Siemens Healthcare Diagnostics Ltd merged Management Discussions

SIEMENS HEALTHCARE DIAGNOSTICS LIMITED ANNUAL REPORT 2009-2010 MANAGEMENT DISCUSSION AND ANALYSIS Overview: The Indian economy is the 12th largest in USD exchange rate terms. Indias GDP has touched US$1.25 trillion. India is the second fastest growing economy of the world and during the fiscal year 2009-2010 Indias GDP growth rate was nearly 9% despite rise in crude oil prices and financial turbulence. Indian economy is a diverse one, encompassing agriculture, textiles, handicrafts etc. Although many people are still dependent upon agriculture, the service sector is also playing a very important role in the Indian economy. The healthcare sector in India is on a roll. The purchasing power of the Indian middle class is rising very rapidly. So they can afford quality healthcare. It is estimated that by 2012 the healthcare sector will rise up to US$40 billion. Today most of the Indians can buy western medicines and so the healthcare sector in India is growing rapidly. Due to its very bright prospects people are also inclined to invest in the healthcare sector. The booming healthcare sector in India is also spurring industries such as healthcare equipment and information technology in healthcare. Information technology plays an important role in health care, and according to a report, India has the fastest growing healthcare IT market in India. The Indian healthcare sector is also attracting many foreigners to India, to access the healthcare facilities. Indian Healthcare Sector: In the recent past India Healthcare sector has attained greater heights and the facts given below are clear indicators of such a success * On par with the International Standards, Indian Specialists have performed over 500,000 complex surgeries in the areas of cardiology, neurology and oncology with enormous success rates. * Statistics indicate that 98.7% of cardiac surgeries performed in India are successful and it is estimated that this success rate is significantly higher than that of USA. * Estimates show that success rates in renal transplantation is close to 95% Government of India is taking several steps to promote medical tourism and in fact patients visiting India for such medical interventions are provided visa under a special category call Medical Visa. Activities: The Company continues to develop further: With the acquisition of Indian businesses of Dade Behring Diagnostics (I) Pvt. Ltd., New Delhi effective August 1, 2008 your Company has extended its lead in Diagnostics Industry, especially in Clinical Chemistry, Microbiology & Plasma Protein offerings. By integrating Dade Behring, the Company has broadened the diagnostic spectrum for In vitro testing requirements. With Siemens Medical Division having technologies for in vivo testing, this makes your Company the first integrated diagnostics company. It combines under one roof imaging diagnostics, laboratory diagnostics, clinical information technology, consulting, and comprehensive services. The Company, being in the Diagnostics business continued to focus on Immunodiagnostics & Clinical Chemistry business and maintained its leadership in Urinalysis business. The Company has also significant presence in critical care, Hematology, Microbiology & Plasma protein business. In the Immunodiagnostics business, new instrument and Assays were launched to expand the menu offered by the Company. Demographic change and increasing cost pressure in healthcare today require comprehensive and broad-based solutions that improve quality while reducing cost at the same time. As an innovation leader and one of the worlds largest solutions providers in healthcare, Siemens Healthcare acts on these challenges. Industry Structure & Development: Diagnostic Industry maintained its high Compound Annual Growth Rate (CAGR) of 15%. The trends favouring such a high CAGR are fast growing household income, accelerated urbanisation, increase in life style diseases, increase public awareness and focus on healthcare due to rise in income levels and education. Setting up of Chain labs have become the order of the day. More and more laboratories are opting for automization to increase their efficiency. High growth is being achieved by setting up satellite labs and increase in collection points. This is resulting into more and more Hospital outsourcing their diagnostics activities to these labs. The major Healthcare facilities are appearing in private hospitals, independent labs and private chain labs and public hospitals continue to serve the masses. Opportunities, Threats & Risks: Since the Company has significant presence in key business areas of Immunochemistry, Clinical Chemistry, Hematology, Urinanalysis and Critical care, favourable conditions are prevalent for Company to leverage its product portfolio in laboratories segment. Extensive sales and marketing, customer support, services and distribution network on all Indian basis is providing an excellent opportunity to the Company to achieve its targeted growth momentum. Diagnostics market is highly competitive - both in terms of cost perspective and number of competitors. Local and new Tow cost competitors are entering the market applying price pressures on the more established players. However, the market perception of such low cost technologies and low cost competitors remains that of poor quality. Customer landscape is highly fragmented and volume driven businesses are getting consolidated. Product registration protocols and uncertainty over application of Diagnostics specific FDA regulations continue to exist. Internal Control Systems: The Company has adequate internal control systems for its financial reporting and asset management. The Company, being part of Siemens Group follows the group policies and has established Code of conduct for Directors, management and employees. The Companys internal control systems are regularly reviewed by external firm of auditors and as stated by Statutory Auditors in their report, considered adequate. Operational audits are conducted under the ISO 9000 certification process and risk based process controls are reviewed during the internal management meetings. All audit findings are reviewed by the management and Audit Committee of the Board and the suggestions and recommendations agreed by the Company are implemented with defined responsibilities and time lines. Material Development in Human Resources and Industrial Relations: The Company, being in Diagnostics Industry which is knowledge base and technical in nature, regularly imparts training to its various employees to update their knowledge and skills. Investments are made to upgrade facilities available to employees to carry out their tasks more efficiently. Global and Regional Human Resources initiatives are adopted to strengthen company specific efforts. The Company continues to maintain cordial and harmonious industrial relations.