 billion. The third segment in pathology called haematology constitutes 20% of the market with $1.5 billion in revenues and in this, common tests are done for Complete blood count (CBC), Erythrocyte Sedimentation Rate (ESR) etc.

Then a growing emerging sector with $1.7 billion and constituting 22% of the diagnostics market includes Molecular pathology (Genomics- RNA / DNA sequencing, biomarkers, Histopathology, Urinalysis etc. is gaining more traction in India. Now the shift is towards specialised tests. In clinical chemistry, tests are common for therapeutic drug monitoring, toxicology screening, tests for tumour markers, cardiac marker tests (troponin levels, creatine-kinase levels) microfluid POC etc. Immunoassay tests are now available for HIV tests, infectious agent antigen detection tests, Auto-immune disease detection, tests for tumour markers (e.g. prostate-specific antigen – PSA) etc.  That is where the margins and growth potential are maximum, say experts.  

The pathology market is projected to reach $14.4 billion by FY28, with a CAGR of around 14%. Notably, molecular pathology and histopathology are anticipated to experience the highest CAGRs at 16% and 17%, respectively, while clinical chemistry is expected to grow at a rate of 12%, says Praxis.

Several factors are driving this growth, including the rise in chronic diseases, the increase in the geriatric population, and the growing demand for preventive tests. The prevalence of chronic diseases emphasizes the critical need for accurate diagnosis and treatment planning, while the uptick in infectious diseases heightens the demand for precise pathology services. Moreover, the expansion of the geriatric population, prone to age-related illnesses, necessitates routine diagnostics. Specialised pathology services and enhanced geriatric facilities are becoming indispensable to addressing the demands of the senior population. By tailoring diagnostic support to the specific healthcare needs of older adults, these services significantly contribute to improving health outcomes and quality of life among seniors, notes Praxis.

With that kind of growth unravelling, the Indian diagnostics market is sure to witness more deals and consolidation in future.