At the centre of Covid, diagnostic labs have been much in demand

At the centre of Covid, diagnostic labs have been much in demand

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ET Intelligence Group: Testing has been at the centre of the measures globally taken to tackle the Covid-19 pandemic. That has provided a booster dose to the diagnostics industry, in India as well.

From government-referred to now on-demand testing, the volume of Covid testing has increased gradually for diagnostic firms. While demand for other tests had disappeared in the early months of the pandemic, that has also now reached the pre-Covid level or near that. The non-Covid business in the September quarter for Dr Lal Pathlabs, for instance, was 98% of the year-earlier period.

Companies have increased patient realisations through bundling of tests and ramping up home testing offerings. Growth in high-value specialised testing and controlling of costs by going digital and automating processes also helped corporate labs boost profitability. For Metropolis Healthcare, one of such lab operators, the operating profit margin for the quarter through September was the highest on record.

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Covid has provided an opportunity to firms to ramp up investment in new technologies. They are leveraging digital technology to improve business and reach. These companies are strengthening their systems using digital labs, operations automation, ecommerce, mobile app, logistics information and business continuity plans.

Large diagnostic firms have also started investing in next generation technologies and begun offering genetic testing, sperm DNA testing, oncogenomics and neurogenomics using latest technologies such as next generation sequencing and FISH & Sanger sequencing. While these will bring in new income and help them to be future-ready, Covid-related testing is expected to continue to contribute a substantial portion to their revenue for at least a few more quarters. The diagnostics industry in India is highly fragmented and unorganised with corporate chains constituting just around 15% of the market. Walk-in customers account for the highest share of the business.

With demand for lifestyle disease-related services set to grow, evidence-based treatments increasing and rising focus on preventive healthcare and wellness, diagnostics has strong growth drivers in the country.

The industry is undergoing consolidation as corporate diagnostics chains have been acquiring small or standalone centres. This inorganic expansion continued despite the pandemic. For instance, in recent months, Dr Lal PathLabs signed a binding agreement to acquire 100% of Jamnagar-based Bindish Diagnostic Laboratory and a 70% stake in Chanre Diagnostics Laboratory.

The Street has celebrated the success of the diagnostics business, with the stocks of diagnostic companies such as Dr Lal PathLabs, Metropolis Healthcare and Thyrocare surging to record highs in October.



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