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TECHNOLOGY

Home TECHNOLOGY Page 7

Medical Devices
by EOS Intelligence EOS Intelligence No Comments

India and China Make Space for Domestic Medical Devices

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Medical device industries in India and China have long been dominated by international players, especially when it comes to high-end devices. High investment requirement, long gestation period on ROI, limited support from the government, and relatively low demand and awareness about medical procedures have resulted in limited domestic investments. However, the industry has been evolving as more and more local players are realizing the scope of this high-potential market that is still in its nascent growth stage in India and China. Moreover, increased government support is further expected to boost indigenous production in the industry.

Similar market structures, a whopping difference in size

While the medical device sector in China is far ahead of that of India (with respect to sales, number of players, and investment), they both have a similar market structure, i.e. being dominated by large multinational players, who have built strong relationships with large hospitals, healthcare organizations, and influencers.

Very few local players have had any significant presence in this industry, and those that did hold some share in the market, limited their focus to the low-investment, low-price product range. However, with healthcare spending in the two countries rising significantly, more and more domestic players are entering and expanding into this space.

India’s healthcare industry is poised to reach US$280 billion by 2020 registering a CAGR of 15% during 2016-2020, while China’s healthcare spending is projected to reach US$1 trillion by 2020, growing at a CAGR of about 12% during the decade.

The rise in healthcare spending in both countries is underpinned by rising disposable income, availability and growing awareness about medical care, expansion of health insurance coverage, rising burden of lifestyle diseases and increased stress levels, as well as ageing population (especially in China).

In addition to this, the governments in both countries are providing instrumental support to companies interested and engaged in medical device manufacturing on domestic soil.

Government takes initiative to promote Indian domestic manufacturing

India’s medtech market, which was valued at close to US$4 billion (INR 260.5 billion) in 2015 is expected to reach about US$8 billion (INR 550.4 billion) by 2020, registering a CAGR of 16.1% during 2015-2020, which is significantly higher than the global industry growth of about 4-6%.

Although about 65-70% of the market value is characterized by imports, the current government’s initiatives in the sector (including the Make in India initiative) are expected to reduce the country’s dependency on imports in the medium-to-long term. Some of the initiatives undertaken by the government include allowing 100% FDI in the sector, setting up medical technology and devices parks across selected states to bring down indigenous manufacturing costs by as much as 30%, developing two testing and quality certification labs aimed at monitoring and improving quality of manufactured devices, and issuing Medical Device Rules 2017, which promote domestic manufacturing.

Before the Medical Device Rules 2017, medical devices were regulated as drugs and this resulted in several regulatory bottlenecks with regards to medtech manufacturing. The new set of rules ease the process of obtaining licenses and undertaking clinical trials, encourage self-compliance, and promote a single-window digital platform for the processing and easy tracking of applications and licenses for import, manufacture, sale/distribution, and clinical investigation of medical devices. In addition, the new medical device rules classify medical devices into four categories based on the risks these devices may pose, in line with global standards for classifying and registering medical devices.

In addition to this, the government also corrected the inverted tax structure faced by the industry in the past (i.e. import of finished goods attracted lower duty compared with import of raw materials for domestic manufacturing). Under the 2016-2017 budget, the government relaxed import duty on components and raw materials required to manufacture medical devices to 2.5% and provided full exemption from additional customs duty (SAD). Further, it increased duty on import of finished medical devices from 5% to 7.5% (in addition to imposing an additional duty of 4% on medical devices by withdrawing exemptions.)

While the move of reducing duty on raw materials has been appreciated by the industry, the rise in duty of imported medical devices has met with mixed reviews. India is highly import-dependent with regards to medical devices and a rise in duty on most categories will make medical care more expensive for the consumer.

Further, in June 2017, the union cabinet announced a US$250 million initiative as a part of the National Biopharma Mission to fund bio-tech start-ups in the field of medical devices, bio-therapeutics, etc. The government is also looking to encourage innovation in this space by setting up R&D incubation centers in association with leading research institutions in this field.

Apart from easing the supply side, the government’s initiatives, such as Free Diagnostics Service Initiative also play a vital role in boosting the demand for medical devices (especially in-vitro devices) in the country. Through this initiative, the government, under the National Health Mission aims at providing a minimum set of diagnostics to the underprivileged population in the country.

In addition to this, the program has worked on devising an integrated approach to combat prevalent non-communicable diseases such as hypertension, diabetes, and cancer by undertaking year-round screening and testing. This will result in large government orders for IVDs and other medical devices.

Another initiative undertaken by the government to both support the domestic industry and ensure a more widespread reach of medical devices has been price capping of coronary stents and orthopedic implants. Observing the huge distributor margins on these medical devices, the government undertook a bold step to cap the prices at which stents and knee implants can be sold in India.

Prior to the price control, the average retail price for a bare metal stent was about US$700, while that for a drug-eluting stent was about US$1,800-2,000. In February 2017, the government fixed a ceiling price of ~US$106 (INR 7,260) for bare metal stents and ~US$431 (INR 29,600) for drug-eluting stents.

In a similar move, the government capped prices for knee implants in August 2017. Knee implants, which ranged from ~US$2,308-US$13,121 (INR 158,300 – 900,000) were limited to ~US$791-1,661 (INR 54,270-113,950). In mid-2017, the government published a list of 19 medical devices (including catheters, heart valves, other orthopedic implants, etc.) that will be monitored for pricing, thus similar price capping may be expected for other devices as well.

Large players may withdraw their latest generation products from India, while Indian players will focus only on cost-effective products instead of innovations.

While the intent for the price capping is noble and will provide a boost to the domestic manufacturers who are better equipped at producing low-priced products, several leading international companies, such as Abbott Vascular and Medtronic, have criticized the decision and submitted applications to increase the ceiling price for the premium quality products or allow them to withdraw the products from the Indian market (as per the government’s rules, no manufacturer can withdraw their products from the market for a period of 12 months from the date of the price ceiling without prior approval from the government). This may be detrimental to the overall industry as large players may withdraw their latest generation products from India in the long run, while Indian players will focus only on cost-effective products instead of innovations.

Indian domestic players might go beyond high-volume low-end products

The Indian medical device market is largely import driven with a very fragmented domestic players landscape. While there are around 800 local medical device manufacturers across the country, only 10% have a turnover of more than ~US$7.3 million (INR 500 million).

The small-scale domestic players focus primarily on the consumables and disposables segment of the medical device industry, which include high-volume low-end products such as syringes, needles, and catheters.

The patient aids segment, including mostly hearing aids and pacemakers, is largely import dependent.

While the equipment and instruments segment and the implants segment are largely dominated by foreign players, they have recently seen an influx of local players that have customized their offerings to the Indian market. Karnataka-based Remidio Innovative Solutions has come up with a retinal imaging system, wherein the fundus of the eye connects to a mobile phone camera to take pictures of the retina to detect diabetic neuropathy. The device can also be used in remote areas and the images and results can be shared in real time on the treating doctor’s phone. Similarly, Karnataka-based Tricog Health Services has developed a cloud-based ECG machine for faster diagnosis. Several other players include Sattva, Cardiotrack, Forus Health, etc.

Understanding the needs and price-sensitivity of the Indian market, several leading global players have also created customized offerings for Indian consumers. For instance, GE Healthcare has come up with a compact CT scanner, which consumes less power, while Skanray Technologies has developed affordable X-ray imaging systems to meet the Indian needs.

We can expect a transition in the domestic sector, which will not only focus on high-volume low-end products but also look at entering the high-end innovative segment offering more affordable and locally customized solutions.

 Since the Indian government has fixed the inverted duty structure and provided other instrumental support to the domestic sector, we can expect a huge transition in the industry, which will not only focus on high-volume low-end products but also look at entering the high-end innovative segment offering more affordable and locally customized solutions. This may eventually result in a phase of consolidation, with foreign market leaders absorbing several innovative Indian start-ups and established players.

Medical Devices – India and China Make Space for Domestic Players

Chinese government also focuses on aiding local producers

China’s medical device market is the third largest globally, after the USA and Japan, and is expected to surpass Japan to become the second largest by 2020. In 2017, the industry was valued at US$58.6 billion, maintaining a double-digit growth over the previous three years.

Similar to the Indian market, the Chinese medical device sector continues to be dominated by foreign players through imports or their locally manufactured products. However, the market is also characterized by the presence of several local players (though smaller in size), especially in the drug-eluting stents, IVDs, and orthopedics segments.

While the foreign players hold the major chunk of innovative medical devices, the government has been taking several and significant steps to promote local companies. The government requires international players to have local legal entities in China for registration and licensing, thus China cannot serve only as an export market.

Another such major step is the regulatory proceedings under Order 650, which mandate clinical trials in China for all class II and III medical devices, with few exceptions. This prolongs the period for obtaining a license to 3-5 years and adds close to US$1-1.5 million (CNY 7-10 million) in costs. However, it has introduced a shorter channel, called the Green Channel, which provides a fast track review option. While the government introduced this to foster domestic innovation, foreign players can use it too. To be eligible for the Green Channel, the device must have a Chinese patent and it must be an innovative product with design progress and records. Products qualifying for the Green Channel are given priority in the registration review and are exempt from the US$90,000 registration fee.

In 2016, the government introduced a second priority review system for certain breakthrough products. Under this fast track channel, the need for a lengthy pre-qualification application process was further eliminated.

The government’s guidelines in its new healthcare reform called The Healthcare Reform 2020 also aim at reducing the share of imported medical devices and promoting locally produced counterparts. Several state-based medical tenders differentiate between local and imported products, giving preference to the former. Moreover, in some tenders a further distinction is made between domestic and foreign-owned local manufacturers. Thereby foreign companies that buy-out local companies to get an easier access into China are also considered as foreign players.

Under its Made in China 2025 plan, the government has also focused on domestic development and manufacturing of high-end and innovative medical devices. These devices include imaging equipment, medical robots, fully degradable vascular stents, and other high-caliber medical devices. The government aims to boost local production of such innovative and high-value devices by supporting the R&D infrastructure and manufacturing capabilities of local players. The government also provides extension of tax benefits for a period of three years if the investment made is used towards the development of medical devices.

Moreover, under the initiative, the government has aimed at increasing the use of locally produced devices by hospitals to 50% by 2020 and 70% by 2025. To pursue this goal, in September 2017, the Sichuan province mandated the use of locally-made devices in hospitals across 15 categories including respirators, PET, and CT scanners.

Just like India, China is also focusing on combating high distribution costs of medical devices, which in turn will make their prices more affordable for the general population. However, instead of capping prices, the government has introduced a Two Invoice System. The system limits the number of invoices between a supplier and the hospital to only two – the first invoice would be from the manufacturer/trading company to a government-appointed supplier/distributor (GAS) and the second invoice will be from the supplier to the hospital. This will eliminate most links in the non-transparent and fragmented distribution network in the Chinese medical device sector, which encompassed several distributors, sub-distributors, agents, etc. (the sub-distributors were engaged due to their personal and long-standing relationships with a set of hospitals). This new system is expected to reduce the corruption level by reducing the number of intermediaries and in turn improving efficiency and reducing prices for the patients.

Chinese players dominate several narrow industry segments

China’s medical device industry is dominated primarily by international players, especially with regards to high-end and innovative devices. Having said that, there are a lot of upcoming local players, although, most of them are still limited to the high-volume low-technology segments.

However, local Chinese players have managed to dominate several narrow industry segments, such as drug eluting stents, which is dominated by three domestic companies, namely Biosensors International, Lepu Medical, and MicroPort. Similarly, local players have managed to capture a significant share of the digital x-ray market, which was dominated by foreign players a few years back.

The orthopedic sector is also characterized by the presence of several large and small local players while a few dominating local players (Trauson, Kanghui, and Montage) have also been acquired by leading international players (Stryker, Medtronic, and Zimmer, respectively). Mindray and Microport, two of the largest Chinese medtech players (who have also successfully internationalized), have strong hold on the country’s patient monitoring equipment and orthopedic segment, respectively.

Moreover, while foreign companies enter the Chinese market to cater to the grade-3 hospitals and the high-end segment, the local players focus primarily on the grade-2 hospitals’ value segment (i.e. products that may not have as many functionalities but serve the basic need). The products in the value segment are more localized in terms of both need and pricing. Several international companies, such as Siemens, Philips, and GE, have also modified their product offerings and have come up with a lower-end range of devices to capture this market (as per experts, the value segment has the potential of becoming much larger in comparison with the high-end segment over the coming years).

Leading Chinese medical device companies are investing heavily in their R&D to move up the value chain with more innovative and high-segment products. Therefore, in the coming years, one can expect intense competition in the Chinese medical device sector.

Similarly, leading Chinese medical device companies are investing heavily in their R&D to move up the value chain with more innovative and high-segment products. Therefore, in the coming years, one can expect intense competition in the Chinese medical device sector, which may also lead to some consolidation. With growing government support to local companies as well as their ease to localize, it is expected that the domestic players will provide a stiff competition to international players unless the latter take action soon.

 

EOS Perspective

While the governments in both countries are taking significant and constructive steps to increase the reach of the medtech industry as well as boost domestic manufacturing, it is too far-fetched to believe that this will uproot the leading global players from the market. However, that being said, in case global companies such as GE, Siemens, and Philips do not continue to customize and localize their offerings as per the changing needs of these markets, they will definitely lose market share to domestic players.

If global companies do not continue to customize and localize their offerings, they will definitely lose market share to domestic players.

Moreover, with the upcoming regulatory changes, support to local production, and overall surge in demand (especially from tier-2 and tier-3 cities in India and grade-2 hospitals in China), the sector is likely to undergo a phase of consolidation in both countries.

by EOS Intelligence EOS Intelligence No Comments

Driving Down Healthcare Costs with AR and VR Technology

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Augmented Reality (AR) delivers digital components atop an existing reality in order to make it more meaningful and interactive, while Virtual Reality (VR) enables immersive simulation of real-life setting or environment. AR and VR have wide-reaching applications in healthcare, from treatment and therapy to training and education. Though AR and VR have promising applications in healthcare, are these technologies prime for widespread adoption? This will largely depend on how effective these technologies are in relation to its cost of investment. Some of the AR and VR solutions standout to bring in significant cost savings.

In 2015, based on analysis of 80,000 surgical cases (retrieved from 2010 National Inpatient Sample, USA), Johns Hopkins University School of Medicine estimated that if all US hospitals increased the number of minimally-invasive procedures by 50%, nearly 3,600 complications could be avoided and hospital stays could be cut by 144,863 patient days, resulting in total cost savings of about US$288 million annually.

Augmented reality can offer higher accuracy

Despite such evident advantages, minimally-invasive surgeries are not as common as traditional approaches, because they require high precision and accuracy – and that is exactly where AR can be useful. For instance, Philips, a Dutch medical technology company, developed a real-time imaging solution which allows projection of high-resolution 3D image of the patient’s spine and a fully-automatic AR navigation system which guides the surgeon to plan the optimal device path, and subsequently place pedicle screws. The first pre-clinical study on the technology showed that the use of AR technology resulted in 85% accuracy as compared to 64% accuracy in case of conventional techniques. Using AR technology, doctors can perform minimally-invasive surgical procedures with high level of precision and efficiency, while minimizing mistakes and errors, thus reducing the preventable costs.

The first pre-clinical study on the technology showed that the use of AR technology resulted in 85% accuracy as compared to 64% accuracy in case of conventional techniques.

Remote mentoring and assistance delivered through augmented reality

Tele-mentoring is another practical application of AR which can bring considerable cost savings. In some complex cases, the locally available healthcare professionals are not skilled and experienced enough to carry out the procedure and experts from different cities or countries need to be called in to perform the treatment, and this involves a lot of time and costs. There are certain AR platforms that allow experts from remote locations to virtually join a surgical procedure. Using Google Glass or tablet, a real-time projection of the remotely located expert’s hands could be overlaid onto the local surgeon’s field of sight during the procedure.

In 2016, as a part of ongoing neurosurgical collaboration between Children’s of Alabama Hospital (USA) and Children’s Hospital in Ho Chi Minh City (Vietnam), Virtual Interactive Presence and Augmented Reality (VIPAR) telecommunication system was implemented at both hospitals to provide intraoperative assistance. The cost of setting up the hardware, software, and internet connection (for one year) was around US$2,500. This is far less in comparison to the cost of the American experts’ travel and stay in Vietnam. For instance, the expense of sending a team of three doctors from the USA to Vietnam for 14 days could total to around US$12,500.

Virtual reality could be an alternative to opioids

VR therapy is proving to be effective in providing relief from pain. Several studies have suggested that parts of the brain linked to pain-somatosensory cortex and the insula are less active when patients are distracted by an immersive experience created by VR technology, thereby reducing the pain. A clinical study by AppliedVR, a US-based company building VR platform for use in healthcare, suggested that VR therapy was effective in reducing pain by 52%.

This can prove to be a breakthrough in the field of pain management, and possibly reduce the opioid prescription. High-income countries such as the USA, Canada, UK, and Australia are struggling with the opioid crisis. Although, the cost of opioids is relatively low, the resulting addiction problems and drug overdose deaths lead to high societal and economic costs. For instance, the economic cost of the opioid crisis in the USA in 2015 was estimated at US$504 billion (85% of these costs were associated with fatalities resulting from overdose). This was equivalent to about 2.8% of GDP of the country that year. For countries such as the USA, where opioid epidemic is declared as a public health emergency, there is a high demand for non-addictive, less harmful alternative pain therapy such one delivered through as VR.

The economic cost of the opioid crisis in the USA in 2015 was estimated at US$504 billion, equivalent to 2.8% of GDP of the country. For such countries, there is a high demand for non-addictive, less harmful alternative pain therapy such as one delivered through VR.

Virtual visualization can reduce the cost of training

VR-based medical training through immersive visualizations is proven to be more effective than conventional teaching methods. In 2015, Miami Children’s Health System claimed that the medical professionals could retain as much as 80% of the information from a VR training session, compared to 20% retention level with traditional teaching methods.

VR can also help to significantly reduce medical training costs. For instance, elderly care facilities in the USA spend on average US$3,000 per employee to teach tracheal insertion through traditional methods; however, Next Galaxy, a US-based company, developed a VR software that will bring down the cost of training per employee to US$40. This VR software uses leap motion force feedback technology which enables the medical professionals to sense when the procedure is going wrong. As a result, this tool can create a realistic scenario, and medical professionals can have nearly hands-on experience of performing the procedure in a safe and controlled training environment, without risking the life of a patient, thus saving costs incurred in potential litigations.

EOS Perspective

AR and VR are among the next-generation technologies with the potential to transform healthcare. There is a consensus amongst analysts that a healthy growth of the global AR and VR in healthcare market can be expected over the coming years. For instance, a research company MarketsandMarkets estimated the market size at US$769.2 million in 2017, with forecast growth at a CAGR of 36.6% to reach US$4,997.9 million by 2023. Similarly, another research firm, Key Market Insights, expects the market to reach to US$5.6 billion by 2022. Several clinical studies indicate that innovative techniques powered by AR and VR are more efficient and effective over conventional methods, thus spurring the interest of private companies and in turn, expanding the market space.

Though AR and VR technologies offer significant opportunities for cost savings, the cost of investment in such new and emerging technologies is also an essential point of consideration.

There is high uptake of VR applications that are compatible with consumer-grade VR headsets such as Google Cardboard, Oculus Rift, HTC Vive, etc. These devices have already reached mainstream use. Moreover, as the technology matures, the competition is increasing, further driving down the price of the devices; for instance, in 2017, Oculus Rift (headset with motion sensor controller) was priced at US$399, half of its launch price in 2016. Increasing use of more affordable consumer-grade VR devices for healthcare applications will further bring down the cost of investment, thereby driving adoption of the VR technology in the sector.

Increasing use of more affordable consumer-grade VR devices for healthcare applications will further bring down the cost of investment, thereby driving adoption of the VR technology in the sector.

While AR headsets and smart glasses such as Microsoft HoloLens and Google Glass are still in trial version, some of the AR applications can be experienced on any smartphone/tablet without the need of headset or controllers, thus making it more accessible and affordable; for instance, EyeDecide, developed by OrcaMD, is an AR-based mobile app that simulates patient’s vision to demonstrate their actual medical condition. Such applications, which are priced as low as US$1.99 to US$4.99, can be widely used to enhance patient experience.

Healthcare organizations could leverage AR and VR technology to improve efficiency and quality of service and enhance patient care while cutting costs. Moreover, as these technologies are reaching mainstream, the cost of investment is expected to go down. Thus, AR and VR technologies are proving to deliver more value while reducing overall costs.

by EOS Intelligence EOS Intelligence No Comments

Is Technology the Solution to the Next Food Crisis?

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The UN estimates rapid population growth with additional 2-3 billion people globally by 2050. To feed this swelling population, food production needs to scale up by 70%, otherwise we are likely to be at risk of a global food crisis. With resources becoming scarce and climate change diminishing crop production by 2% per decade, food production methods need radical transformation and technology could be the possible solution to it. Using technology in farms and fields holds extraordinary promise of helping the agriculture sector become more efficient, productive, and sustainable.

Population increase, resource limitations, and climate change are putting pressure on farmers to produce more with less. To boost production it is essential to efficiently manage farm inputs such as seeds, fertilizers, and pesticides, optimize sowing and harvesting cycles, monitor field data (soil condition, plant stress, etc.) for improved crop yield, among others. However, managing these inputs is cumbersome and laborious without consistent and precise monitoring. Unfortunately, many farmers still rely on guess work and traditional processes instead of actual data to make all farming decisions. Technology could prove useful by helping farmers to closely monitor all farm activities and take informed data-driven decisions to improve production levels.

Technology can offer relief to pressures in agriculture

Emerging technologies such as weather tracking, robotics, and Internet of Things (IoT) can consistently monitor every aspect of agriculture such as soil fertility, health of farm animals, temperature and humidity conditions, optimal time to sow and harvest, schedule chemical application on fields, analyze irrigation requirements, among several other functions.

Weather forecast-based predictive modelling

Weather is a crucial determinant to ascertain the best time to sow, fertilize, spray, irrigate, and harvest crops. About 90% of crops losses are due to weather events and 25% of those losses could be avoided by using weather forecast-based predictive modelling on farms. Integrating weather forecast models with farming practices could enable better decision-making and improve crop yield. Companies such as John Deere, Ignitia, etc., already offer comprehensive weather-based farming solutions.

Robotics

Robotics is another emerging technology gaining traction in the agriculture sector. With robots capable of executing all functions from sowing to harvesting, they could easily replace human labor in the foreseeable future, particularly, at a time when some countries are facing labor shortage. For instance, in 2017, the UK suffered from 20% shortfall in migrant labors, which was mostly blamed on the Brexit vote that has made the UK unattractive for overseas workers to seek employment. The labor shortage is likely to get worse in 2018, making harvesting at labor-intensive vegetable and fruit fields difficult. Hence, some farms across the UK are considering to employ farm robots for vegetable and fruit picking.

Robots are also far more efficient than human labor, which is the key requirement to boost food production – each Harvest CROO Robotics’ robot (made by a US-based company that develops robots for the agriculture sector) is capable of harvesting eight acres in a day, which is equivalent to the work of 30 human pickers.

Internet of Things

Further, IoT has gained significance across several industries and has now entered the farms. IoT is turning farms into a mesh of smart sensors connected in a network, with the help of which every granular detail of crop, soil, livestock, or farm can be analyzed, thus, enabling farmers to devise smart cropping techniques and farming methods. IoT can streamline farming processes, reduce water consumption, and improve production and bottom lines.

EOS Perspective

Eventually, the growing population will put pressure on food supply. In such a scenario, digital farming is the best possible solution to escape the looming food crisis. Technology promises improved communication systems, precise monitoring devices, recommendations that could improve all processes between sowing and harvesting, and efficient livestock monitoring, among others, that could boost agricultural yields, reduce food wastage, decrease the inputs or resources needed per unit of output, and ensure sustainable farming practices.

However, most farmers have not adopted digital farming solutions and the use of technology is far from being a mass phenomenon yet. Cost is the most significant barrier to adoption, with most farms unable to bear the high upfront costs. Another common challenge is the lack of robust communication and internet network in rural areas as well as the absence of awareness and skills among farmers to apply technologies in farms.

Most farmers have not adopted digital farming solutions and the use of technology is far from being a mass phenomenon yet. Cost is the most significant barrier to adoption.

Consequently, the development of digital farming will require commitment and intervention by governments across the world, to offer incentives and cover the substantial start-up costs. Fortunately, few organizations have already started undertaking initiatives to tackle challenges. For instance, Mimosa Technology (a Vietnam-based IoT solution provider for agriculture sector) leases IoT-based hardware devices to farmers’ cooperatives in Vietnam to lessen the cost burden for smallholder farmers.

Initiatives are also being taken to ensure network connectivity and improve digital literacy in remote/rural areas – for example, governments of Thailand, India, or the UK, to name a few, are planning to boost digital connectivity in rural areas.

Eventually, technological innovations can be expected to make farming practices precise and to improve output. The use of digital farming solutions is an answer to the probable food crisis but for it to succeed, a mass adoption of technology across farms is a necessity. With growing awareness of benefits of automation in fields and efforts made by various organizations and governments to overcome challenges, digital farming would sooner than later transform the agriculture sector.

Brief description of companies and projects:

  • CropX: A USA-based agriculture-analytics company
  • CLAAS: A Germany-based agricultural machinery manufacturer
  • SmaXtec: An Austria-based provider of solutions to monitor livestock
  • Farmers Edge: A Canada-based company offering digital solutions for agriculture
  • The Weather Company: A USA-based weather forecasting and information technology company, a part of IBM
  • John Deere: A USA-based manufacturer of machinery for agriculture, construction, and forestry
  • Ignitia: A Sweden-based weather forecasting company
  • Robot Thorvald (to be launched): A robot developed by Saga Robotics, a Norway-based manufacturer of robots
  • Deepfield robotics: Robots developed by Bosch, a Germany-based engineering and electronics company
  • Hands Free Hectare: A project developed by Harper Adams University and Precision Decisions
  • Robot Agbot: A robot designed and built by QUT (an Australian university) with support from the Queensland Government
by EOS Intelligence EOS Intelligence No Comments

Infographic: China Going Cashless – What Does It Mean for Consumers, Trade, and Economy?

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China is heading fast towards a cashless society. The immense adoption and use of smartphone apps that provide mobile-payment services for buying goods and services have transformed how payments are made, eliminating the need to carry cash and reducing the dependence on credit and debit cards, which are already close to scarce in China. Easy access to smartphones and lack of alternative non-cash payment options, low penetration of credit cards and tedious debit card payment process that includes authentication via messages and codes, have led to the growth of online payments in the country.

This cashless payment revolution is expected to continue and grow, thus impacting the way businesses function, consumers shop, and China’s economy rolls.

by EOS Intelligence EOS Intelligence No Comments

Fitness Apps Thrive in Spite of Issues, But for How Long?

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Global fitness app market was worth US$930 million in 2016, expected to grow at a CAGR of 23.6% during 2016-2021 to reach US$2.7 billion. This growth can be attributed to drivers such as steady increase in smartphone adoption, affordable costs of mobile apps, as well as growing health awareness among consumers, including smartphone users. Regardless of how steady growth the market is registering, its expansion may hit a roadblock due to low product differentiation in a fiercely competitive market and unclear privacy policies that may cause wariness among consumers.

Fitness apps are becoming a new way to stay fit for smartphone and tablet users. During 2014-2016, fitness apps users have greatly increased in number, which led to fitness apps usage increase of over 330% in that period. A major driver of this growth is the fact that many fitness apps are highly engaging, according to a 2016 research conducted by Apptentive, a mobile customer experience and engagement software measuring the percentage of customers who retained an app for a certain period of time. In the health and fitness category, an average of 75% of users retained an app for at least 28 days, positioning the category as one of the top performers among news, finance, music, and shopping apps.

The high engagement of fitness apps is partially due to these apps providing users with a constantly-updated overview of their performance details and general wellness, which offers continuous motivation. This certainly benefits fitness apps growth and expansion in the market by not only attracting new users but also keeping existing users as loyal customers (at least to a certain extent).

Another driver for the fitness apps market growth is the cost-effectiveness of these apps, especially in comparison with typical gym membership fees. While a local gym in a city such as New York may charge around US$130 a month (plus a sign-up fee in some cases), fitness apps offer basic training routines, tracking location, and a calorie counter free of charge. Most fitness and health apps also offer an upgraded version with extra features, such as personal trainer, at prices ranging between US$2.99 a month and US$49.99 for an annual subscription.

These drivers bring about a favorable market environment for fitness apps to thrive, further underpinned by an estimated 2.1 billion smartphone users globally in 2016, a strong internet penetration – 87.4% in the USA, 73.1% in Europe, 54.3% in Latin America, and 52.3% in Asia, and a growing health awareness among an increasing number of people.

What may seem as a challenge is the fact that many fitness apps do not manage to stand out in the vast pool of apps, resulting in lack of product differentiation in the market. Most fitness apps offer very similar features – workout routines adjusted to the user’s level of fitness, sharing workout results online, etc., with focus on increasing user’s engagement with the app. Although this last point seems to have been achieved as fitness app users seem to be generally loyal to one app, a low product differentiation means low switching barriers for the users over long term, while limited innovation in introduction of new features can potentially hinder fitness app market growth.

Another challenge for fitness app developers is to improve the apps’ privacy policies. Fitness apps collect a gamut of sensitive, personal information about the users and require the geo-location feature to be enabled during workouts, meaning user’s location can be pinpointed at any time while using the app. Fitness apps mostly fail to clearly specify how this information will be handled. According to a report published by the Future of Privacy Forum (FPF), USA-based think tank and advocacy group, 30% out of the top paid and free health and fitness apps found in the App Store and Google Play in 2016 lagged behind in providing basic transparency about the app’s privacy terms. In other words, there is a probability that personal user information logged on the apps could be misused, weakening consumer’s trust, which could translate into users choosing not to use fitness apps to exercise, as their awareness of privacy issues increases.

Such lack of transparency from fitness app providers may cause users to grow wary of using the apps to track their workouts and to introduce personal information regarding their health. This can turn out to be a considerable problem for the app companies, as the key advantage and the selling point of their products is personalized data analysis, training plans, performance charts, etc., for which it is essential that the user allows the app to gather their personal health and workout input data. Without this, the use of these apps is virtually pointless.

EOS Perspective

Fitness apps have proven to be highly engaging causing consumers to rapidly adopt the ’anytime, anywhere’ way of exercising and to continue using these apps through extended periods of time. While convincing potential users to start using any fitness app does not seem to be a problem and customer acquisition does not pose a major challenge in general for the industry as a whole, it appears that low product differentiation is the key obstacle for individual developers to get their products to stand out in the jumble of similar apps, and this lack of differentiation might be the factor to hamper fitness app market growth.

Some app providers seem to be noticing this, however they are trying to tackle this issue by doing everything but truly differentiating their products, and instead attempt to outdo their competitors by trying to shout loud about their own apps. As many apps lack differentiation and tend to melt into one vast pool of similar apps, fitness app developers are trying to make their products be more heard and visible using social medial to gain a competitive advantage.

One such case is the Sweat app, belonging to the Australian international fitness figure Kayla Itsines, who has been using social media extensively – mainly Instagram and Facebook – as a means of promotion for her app. By implementing a well-designed and aggressive social media marketing strategy, the Sweat app spread around 195 countries engaging 11 million users in 2017 alone. In that same year, the app registered US$100 million in revenue. The use of social media (hashtags, motivational photos, short videos, reposting before and after pictures of app users who had made remarkable progress) granted major visibility in the market and an increase in new subscriptions, without the need for actual innovation and truly unique selling proposition.

A lot of fitness apps offer user workouts based on generic information introduced by the user (e.g. weight, height, age) and data measured by GPS, accelerometer, or gyroscope, however lack the ability to register the body’s real-time performance, which has an impact on the accuracy of the gathered data and recommendations. This gap offers a good opportunity to differentiate and the app developers should try to align their applications with current trends such as the increasing popularity of wearable devices and smart garment.

Fitness apps companies might want to continue to seek to collaborate with garment industry players to develop smart garment – a piece of clothing such as a sport bra with conductive threads woven into the fabrics to work wirelessly with a smartphone. Smart threads in the fabric are capable of reading user’s biometrics, for instance heart rate, body temperature, and dehydration, among others that otherwise a smartphone would be incapable of registering on its own. By integrating the smart garment with a fitness app, the latter can use the real-time data collected on the body’s actual performance to accurately monitor workout sessions, giving a range of possibilities to use this data to differentiate the service offered by the app. As a result, the end product could stand out in the vast pool of apps while facilitating the user to efficiently reach their personal goals. It is a path for app developers to consider, as the growth of standard, smartphone-based apps is surely going to be limited.

by EOS Intelligence EOS Intelligence No Comments

Infographic: Understanding the Cost Dynamics of 3D Printed Drugs

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Medical industry needs no introduction to 3D printing technology, which has found usage in applications varying from custom prosthetics to surgical procedures. And with the US Food and Drug Administration (FDA) approving the sale of Spritam (in 2016 across USA), a drug used in preventing seizures, produced by Aprecia Pharmaceuticals using 3D printing, this commercial use of 3D printing technology embodies a momentous development in the field of printing drugs. The deployment of this technology offers certain benefits, but also comes at a cost, and affects the cost dynamics of producing a drug.

Cost savings offered by 3D printing technology are massive. Making drugs using printers will gradually reduce the processing equipment required, allowing the final product to be printed on one versatile machine, saving thousands of dollars. Going a step ahead, pharma companies will provide the base products for printing of the medicines at clinics and pharmacies, which means that the investment in production and storage facilities at the pharma company’s end will decline as the physical making of the drug will be shifted closer to the end-user. The technology will also help save on packaging and labelling costs along with bringing down logistics expenses.

However, as 3D printing capabilities develop further and as the cost of printing drugs falls, increasing easy accessibility to these drugs, it will become imperative to address safety and regulatory concerns associated with this technology.

While making drugs with 3D printing technology could be a game changer for the medical industry, it also comes with a potential threat of counterfeit and illegal drugs. As drugs production will be shifted from centralized location of pharma companies, which are able to ensure more controlled and supervised production processes, drugs will be printed at numerous clinics and pharmacies, and hence strict regulations need to be adopted and methods of production need to be appropriately controlled. Unified safety procedures and quality control measures need to be developed so that patients can be assured of the quality of the products.

The immense potential offered by this technology is increasingly materializing through commercialization in developed markets. However, as massive financial inputs from pharma companies paired with research grants and support by governments are still required, it is fair to believe that this technology is still far out from the reach of the less developed parts of the world, at least in the foreseeable future.

3D printed drugs

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Commentary: OLA Finds Its Way on Aussie Roads

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With plans to expand globally, Ola Cabs, India’s leading ride-sharing service provider, marked its entry into the international market by announcing in January 2018 the launch of its services in the Australian territory. While the exact date of the service launch in Australia is not yet decided, as it is subject to regulatory approvals, the service provider has already started the ground work by inviting private hire vehicles to join them. The company is starting to collaborate with private hire vehicle owners in Sydney, Melbourne, and Perth, the three cities where Ola cabs will initially be available for rides, to be ready to roll out once the commercial operations commence.

Presently, the market for ride-sharing service providers in Australia includes players such as Uber, Taxify, and GoCatch, among others. With Uber, which has emerged as the leading player in Australia, already present in the market, Ola needs to have its strategy, policies, and priorities set just right to smoothly launch and successfully run its operations. However, the presence of Uber has worked, to some extent, in favor of Ola, as it paved the way for ride-sharing services in the country resulting in regulatory policies being already in place. This makes the market entry a bit easier for Ola as the company will not need to deal with several challenges that the early market entrants in such novelty markets as ride-sharing typically have to tackle.

However, competing against its largest rival, Uber, is not the only concern for Ola. To be successful in the Australian market, Ola also has to focus on smaller and newer competitors, and set its operational and pricing policies keeping in mind their strategies in the market. Taxify, an Estonia-based company that launched its operations in Australia in December 2017, is expected to closely compete with Ola, especially with its ride services being operational only in Sydney and Melbourne, two of the locations where Ola is launching its services as well. With two ride-sharing service providers launching its operations in similar locations within a span of few months, a price war between the two is expected to happen. Currently, Taxify offers rides to its commuters without any surge pricing, making the ride cheaper than Uber. If Ola plans a similar pricing structure, among other strategies to drive the business, the competition between the two operators will, most likely, heat up very soon.

With two ride-sharing service providers launching its operations in similar locations within a span of few months, a price war between the two is expected to happen.

In the Australian market, the ride-sharing services segment is still in its infancy stage of development and with only one player (in this case, Uber) currently dominating the scene, it makes sense for Ola to launch its operations here now, offering a new option for consumers to choose from. Entry of Ola, along with new players such as Taxify, may indicate a transitioning phase in the Australian ride-sharing market as the entry of new players has the potential to end Uber’s monopoly. Currently, with very little known about the operating dynamics, not much can be commented about the success of Ola in the Australian market. However, the unsaturated state of the local market clearly indicates that Ola has a good chance to thrive in Australia, as long as they get the pricing right and set their eyes on the long-term business growth rather than short-term gain through higher prices.

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China Bike-Sharing Market Moving towards Consolidation

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Though several bike-sharing start-ups in China flourished in past two years, mainly due to backing from venture capital funding, many are finding it difficult to keep up the momentum as the investment dries up in absence of sustainable business profitability model. Small players in particular are struggling to comply with recently introduced regulatory standards for the industry. In our article titled ‘Bikes Are Back: China Gaining Pedal Power’, published in April 2017, we discussed the outlook for the bike-sharing app-based businesses in China, and now we are taking a look again into the current market dynamics in view of new regulatory framework that can reshape the competitive landscape.

The bike-sharing industry in China has noted a steep growth in a short span of time. As per estimate of Ministry of Transport, there were about 70 bike-sharing companies operating in China by July 2017 (as compared to 17 in January 2017). However, the market is skewed towards the duopoly of MoBike and Ofo. According to Sootoo (an online service platform providing analysis for internet and e-commerce industry in China), as of March 2017, MoBike and Ofo accounted for 56% and 30% market share, respectively. Other companies face cut-throat competition to carve up the remaining 14% of the market.

The summer of 2017 was particularly harsh on several small players unable to bear the heat of increasing competition and financial crunch. Chongqing-based Wukong, which shut down its operations in June 2017, is believed to be the first bike-sharing company to collapse. Subsequently, several other small companies, including 3vBike, Xiao Ming Bike, Cool Qi Bike Ding Ding Bike, Kala Bike, and Kuqi Bike, also wound up their businesses citing issues such as lack of investment, cash flow crisis, mismanagement, competition, losses due to theft and vandalism, etc.

Intense competition, especially among the second-tier companies, is driving the market towards consolidation. In October, Youon, a Shanghai-listed company operating in 220 cities and owing 800,000 bikes, acquired 100% stake in Hellobike (a Shanghai-based company with presence in 90 cities across China). In November 2017, Bluegogo, owning fleet of 700,000 bikes and 20 million registered users, announced that the company was facing financial troubles and hence the business was sold to another Chinese start-up, Green Bike-Transit. This acquisition trend is likely to continue, as the capital intensive and cash-burning bike-sharing businesses has come under the purview of strict regulatory framework.

In August 2017, Ministry of Transport and nine other ministries jointly issued the first set of guidelines with the aim to better regulate and standardize the emerging bike-sharing market in China. State governments developed their own standards and regulations based on the guidelines.

Some of these regulations are in favor of bike-sharing companies. For instance, central government directed state authorities to step up their efforts in providing protection to bike-sharing companies against vandalism, theft, and illegal parking issues. The users are required to register with the bike-sharing operators using their real name. This will allow the security forces to easily identify and penalize the offenders. This may bring some respite to small players such as 3Vbike, a Beijing-based company with a fleet of over 1,000 bikes, which shut down its operations in July 2017 after most of its bikes were stolen. Moreover, local authorities need to work with bike-sharing operators to develop dedicated parking spaces near high-demand locations such as shopping areas, office blocks, public transportation stations, etc. This is likely to ease up chaos and nuisance caused by illegal parking.

On the other hand, some of the regulations call for bike-sharing companies to bear additional expenses. As per the new regulations, all bike-sharing operators are required to provide accident insurance to their users, a practice which was earlier followed only by the market leader, MoBike. The companies are also required to set-up support mechanisms to manage customer complaints. In the guidelines, central government also advised state governments to develop local standards for regular maintenance of bikes. Accordingly, the government of Shanghai and Tianjin instructed bike-sharing operators to appoint one maintenance personnel per 200 bikes and the bikes need to be discarded after three years in operation. Such standards are certainly necessary to enhance user experience and safety, but it will put additional strain on already financially-stressed companies.

As per the new guidelines, companies are encouraged not to charge security deposits at all. If security deposit is collected, the company must clearly distinguish security deposit fund from other funds and ensure timely refund of the deposits. The bike-sharing companies typically charge CNY 99 – CNY 299 (~US$15 – US$45) as one-time refundable security deposit and then a rental fee of CNY 0.5 – CNY 1 (US$0.08 – US$0.15) is charged for every half-hour to one-hour ride. Since the firms need to refrain from using the deposits, and given that the rental fees are likely to remain significantly low due to intense competition, the companies might struggle to manage day-to-day operations. Investor money will dry out eventually, hence the companies are in dire need of developing new revenue streams. Besides in-app advertising, companies are also exploring the use of their bikes as an advertising space. For instance, Ofo customized number of bikes with Minions characters to generate revenue from advertising the release of ‘Despicable Me 3’ movie in China.

The new guidelines also allow the local authorities to limit the number of bikes to check over-supply and traffic congestion. Following the announcement of this new guideline, Beijing, Shanghai, Guangzhou, Wuhan, Shenzhen, and eight other cities reportedly banned deployment of additional bikes. As a result, the prime markets are now off-limits for new entrants.

china bike sharing

EOS Perspective

App-based bike-sharing start-ups have revived the biking culture in China. By July 2017, the bike-sharing companies, claiming 130 million registered users in total, flooded the streets of China with 16 million bikes. The bike-sharing boom is certainly more than a fad, however, a shift in market composition is expected in the near future.

The new regulations have paved the way for development of higher industry standards aimed at better user experience and safety. However, compliance with these regulations is likely to put an additional financial burden on small players. Moreover, small players are finding it difficult to challenge the duopoly of MoBike and Ofo (together accounting for 86% of the market share as of March 2017). The consolidation among second-tier companies might ease the competition, however, this might not be enough to level with the market leaders. To survive the competition, small companies will need to either innovate or capitalize on niche markets and opportunities. Most of the companies operating in the market today have similar service model. Technological innovation or distinguished service model can enable the company to stand out from their competition. Furthermore, with rising level of competition and market saturation in major cities, small companies need to shift focus on underserved third and fourth-tier cities. For instance, in May 2017, Shanghai-based Mingbike announced its plan to gradually move out of Shanghai and Beijing in a strategy shift towards smaller cities. In these smaller cities, the companies can also explore niche business opportunities such as gaining exclusive contract for operating around local attractions.

Speculation about the merger of two dominant players MoBike and Ofo surfaced in October 2017. The two bike-sharing giants are under investor pressure to consolidate and put an end to the competitive pricing war. For now, both the companies have clearly stated that they are not interested in merger at this point. However, industry experts are hopeful of a merger in the future given the history of the investors – Tencent (backing MoBike) and Alibaba (backing Ofo), who separately invested in taxi-haling rival companies that eventually merged to become a single dominant player in China. Didi Chuxing, a taxi-hailing service company, was formed with merger of Tencent backed Didi Dache and Alibaba backed Kuaidi Dache in 2015. In 2016, Uber merged its China operations with Didi Chuxing, while retaining a minority stake. Travis Kalanick, co-founder of Uber, acknowledged that both the companies were making huge investments in China but unable to retrieve profits and the merger was aimed to build a sustainable and profitable business in China. Bike-sharing industry in China is also at a similar juncture. Since both MoBike and Ofo have not achieved profitability yet and they largely depend on investments, they might give in to the interest of the investors. Hence, one can expect that the bike-sharing industry in China might eventually move towards monopoly.

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