Pathology Laboratories or Testing Centers
Pathology Laboratories or Testing Centers
Business Model Description
Invest in establishment of accessible B2C pathology laboratories or testing centers that carry out genomic and molecular testing, connected to epidemiological data and digital information systems, thereby also supporting national vaccination / immunization drives. Examples of companies active in this space are:
PT Nusantara Genetic Semesta, founded in 2019, is a biotechnology company which analyzes microbiome profiles for skincare, personal care, food and beverage industries. In 2020, it raised USD 0.7 mn from East Ventures Pte. Ltd. (14)
GSI Lab was established to help Indonesia control Covid-19. It focuses on a high-throughput PCR (polymerase chain reaction) diagnostic laboratory with a capacity of up to 5,000 tests per day. It is powered by highly trained staff, automated PCR equipment, and digital systems for maximum accuracy and large-capacity same-day results, if required.
PT Prodia Widyahusada Tbk (PRDA) is a Clinical Laboratory chain and the national referral lab, operating through 151 branches and outlets in >96 cities (39.2% revenue market share). It provides laboratory and panel test services, along with other diagnostics support services. Initial Public Offering (IPO) of PRDA on the Indonesian Stock Exchange raised proceeds of USD 120 mn. (15)
Expected Impact
Affordable diagnostic service provision to ensure timely diagnosis and treatment of diseases contributing to improved healthcare systems in Indonesia.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
Disclaimer
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Country & Regions
- Indonesia: Countrywide
- Indonesia: Western New Guinea
- Indonesia: Sulawesi
Sector Classification
Health Care
Development need
Below optimum referral system of healthcare services and lack of accessible quality health care has lead to an increase in unmet needs for healthcare from 4.66% (2015) to 5.44% (2020) (1), relatively high maternal mortality rate (MMR) (305/100,000 live births, 2015) and infant mortality rate (26.9/1,000 live births, 2015) (2).
Policy
Healthcare policy, under the National Priority (PN) 3: aims to improve human capital and competitiveness. Priority Program (PP) 3 and 2 cover the universal health coverage to address the maternal and infant mortality, communicable and non-communicable diseases, reproductive health and family planning (3).
Gender inequalities and marginalization issues
Maternal and infant mortality are among the highest among peer countries in Association of Southeast Asian Nations (ASEAN), caused by health and socioeconomic issues, such as child marriage practices in several regions (4).
According to the 2018 Socio-economic National Survey (Susenas), 1 of every 9 girls aged 20-24 gets married before the age of 18, i.e. ~1.2 mn girls, with Indonesia recording the 8th highest number of child marriages in the world (5).
Investment opportunities introduction
Healthcare spending in Indonesia was USD 38.3 bn [or USD 112 per capita (5)], i.e. 3.6% of GDP, (6) and USD 21 bn in 2019 (7). It is expected to reach USD 51 bn by 2020 (4.18% of GDP) (8).
Key bottlenecks introduction
Last-mile connectivity has been challenging since Indonesia is an archipelago with a geographically fragmented population. Availability and recruitment of quality healthcare personnel has also been a problem across the country.
Development need
With a lack of diagnostic centers, Covid-19 has overburdened the healthcare system, causing a decline in diagnostic services available for other diseases, such as Tuberculosis (TB), (1) (increasing the undiagnosed TB cases). Indonesia has one of the highest proportions of non-notified TB cases globally. (9)
Ministry of Health's (MoH) Strategic Plan for health development (2020-2024) includes strengthening the national laboratory system.
Results of the Joint External Evaluation (JEE) revealed the need for expansion of capacity of public health laboratories (surveillance laboratories), both in terms of quantity and quality (Sarpras, HR competency, and test capability) to handle new emerging diseases (10).
Gender inequalities and marginalization issues
Provision of laboratory tests is higher in urban puskesmas compared to rural Puskesmas. (11) Inadequate number of testing labs has restricted Indonesia in achieving its Covid-19 testing target (4) and has resulted in an increase in deaths among the poor due to late diagnosis or undetected Covid-19 cases. (12)
Investment opportunities introduction
Clinical laboratory market in Indonesia is expected to reach USD 3.2 bn in 2022, with expansion of private laboratory chains and use of advanced technology to provide high quality laboratory services to meet the growing demand for testing services induced by growing awareness for healthy living. (13)
Key bottlenecks introduction
Innovation and technology adoption are still limited in domestic medical supplies industries (3). Lack of trained healthcare staff may result in inaccurate testing and results.
Medical Equipment and Supplies
Pipeline Opportunity
Pathology Laboratories or Testing Centers
Invest in establishment of accessible B2C pathology laboratories or testing centers that carry out genomic and molecular testing, connected to epidemiological data and digital information systems, thereby also supporting national vaccination / immunization drives. Examples of companies active in this space are:
PT Nusantara Genetic Semesta, founded in 2019, is a biotechnology company which analyzes microbiome profiles for skincare, personal care, food and beverage industries. In 2020, it raised USD 0.7 mn from East Ventures Pte. Ltd. (14)
GSI Lab was established to help Indonesia control Covid-19. It focuses on a high-throughput PCR (polymerase chain reaction) diagnostic laboratory with a capacity of up to 5,000 tests per day. It is powered by highly trained staff, automated PCR equipment, and digital systems for maximum accuracy and large-capacity same-day results, if required.
PT Prodia Widyahusada Tbk (PRDA) is a Clinical Laboratory chain and the national referral lab, operating through 151 branches and outlets in >96 cities (39.2% revenue market share). It provides laboratory and panel test services, along with other diagnostics support services. Initial Public Offering (IPO) of PRDA on the Indonesian Stock Exchange raised proceeds of USD 120 mn. (15)
Business Case
Market Size and Environment
> USD 1 billion
Clinical laboratories ownership in 2019 - Private Sector: 1,056 or 81.7%; District/City Government: 206 or 15.9%; Provincial Government: 27 or 2.1%; Ministry of Health: 4 to 0.3% (16)
As of July 2021, the independent market lab stood at USD 349.28 mn and players like PRDA, a clinical laboratory chain, held 39.2% of total market share. (16)
Indonesia is expected to become the 5th largest economy in the world by 2024 and a majority of it's income is likely to come from the middle class thereby driving the demand for affordable healthcare. (16)
With growing urbanization and growth of middle class, by 2030, lifestyle-related diseases will be the primary cause of 87% of deaths. Indonesia has the potential to lose USD 4.4 tn from 2012 to 2030 due to the impact of chronic or “non-communicable” diseases (NCDs) that may go undetected or not properly treated. (16)
Indicative Return
10% - 15%
> 25%
Players in this area expect average 15-20% year-on-year (yoy) growth in revenue driven by increasing demand for clinical laboratory testing. Key drivers: yoy growth in number of tests, number of tests per customer visit and revenue per visit assuming average price blended at USD 45.69/person. (16)
The existence of self-vaccination and telemedicine have the potential to be a catalyst for increased patient visits looking for diagnostic services.
Private Equity firms target 20-25% IRRs on their investment. Returns depend on stage of investment and the valuation at the time of exit. Example: Seed fund investors will earn a better return if they hold their investment, than the investors who enter at a later stage.
Investment Timeframe
Medium Term (5–10 years)
Capital investment is large since diagnostic centers or labs need to be set up in various locations, collection centers need to be set up, testing and lab equipment needs to be purchased. Return realization can be medium to long-term.
PT. Prodia Widyahusada and Aw Tar Choon acquired 40% stake in PT Prodia Stemlife Indonesia from Stemlife Berhad in May 2012 at an implied equity value of USD 1.75 mm. IPO of PRDA on the Indonesian Stock Exchange raised proceeds of USD 120 mn. (15)
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Market - Volatile
Market - Volatile
Impact Case
Sustainable Development Need
Growing urbanization and growth of middle class by 2030, lifestyle-related diseases [chronic or NCDs] can be the main cause of 87% of deaths in the absence of proper and timely diagnosis. This would result in a loss of USD 4.4 tn between 2012 & 2030. (16)
Reduce infant mortality rate caused due to pneumonia or diarrhea with timely detection and treatment of illnesses. (2)
Genomic sequencing has been very important for the Covid-19 response. With the emergence of new variants of the virus in various locations, genomic data collected through path-labs, has guided countries to make quick and informed public health decisions since the start of Covid-19. (18)
Gender & Marginalisation
At-home sample collection can provide easy accessibility to proper and timely care for addressing the needs of women who may also have limited agency in accessing healthcare, elderly or disabled people.
Diagnostic centers can collaborate with telemedicine companies to ensure last-mile reach for collecting samples and offering vaccination / immunization services for life-threatening diseases.
Expected Development Outcome
Improved availability and accessibility of testing centers, supported by competent health workers at a national level. (2)
Improvement in end to end health-care services including health promotion, disease prevention, diagnosis, disease handling, disease management, rehabilitation, and palliative services. (2)
Ensuring timely genomic sequence testing to detect the existence of virus mutations and prevent the mass spread of infectious diseases. (18)
Gender & Marginalisation
Improving continuum of care for maternal, newborn, and child health in public and private health facilities and expanding complete basic immunization at the last-mile level coverage can facilitate improved mortality rates (2)
Ensuring last-mile reach for provision of test-collection service, vaccination/ immunization for especially for vulnerable groups like the elderly or women who have limited access due to prevailing socio-cultural norms that may restrict their mobility and affordability of such services.
Primary SDGs addressed
3.2.2 Neonatal mortality rate
3.8.1 Coverage of essential health services
3.b.1 Proportion of the target population covered by all vaccines included in their national programme
3.b.3 Proportion of health facilities that have a core set of relevant essential medicines available and affordable on a sustainable basis
15 per 1,000 live births (2017) (21)
Not available as on January-2022
57.9% in 2018 Vs. 59.2% in 2013. (21)
92.12% in 2020 Vs. 79.38% in 2015. (21)
7.0 (intervention scenario); 11.2 (BAU) (2)
Not available as on January-2022
Complete Basic Immunization for children 12-23 months old 75% in 2023, 90% in 2024 (3)
94% in 2023, 96 % in 2024 (3)
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Indirectly impacted stakeholders
People
Public sector
Outcome Risks
Profit making corporates may exploit customers by charging high amounts for carrying out essential tests in the absence of regulations or price-caps.
Lack of trained staff may result in inaccurate test diagnosis and wrong treatment.
Demand for better quality testing equipment can increase the pressure of import on the economy in the absence of domestic manufacturing, potentially driving up costs for end-customers.
Gender inequality and/or marginalization risk: Vulnerable sections of the community may require additional financial assistance (concessional prices) to make use of the platform.
Impact Risks
Lack of accessible diagnostic facilities and testing centers will result in patients rendered untreated. This can be fatal in case of an epidemic spread.
Impact Classification
What
Improved quality of healthcare with timely diagnosis that can be followed by effective treatment regimes.
Risk
Lack of regulation or price control may lead to exploitation of consumers.
Contribution
Efficient diagnostic services can ensure timely treatment of chronic lifestyle diseases such as, diabetes, TB. Indonesia has 316 TB cases/100,000 population. (22)
Impact Thesis
Affordable diagnostic service provision to ensure timely diagnosis and treatment of diseases contributing to improved healthcare systems in Indonesia.
Enabling Environment
Policy Environment
MoH's Strategic Plan for health development (2020-2024): includes strengthening the national laboratory system (10).
Results of the Joint External Evaluation (JEE) revealed the need for expansion of capacity of public health laboratories (surveillance laboratories), both in terms of quantity and quality (Sarpras, HR competency, and test capability) to handle new emerging diseases (10).
Decree No. HK.01.07/MENKES/4642/2021 concerning the Organization of the Coronavirus Disease 2019 (Covid-19) Testing Laboratory: need to expand examination laboratories to handle Covid-19 by adding permanent/mobile laboratories that are safe, and follow biosafety/biosecurity standards (23).
Testing Laboratory as referred to in the MoH Regulation No. 14 of 2021 must meet the required Laboratory Standard competent and have human resources to conduct testing and validation of Covid-19 testing (24).
In the State Budget 2022, the GoI has allocated USD 17.8 bn (~9.4% of the 2022 Budget) for health sector, focused on vaccination drive, intensify 3T (testing, tracing, and treatment) measures, hospital fees reimbursement for Covid-19 patients, supply medication and incentives for medical workers. (25)
Financial Environment
Financial incentives: Triggered by Covid-19, the GoI is giving national companies 0% Non-Tax State Revenue (PNBP) to produce in-vitro diagnostic (IVD) devices/kits for fulfilling domestic demand as regulated in MoH Regulation No. 62/2017. (28)
MOF Regulation Number 128/ PMK.010/2019 stipulates that companies claim reduction in gross income of 100% of total costs; and reduction of 100% of costs granted for human development activities for students, educators and/or educational personnel at universities diploma program on vocational health program of medical laboratory technology. (29)
Import of goods for handling Covid-19 are given exemption from import duty and/or excise, free Value Added Tax and exemption from income tax collection PPh 2. The goods included are In vitro diagnostic equipment, including PCR test equipment. (30)
Regulatory Environment
Regulation of the MoH of the Republic of Indonesia No. 14 of 2021 concerning Standards for Business Activities and Products in the Implementation of Risk-Based Business Licensing in the Health Sector: Medical laboratory business is considered as Health support service activities with a high risk (24).
Classification of medical laboratory business as regulated by BPS Regulation No.2 of 2020 is distinguished based on the type of service and based on the ability to test clinical specimens classified into: General Medical Laboratory and Special Medical Laboratory (26).
Medical Laboratory obligations and licensing are classified through Risk-Based Business Licensing, as regulated in MoH Regulation No.14 of 2021. Supervision of medical laboratory business licensing is carried out in the form of routine supervision and incidental supervision by the local government bodies (24).
MoH Reg. No. 40 of 2018 Concerning Guidelines For Implementing Cooperation With The Government And Business Entities In The Provision Of Health Infrastructure: availability of quality health infrastructure/services for the community to reduce infrastructure gap and fulfil quality health services (27).
Health infrastructure that can be collaborated in the PPP scheme in the Health Sector in MoH Reg. No. 40 of 2018 includes health laboratories, including the provision of health laboratory buildings, health laboratory infrastructure and/or laboratory equipment; and/or health services for health laboratories (27).
Marketplace Participants
Private Sector
Corporates: PT Nusantara Genetic Semesta, PT Prodia Widyahusada Tbk Social enterprises: GSI Lab Investors: East Ventures Pte. Ltd.
Government
Ministry of Health, Ministry of Industry, BRIN, Ministry of Agriculture, Ministry of Environment and Forestry, The National Agency for Drug and Food Control of Indonesia / Badan POM
Multilaterals
World Health Organisation (WHO), United Nations Entity for Gender Equality and the Empowerment of Women (UN Women), United Nations Development Programme (UNDP), United Nations Children's Fund (UNICEF), Asian Development Bank (ADB), World Bank (WB), United Nations Population Fund (UNFPA), Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ)
Non-Profit
Yayasan Lembaga Konsumen Indonesia (YLKI), Ikatan Dokter Indonesia (IDI), Ikatan Bidan Indonesia (IBI)
Public-Private Partnership
Solicited PPP Project for BBBPT Laboratory
Target Locations
Indonesia: Countrywide
Indonesia: Western New Guinea
Indonesia: Sulawesi
References
- (1) Bappenas. 2021. Indonesia's Voluntary National Review 2021. https://sustainabledevelopment.un.org/content/documents/280892021_VNR_Report_Indonesia.pdf.
- (2) Republic of Indonesia. 2019. Roadmap of SDGs Indonesia Towards 2030. https://www.unicef.org/indonesia/media/1626/file/Roadmap%20of%20SDGs.pdf.
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