SGS_Healthcare_Case_Studies_Clinical_Research by Sutherland Global Services

Market Assessment CRO market in Kerala Market Assessment

www.sutherlandglobal.com January 10, 2013

Market Assessment: CRO market in India Client • The client was a leading clinical research business, planning to expand into India

Client Ask • The client wanted SGS to assess the CRO market in India • It also asked SGS to evaluate Kerala as a location for the CRO set-up and assess Kochi, in particular, as a CRO hub

Sutherland’s Solution • SGS conducted an extensive secondary research to understand the CR industry and factors that determine growth of the CR industry such as labor, healthcare infrastructure & utilities • The position of Kerala with respect to these factors was mapped in order to arrive at the attractiveness of the state as a CR hub • Key cities in Kerala that have the components to support a successful CR industry were identified • Detailed location attractiveness was established for two major cities, namely, Thiruvananthapuram & Kochi • Detailed primary research was conducted with businesses operating in the CR space in these cities to capture city-specific intricacies related to the CR business there

•Benefits to the Client • Based on the research information provided by SGS, the client was armed with the right information to invest in the CR market in India and Kerala, in particular • The research also helped weigh the rewarding prospects in the CRO space in the two main cities of Thiruvananthapuram & Kochi • The client was able to bank on the reliable data highlighting the location attractiveness of the two main cities, Thiruvananthapuram & Kochi, which was assessed on parameters that impact the growth and sustenance of the CRO business

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Forecast of over 21% growth for the India CR market coupled with Kerala’s Suitability for CR indicates that Kerala could be positioned as a CR hub… India- Fast Growing CRO Market • Global CRO market increasing at a double digit CAGR of over 11% from 2006-10 to reach $ 21 Bn . Further the market is expected to grow by over 10% over 2011-2015 period • China & India are the most attractive locations to perform clinical trials outside of the United States. Indian Clinical research Market reached $0.55 mn in 2010 registering CAGR of 34% since 2006. Further, the market is expected to register CAGR of 21% during 2010-2015 (almost twice that of global growth rates) o With abundant talent & adequate infrastructure, conducting Clinical research in India is 30-40% cheaper compared to US • Most dominant clinical trial phases carried out in India- Phase3 & Phase 4. Clinical trial management, study start-up, data management, Biostatistics & Reporting are primarily outsourced during Phase 3 & 4 o More than 75 CROs currently operating in India along with MNCs such as ICON & Quintiles. ICON & Quintiles together account for over 50% of the Indian CRO market. ICON has a centre at TechnoPark, Thiruvananthapuram

Kerala- Favorable CRO Destination • Kerala along with its neighbor states Tamil Nadu and Karnataka, constitutes over 20% of the medical and pharmacy talent pool in India • Robust healthcare infrastructure facilities in the form of hospitals, health clinics and laboratories (over 900 primary Health Centers in Kerala) augur well for conducting clinical trials in India. Ample CRO training institutions in Kerala offering varied Clinical Research courses facilitates ready to hire talent (trained pool of over 1,000 graduates annually) • Cheap Labor, infrastructure & Utilities (cost saving of approx. 30-35% over Tier -1 CRO destinations such as Bangalore & Hyderabad & ~10%-15% over emerging Tier-2 cities such as Chandigarh) • Willingness of available talent to join CROs in Kerala is relatively lesser as compared to established hubs such as Bangalore where the industry is currently concentrated Source: SGS Analysis © 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com January 10, 2013

…however, Government of Kerala has big role to play to strengthen value proposition for CRO investments

Strong participation and leadership from the Government •Identify key locations and hubs within Kerala that are suited to different kind of CRO activities such as trial management, data management, bio-statistics, etc. • Based on availability of type of patient pool based on therapeutic areas of treatment, identify the type of phases that are well suited to be conducted in Kerala

Develop flexible and agile Government structures, incentives and policies to cater to individual requirements of investors •Taking lessons from Bangalore which is a major CRO hub, adopt flexible and investor friendly fiscal and outsourcing policies

Invest in building infrastructure •Further, investments in clinical laboratories and trial set-ups in hospitals needs to be arranged to encourage sponsors conduct trials in Kerala

Brand & Position Kerala as an upcoming CRO destination •Inviting major CRO across the globe, promote Kerala as an attractive CRO destination alongside industry stakeholders by hosting interactive summits/ seminars

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Although Tier-1 Cities such as Mumbai & Bangalore are the major CRO hubs, Tier-2 cities such as Cochin & Trivandrum are gradually seeing traction

Ludhiana Chandigarh

Lucknow

Major CRO Hubs in India

New Delhi

Bikaner Jaipur

Guwahati

Ahmedabad Vadodara Nadiad

Mumbai Pune Mangalore

Banglore

Coimbatore Cochin

Kolkata Nagpur

City

# CROs

Mumbai

~17

Bangalore

~15

Hyderabad

~11

Kerala

Hyderabad

Vishakhapatnam

Vijaywada

Chennai Madurai

Trivandrum

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Thiruvananthapuram & Kochi emerge as major CRO hub in Kerala While the TechnoPark in Thiruvananthapuram has attracted major MNC CROs in TechnoPark for CDM, Kochi too can attract investments if IT Park/ adequate infrastructure is provided Major CROs in Kerala

Services in Kerala Trial Mgt.

Data Mgt.

Study StartUp

Name

Location

Employees

Belmont Research Solutions

Kochi

N.A.

Metropolis Healthcare

Thrissur

N.A.

Paragon Biomedical*

TechnoPark, Thiruvanantha puram

N.A.

Altree Health care & Research centre

Kochi

N.A.

Clinfound Clinical Research Services Pvt.

Kochi

N.A.

ICON Clinical Research*

TechnoPark, Thiruvanantha puram

N.A.

Reporti ng

Biostati stics

X X

* Although a full services CRO, Paragonâ&#x20AC;&#x2122;s TechnoPark office & ICON Clinical research engages in providing Data management & Biostatistics activities only Source: Hotfrog, Company Websites ÂŠ 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

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Destination Kochi Attractiveness Evaluation Framework Kochi emerges as attractive CRO destination on Location Attractiveness Framework index First Level COST

TALENT

Second Level 50%

50%

Third Level

Cost of Labor

33%

Facilities and Other Cost

33%

Utilities Cost

33%

Score 0.87

Electricity Internet Water Cost of operations Differential

25% 25% 25% 25%

Availability Suitability Accessibility Willingness

25% 25% 25% 25%

75%

Readiness to Hire

Trainability

25%

0.77

Grand Score

Scale

0.33 Not Ready: • No Cost Arbitrage •Talent Scarcity •Multiple other factors are not favorable

0.67 Action Needed: •With clear roadmap, suitable over the next 1-2 years •Significant government intervention required

Source: SGS Analysis, Consulting Frameworks from Leading Consultants © 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

0.67

1.00 Extremely Favorable: •Ready to attract investments •Minimal policy intervention required •Most of the criteria are favorable

Scores shown are out of 1 www.sutherlandglobal.com January 10, 2013

COST

TALENT

Kochi ranks high in terms of cost advantage Kochi remains quite cheaper in terms of manpower, facilities and utilities cost as compared to its peers

INDEX SCORE*

Kochi

Tier 1 City (Bangalore)

Tier 2 City (Chandigarh)

Labor Cost (Average Salary Rs lakhs/year)

1.8-2.5

2.4-3.0

2.0-2.5

1.0

Facilities Cost (Rental Rate in Rs./Sq. ft/month)

25-30

30-45

25-35

1.0

Electricity Cost (Rs. Per Unit)

3.0-3.5

6-7

4-5

1.0

Internet Cost (Rs/ E1 Leased Line/ annum)

1.5 Lakhs

0.5

Water Cost (Rs/ KL)

20-25

20-35

15-20

0.67

Approximate savingscost of operations**

30-35%

15-20%

1.0

Utilities Cost

0.87

Final Score- Cost INDEX SCORE*- Calculated based on normalized scores attached with each parameter (High=1, Medium = 0.67, Low=0.33) scores shown are our of 1 Source: SGS Analysis, Primary Research ÂŠ 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

** As compared to Tier-1 Cities www.sutherlandglobal.com January 10, 2013

COST

As opportunities emerge in Tier-II cities, suitable talent is more willing to join Kochi CRO as compared to other Tier-II cities

TALENT

Brand Reputation and Salary are the major drivers for joining Kochi as the CRO opportunities are better in Tier-I cities such as Bangalore: However, Kochi preferred over other Tier-II cities due to upcoming opportunities Willingness Talent Pool

Willingness to Join Kochi

Bangalore

Observations

Chandigarh

M.Sc. B.Pharm BHMS/ BAMS



Intense competition for job leads to higher flexibility to join in Tier-II location as well; salary a major motivation



Better Opportunities in Bangalore followed by Kochi results into increasing preference for Bangalore



Better qualified, doctors prefer hospital, pharmaceutical conglomerates for long term career sustainability However, promising professional growth, lesser competition and emerging opportunities indicate increased willingness to make career in Kochi



M.B.B.S Trainability Talent Pool

Trainability Data Management

Observations

Clinical Trials 

M.Sc. Statistics, M.Sc. Math are suitable talent pool for Clinical Data Management (CDM)



With sound understanding of clinical trial practices and regulations, these pool of talent however, required some effort for training on Statistical tools, analytics and platform applications



Although highly trainable, they are over-qualified, especially for conducting clinical trials

M.Sc. B.Pharm BHMS/ BAMS M.B.B.S Source: Primary Research, SGS Analysis