Independent clinical laboratory (ICL)
Independent clinical laboratory (ICL)
Business Model Description
Business-related to in vitro diagnosis (IVD) services include signing contracts with hospitals to offer IVD reagents and equipment and services including maintenance, technological consulting, supply chain management, and logistics integration; entering partnerships with hospitals to take responsibility for laboratory departments; establishing independent clinical laboratories.
Expected Impact
Provide patients with more efficient and accurate diagnoises.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- China: Anhui
- China: Jiangxi
- China: Fujian
- China: Yunnan
- China: Guangdong
Sector Classification
Health Care
Development need
China’s health sector currently still faces many challenges, including weak capacity of grass-roots service providers, imbalanced development and resources distribution between rural and urban areas in health sector and accelerated aging trend.
The Action Plan for Promoting the Quality of Health Industry Development (2019-2022) focused on leveraging digital technology in the health care sector. On the back of COVID-19, the National Health Commission published a notice requiring the Health Commissions in all provinces to build Internet-based platforms for controlling and preventing COVID-19 as well as general healthcare
Gender inequalities and marginalization issues
(1) Medical Financial Assistance (MFA) scheme in China did not offer adequate financial protection for marginalized people. (2) Women may be at risk or at greater risk of infection due to occupational gender segregation.
Investment opportunities introduction
The tageted subregions have low economic input in the healthcare sector, yet policy focus in this area is relatively strong. This indicates that the demand for better healthcare services and the need for further investment is high.
Key bottlenecks introduction
The shortage of medical talents in quantity and poor quality structure is the bottleneck that restricts the development of China's healthcare industry.
Health Care Providers
Development need
the rapid aging trend challenges healthcare delivery; access to nursing homes remains limited; there are significant regional disparities in the distribution of health resources; around 75% of older people suffer from noncommunicable chronic diseases; the demand gap of radiologists is increasing; the cure rate of early detection of cancer is low
Policy priority
China has made significant policy efforts to improve healthcare delivery. A national action plan (2018) was issued by the National Health and Family Planning Commission, planing to make diagnosis and treatment more convenient; gradually form a new system of medical services based on regional coordination, information sharing and service integration,.
Investment opportunities introduction
the 6 IOAs with the highest growth potential were shortlisted:internet healthcare, smart information systems in hospitals, Independent Clinical Laboratories (ICL),Medical imaging based on Artificial Intelligence technology, Smart home-use medical devices for chronic disease management,Senior care.
Health Care Delivery
Pipeline Opportunity
Independent clinical laboratory (ICL)
Business-related to in vitro diagnosis (IVD) services include signing contracts with hospitals to offer IVD reagents and equipment and services including maintenance, technological consulting, supply chain management, and logistics integration; entering partnerships with hospitals to take responsibility for laboratory departments; establishing independent clinical laboratories.
Business Case
Market Size and Environment
> USD 1 billion
> 25%
The size of the market was USD 3 billion in 2019.
Source: Qianzhan Industry Research Institute
Indicative Return
20% - 25%
The estimated potential rate of return given by the experts is 20 – 30%.
However, based on the financial data published by the listed companies in this industry, KingMed Diagnostics, Dian Diagnostics and Daan Gene, the median of ROE in the last three years is 15.55%, which is lower than the experts’ expectation.
"KingMed Diagnostics ROE in 2019: 19.23%; ROE in 2018: 12.95%; ROE in 2017: 14.52%; Dian Diagnostics ROE in 2019: 9.04%; ROE in 2018: 15.55%; ROE in 2017: 15.97% Daan Gene ROE in 2019: 5.10%; ROE in 2018: 5.77%; ROE in 2017: 5.29%"
Investment Timeframe
Short Term (0–5 years)
7 experts estimated that it would take at least 3 years to see positive cash flow for investors.
Dian Diagnostics Founded in 2001 and listed on GEM in 2011" "When a new laboratory is set up, it usually takes about one year to establish and complete the project, and the profit cycle generally takes 2 to 3 years."
Daan Gene Founded in 1988 and listed on SME board in 2004 KingMed Diagnostics Founded in 2006 and listed on A board in 201
Ticket Size
However, based on the financial data published by the listed companies in this industry, KingMed Diagnostics, Dian Diagnostics, and Daan Gene, the median of ROE in the last three years is 15.55%
Impact Case
Sustainable Development Need
In China, more than 80% of cancer cases are diagnosed as advanced stage, and 80% of them are incurable. At present, the cure rate of early detection of cancer in China can reach 60% - 75%, while in developed countries the rate is more than 90%.
Gender & Marginalisation
People in remote and poor areas do not have access to regular and in-depth physical tests.
Expected Development Outcome
Centralising the testing of samples and the procurement of equipment and reagents to dedicated laboratories can reduce expenditures as well as increase the quality of testing.
By taking advantage of economies of scale, ICLs can perform complex tests which cannot be carried out in most hospital laboratories.
It will aslo enhance the accessability of IVD for patients.
Gender & Marginalisation
ICL can provide a better environment and conditions for cancer research to improve the medical cure rate.
Primary SDGs addressed
3.8.1 Coverage of essential health services
3.8.2 Proportion of population with large household expenditures on health as a share of total household expenditure or income
3.b.3 Proportion of health facilities that have a core set of relevant essential medicines available and affordable on a sustainable basis
Secondary SDGs addressed
Directly impacted stakeholders
People
Indirectly impacted stakeholders
Public sector
Outcome Risks
Strict regulation based on data privacy may limit the development of this investment opportunity to great extent.
Impact Risks
Inappropirate use of samples collected from genetic testing can lead to very serious harm to human and peace.
Impact Classification
What
The outcome is very likely to be positive and important because more efficient IVD services will be given to patients.
Who
All patients will be able to access the IVD services offered by ICLs. If ICL can develop in a fast pace, they will extend to rural areas.
Risk
Strict regulation based on data privacy may limit the development of this investment opportunity to great extent.
Impact Thesis
Provide patients with more efficient and accurate diagnoises.
Enabling Environment
Policy Environment
(Policy document): In September 2015, the State Council published a guidance document highlighting the need to establish independent regional IVD institutions and other types of third-party medical institutions for services such as pathological diagnosis, hemodialysis and medical imaging
(Policy document): In June 2018, the National Health Commission and National Administration of Traditional Chinese Medicine published a joint notice stating that medical institutions should delegate services to certified third-party agencies or other medical institutions where practical.
(Policy document): In December 2019, the Ministry of Health set out the basic standards for independent IVD laboratories and officially granted them access to medical institutions.
Financial Environment
Other incentives: In some provinces, local governments reimburse eligible ICL services through the public medical insurance system.
Regulatory Environment
(Regulation): Independent clinical laboratories are strictly regulated by the Ministry of Health. Specific requirements have been issued for the establishment of ICLs, personnel, building standards, facilities, equipment, and funding.
Marketplace Participants
Private Sector
leading industry players, private equity and venture capital firms; foreign investors and investment institutions may be limited by sample and data protection regulations; potential co-investors can be securities and hedge funds
Target Locations
China: Anhui
China: Jiangxi
China: Fujian
China: Yunnan
China: Guangdong
References
- (1) Ministry of Foreign Affairs,2019 https://www.fmprc.gov.cn/mfa_eng/topics_665678/2030kcxfzyc/P020190924780823323749.pdf "2) UNDP.2019 https://www.cn.undp.org/content/china/en/home/library/human_development/national-human-development-report-special-edition.html"
- (3)UN Women. (2020). Policy Brief: The Impact of Covid-19 on Women and Girls. UN Women.
- (21) biotech.com.cn, 2016, http://www.biotech.org.cn/information/142918
- (22) State department, 2015, "Guidance on promoting the construction of hierarchical diagnosis and treatment system" (《关于推进分级诊疗制度建设的指导意见》), http://www.gov.cn/zhengce/content/2015-09/11/content_10158.html
- (23) National Health Commission and National Administration of Traditional Chinese Medicine, 2018, "Notice on further reform and improvement of examination and approval of medical institutions and doctors" (《关于进一步改革完善医疗机构、医师审批工作的通知》) http://www.nhc.gov.cn/yzygj/s3576/201806/bad4e33d8ef34e9ba67979b34aaff8ee.shtml
- (24) Ministry of Health, 2019, "Basic standards of Medical Laboratory (Trial)" (《医学检验所基本标准(试行)》), http://www.gov.cn/gzdt/2009-12/21/content_1492895.html
- (25) instrument.com.cn, 2012. https://www.instrument.com.cn/news/20120821/081714.shtml