“Our idea is to enhance the access and affordability for next-generation techniques, meaning molecular diagnostics, genomics, pathology, digital pathology, proteomics, metabolomics, and all that. This is the spirit behind Neuberg Diagnostics. —GSK Velu, PhD, BPharm
CEO SUMMARY: India is a nation where 50,000 pathology labs operate to serve the clinical laboratory testing needs of 1.4 billion citizens. U.S. investors have financed several of India’s fast-growing lab companies. But now the tables are turned. One Chennai, India-based lab company is investing in the United States. It recently opened a sophisticated genetic and molecular testing laboratory in Raleigh, N.C.
INTRODUCTION: For more than 20 years, investors in the United States have looked to India as an opportunity for clinical laboratory testing. During this time, many pathologists considered India a potential threat involving anatomic pathology services.
For investors, clinical laboratory testing in India represents a huge opportunity. There are 50,000 pathology laboratories to serve India’s population of 1.4 billion people. Since the late 1990s, private equity companies in the United States have regularly invested in certain bigger lab companies in India. In some cases, the capital was used to build new lab facilities in different cities. In other cases, the capital was used to buy independent labs and integrate their operations into acquiring the lab company’s network.
It was also during the 1990s when some anatomic pathologists in the United States began to consider India as a threat.
The common perception was that the lower cost of doing business in India would allow histopathologists in that country to be a lowest-cost provider.
Thus, as use of digital pathology images increased, many predicted that specimens would flow from the U.S. to India. This would happen because of the belief that the lower cost of surgical pathology in India would successfully draw business away from pathology groups here in the United States. That fear proved unfounded because, as of this date, no substantial number of pathology specimens from the United States have moved to India for diagnosis.
Consolidation of Labs in India
What is true over the past 25 years is that several well-financed lab companies in India are consolidating clinical laboratory testing services in that country in much the same way public lab corporations in the U.S. consolidated lab testing between 1985 and the present. (In India, pathology laboratory is the common term for a clinical laboratory and histopathology is the common term for an anatomic pathology laboratory. TDR is using the terms clinical lab and anatomic pathology in this story.)
During his trip to India to visit hospitals and clinical laboratories in 2018, our editor, Robert L. Michel, met with one of India’s most respected entrepreneurs in the clinical laboratory section. He is GSK Velu, PhD, BPharm and he is the Chairman and Managing Director of Neuberg Diagnostics, headquartered in Chennai, India.
Labs in Four Countries
In 2018, Neuberg Diagnostics was only a year old and already one of India’s fastest-growing clinical lab companies. Velu told Michel at that time that Neuberg Diagnostics had the goal of going international. Today, just 36 months later, Neuberg operates 109 labs in India, as well as 15 labs in South Africa, United Arab Emirates, and the U.S. It is preparing to open labs in several other nations.
In fact, Neuberg has turned the tables on the popular wisdom that lab specimens from the US would flow to India. In May, Neuberg announced the opening of its Neuberg Centre for Genomic Medicine (NCGM), a start-of-the-art esoteric and genetic testing laboratory in Raleigh, N.C. The lab is CLIA-certified. Neuberg is ready to compete with labs in this country on their home turf.
Neuberg may prove tough competition here in the US. The privately-held company closed the most recent fiscal year with revenue of 8 billion rupees, equal to $107.3 million in U.S. currency. Velu predicted that Neuberg would report more than US$150 million in revenue in fiscal 2022, according to reporting in India’s Business Standard publication.
Worldwide, Neuberg has more than 4,000 employees working in more than 120 lab facilities and more than 1,200 collection centers.
“We are also planning to open diagnostics facilities in Kenya, Tanzania, Nigeria, and Ghana,” Velu said. “In West Asia, we are looking at establishing clinical labs in a few middle eastern countries with the new lab in Dubai acting as a hub and anchor for lab testing in that region,” Velu told the Business Standard.
As the first India-based lab company to establish itself in the U.S., it seemed appropriate for The Dark Report to invite Velu to meet via Zoom for an interview with our editors. In June, Velu met with Editor-in-Chief Robert L. Michel and Senior Editor Joseph Burns.
During the interview, Velu outlined how he started Neuberg Diagnostics in 2017, his plans for growth in the U.S., and how Neuberg will follow strategies that some of the world’s largest and most sophisticated labs have recently adopted.
He emphasized that leading diagnostic lab companies are focusing on delivering results at the higher end of pathology testing, including digital pathology, molecular diagnostics, genomics, proteomics, and metabolomics.
EDITOR: Since its founding just a few years ago, your lab company has posted spectacular growth. Let’s begin by having you give us a brief history of Neuberg Diagnostics, such as how you got started and what strategy your company uses to differentiate Neuberg from your lab competitors.
VELU: Neuberg Diagnostics is the third version of my pathology career. In 1991, when I was 21 years old, I started working at a small pathology lab in my home country of India. Then about seven years later, I founded a chain of laboratories in India called Metropolis. That was in 1998. By 2015, I sold off Metropolis to the Carlisle Companies, which is a U.S. company that has operations around the world.
EDITOR: What came next for you?
VELU: After my non-compete agreement with Carlisle expired in 2017, I founded Neuberg Diagnostics by combining five laboratory companies from Sri Lanka, South Africa, and the United Arab Emirates into one company.
EDITOR: What was the inspiration behind the name of your new laboratory company?
VELU: We chose the name Neuberg, which is a German word that means “new mountain.” Since this company is my third time being an entrepreneur in pathology, we think it describes our objective in a way that indicates we are doing something different in laboratory medicine and diagnostics.
EDITOR: In May, you opened the Neuberg Centre for Genomic Medicine (NCGM) in Raleigh, N.C., that will focus on genomic and molecular testing based on next-generation sequencing. How do you envision NCGM competing in the U.S. market?
VELU: Our approach is similar to what some of the largest labs in the United States currently do, such as Quest Diagnostics and Labcorp, along with other large lab companies in different parts of the world. These lab companies are working at the higher end of pathology testing, particularly when it comes to digital pathology, molecular diagnostics, genomics, proteomics, and metabolomics. This is the strategy that sophisticated labs in the United States, Europe, and other advanced countries are doing.
EDITOR: That’s understandable, because these newer, more complex diagnostic tests are the future of clinical laboratory testing.
VELU: True. What most pathologists and clinical lab executives in the United States often overlook is that many of these more sophisticated, newer diagnostic tests were not readily available, easily or at an affordable price, in developing markets. This is especially true for India, the Middle East, or in Africa.
EDITOR: Thus, your interest in establishing local labs in these regions, correct?
VELU: Correct, since most existing labs in South Asia, the Middle East, and Africa still do conventional testing while the new techniques in molecular and genetic testing have been difficult to access and to afford. We saw that as our opening.
EDITOR: How would you differentiate your lab testing services?
VELU: Our idea is to enhance the access and affordability for these next-generation diagnostic techniques, meaning molecular diagnostics, genomics, pathology, digital pathology, proteomics, metabolomics, and all that. This is how the Neuberg idea was born.
EDITOR: That is an ambitious goal to launch a sophisticated clinical laboratory from the ground up. Is your plan to offer the full range of complex and new molecular tests, genetic tests, and digital pathology-based services from day one that your labs open? And in doing so, is that your way of getting an edge on your lab competitors?
“…many of these more sophisticated, newer diagnostic tests were not readily available easily or at an affordable price in developing markets. This is especially true for India, the Middle East, or in Africa.”
VELU: We shaped this strategy in the following way. We wanted to offer all those different types of testing because there are two possibilities when you start a new lab company. One way is to establish a genomics- and proteomics-based laboratory in the communities to be served. That comes with challenges that I will describe in a moment. The second way is to set up a centralized lab facility as the hub serving a large region.
EDITOR: My guess is that having enough test volume to support economies of scale governs which of the two possibilities will work best.
VELU: We recognize that when you set up a specialized lab that is focused only on genomics, there may not be enough scale, enough test volume, to do that well. Many entrepreneurs who started labs focused on genomics did not survive their first few years. That’s why we wanted to be more than just a genomics lab as we expand into new regions.
EDITOR: Please explain.
VELU: We needed to create a large-scale medical laboratory by acquiring multiple labs, while also upgrading them to do next-generation techniques. That was our vision when we started Neuberg in October 2017 and then began acquiring a few like-minded pathologists.
EDITOR: Did you have some real-world examples upon which to base this business approach?
VELU: Whenever large lab companies have been successful—such as Quest, the IDEXX lab in Europe, or Unilab in both Europe and the US—they have grown through acquisition. At Neuberg Diagnostics, we did the same thing by doing mergers and acquisitions. Since then, we have become the fourth-largest laboratory chain and soon we may be the third-largest chain of Indian origin. We operate 120 labs across India, the Middle East, Africa, and we now have a small but symbolic presence in the United States.
EDITOR: That’s a sound strategy because your labs in India could do reference testing for your labs in South Africa and the United Arab Emirates. Is that right?
VELU: Yes, to a certain extent. But we also could do it the other way—the second option I mentioned earlier.
EDITOR: That would be the regional hub strategy that you have in play in several places.
VELU: One good example is that our lab in Dubai can be the headquarters for the Middle East region. Similarly, our lab in South Africa can be the headquarters for our operations in Africa. In each case, the two labs would be the most advanced lab facilities serving those respective regions because they provide the most advanced diagnostic testing services in those areas. We wanted to have three hubs: India, of course, then our Middle East hub in Dubai and our Africa hub in South Africa.
EDITOR: How would you differentiate Neuberg Diagnostics in India from all the other lab companies in that nation?
“Right now, we might be India’s largest genomics player. At the same time, we are doing the maximum amount of noninvasive prenatal testing and the maximum amount of clinical exome and whole genome sequencing.”
VELU: If you look at our three largest competitors in India—Dr Lal PathLabs, Metropolis, and SRL Diagnostics—we are right behind them at fourth largest. When I started Metropolis back in 1998, those other two labs started almost at the same time.
EDITOR: Did they offer the same basic lab testing services?
VELU: Their focus was mainly routine testing, along with some standardized specialty testing. Each shared the major goal of having a presence everywhere in India. But as healthcare and physicians began to adopt clinical services like personalized medicine, these labs were not focusing on genomics, proteomics, metabolomics, digital pathology, and all of that.
EDITOR: That would be the opportunity you spotted in 2017.
VELU: At that time, we found that those areas were unexploited—meaning those areas were unmet needs in the marketplace. To succeed in the Indian market, you need to offer the full spectrum of routine, reference, and esoteric testing including molecular and genetic tests. That is how we started.
EDITOR: What has happened to Neuberg Diagnostics in recent years.
VELU: Right now, we might be India’s largest genomics player. At the same time, we are doing the maximum amount of noninvasive prenatal testing and the maximum amount of clinical exome and whole genome sequencing. We’ve done all of that in the past three years.
EDITOR: What type of lab resources are devoted to next-generation sequencing?
VELU: We were the first company in the private sector in India to make an investment in Illumina’s NovaSeq gene sequencing instrument. Today, we have 10 different sequencers in operation. We are starting a third sequencing lab in India, and we plan to start a sequencing lab in South Africa. We’re doing that because genomics has become one of our fulcrum points for growth.
EDITOR: Are you developing other lines of specialty diagnostic testing?
VELU: In addition to genomics, we also are putting substantial effort into using mass spectrometry as a diagnostic technique. Currently, we offer the widest range of assays using mass spectrometry as a platform. These are some of the ways we have differentiate ourselves as a super-specialized player compared with the other pathology labs in the market.
EDITOR: I’ll ask the same question about the U.S. market. How would you differentiate what your new Neuberg Centre for Genomic Medicine in North Carolina is doing versus what other lab companies do in this country?
VELU: What we are doing with NCGM is similar to what’s happening with other lab companies in the United States that offer genomic testing services. Quest is growing in that way, along with GeneDx (a division of BioReference Laboratories) and Invitae. Basically, we will be doing what they’re doing. NCGM aspires to be in the same developing market for genetic testing that Invitae and GeneDx are in. Also, we envision NCGM will be something like what Quest or Labcorp are now. Both of those companies are focused on the developing market for genomics. That happens to be our market strategy too.
EDITOR: With so many existing competitors for genetic testing in this country, how do you plan to get to that level given that your lab in Raleigh just opened in May?
VELU: At the moment, our future plans for expanding our genetic testing program are on hold because the first tests we do in this lab are for COVID-19. That’s where the demand was. We didn’t start with that plan, but, for now at least, our Raleigh lab is doing a few hundred molecular COVID-19 tests per day and one or two other tests as well.
EDITOR: Did you have any delays in getting regulatory approval for your new lab and these specialized assays?
VELU: We got approval to do COVID-19 testing right away, and we expect to get FDA approval to do next-gen sequencing for COVID-19 possibly in the third quarter. For now, we are still waiting for our sequencers to be delivered.
“We expect that something will happen for us in the U.S. market, because even a small niche volume of tests in the United States could generate hundreds of millions of dollars in revenue over the long term. That’s our immediate focus.”
EDITOR: Are there other tests you are ready to launch at your Raleigh lab?
VELU: In addition to COVID-19 testing, we have identified one or two niche or unique tests that we want to run in the coming months. We don’t want to compete with labs that are already well established and running the tests that we plan to run. That’s not our first focus. We have a few ideas for niche or unique tests and we are reaching out to hospital groups to see if there is interest in having us run those tests for them.
EDITOR: What are your ambitions for your U.S. lab facility?
VELU: We expect that something will happen for us in the U.S. market because even a small niche volume of tests in the United States could generate hundreds of millions of dollars in revenue over the long term. That’s our immediate focus.
EDITOR: Can you talk about what kinds of testing you plan to do in your CLIA-certified lab in Raleigh?
VELU: Yes. We are putting in a live-sequencing lab in North Carolina, so we’ll be focused on next-generation sequencing (NGS)-based technology for niche testing. Initially, we’re looking at newborn screening and pediatrics as our main areas of focus.
EDITOR: What other strategies are you considering?
VELU: Our aim is to focus on one type of diagnostic testing in the United States and try to offer some cost-effective and innovative solutions in that one area. For example, newborn screening in the United States is done by public screening laboratories, and they are all looking for partner lab companies to do genomics testing. Currently, PerkinElmer’s genomics division is doing some of that, but beyond that, there’s nobody else in that space.
EDITOR: That market sector is already competitive.
VELU: All the big laboratories are involved in prenatal testing. However, when it comes to newborn and pediatrics, there is no genomics laboratory that has that work exclusively. We’re aiming at that space in the U.S. market. Of course, we are open to doing other kinds of testing, but for now, we will be very focused on niche testing.
EDITOR: What did you find attractive about Raleigh that led you to locate your lab there?
VELU: We had two reasons. One, Raleigh is in the Research Triangle and a substantial amount of research and development goes on there. All that research work has contributed to the legacy that the Research Triangle has of supporting the growth of large pathology businesses. Second, Labcorp is based there. Because of all this activity, there is a good supply of lab professionals and scientists who have hands-on experience with these complex testing technologies.
EDITOR: As a company focused on the whole range of pathology and clinical laboratory testing, including, genomics, metabolomics, proteomics, and digital pathology, would you consider acquiring any other successful lab company or companies that are working with those testing technologies?
VELU: Yes, but currently we are a very small player in the United States. That said, we are not opposed to acquiring smaller players. But our main interest in coming to the United States is not to play a huge nor a disruptive game—at least not yet.
EDITOR: It sounds like you are using this lab as a way to learn about the U.S. lab testing marketplace and build a base for expansion.
VELU: True. We opened our lab in North Carolina to gain an understanding about what’s going on in the U.S. market and to see how our interests for technology innovation would fit there. That’s why we went to North Carolina where Labcorp is based, and where there’s so much activity in laboratory medicine in the Research Triangle. I’m sure people in the United States are looking for cost-effective testing options just as everyone around the world is seeking cost-effective testing.
EDITOR: When Neuberg Diagnostics announced the opening of the lab in Raleigh, the company said you were including capacity for large scale clinical and research projects. That raises the question of whether you anticipate that NCGM will work with pharmaceutical companies to do clinical trials across multiple populations in several countries.
VELU: Yes, we would like to be partners in companion diagnostics with pharma companies. We are currently looking at pediatrics and newborn testing as an area where pharma companies are developing drugs for inherited genetic disorders. We are currently in talks with some pharma companies about the cohort testing that we could do for them.
“…for pharma companies, we have a big base in India, the Middle East, Africa, and now we have a presence in the United States. We are in discussions with pharma companies and believe we can be a strong partner to do IVD testing for them.”
EDITOR: Would you consider supporting pharma clinical trials as part of your strategy, since you’re offering advanced genetics and you can do clinical trials in your labs in the UAE, South Africa, and India? In other words, would NCGM be interested in building a business such as what Covance and Labcorp are doing?
VELU: Yes, because for pharma companies, we have a big base in India, the Middle East, Africa, and now we have a presence in the United States. We are in discussions with pharma companies and believe we can be a strong partner to do IVD testing for them.
EDITOR: Is it in your plans to participate in pharma research and development with your Raleigh lab facility?
VELU: At the moment we are not interested in going beyond testing, but we can certainly offer testing solutions to all pharma companies. All our labs are CLIA-certified and our labs in India and in South Africa are CAP-accredited. Soon, our Dubai lab will be going for CAP accreditation. In all those markets we have the accreditations we need, and we meet the necessary standards that a pharma company could use for testing a large population in a cost-effective way. For those reasons, our offerings compare well with what Covance, Quintiles, or other labs are doing.
EDITOR: To be a laboratory that does testing all over the world, are you getting your labs accredited to ISO 15189, because that standard is accepted in something like 90 countries?
VELU: All our labs are accredited to ISO 15189, although in India we call it NABL, which is the National Accreditation Board for Testing and Calibration Laboratories. This board is national and it uses ISO and other standards. All our major labs are accredited by NABL. In South Africa, we have CAP accreditation, and we have the ISO 15189 accreditation through the South African National Accreditation System. Our Dubai lab also is accredited to ISO 15189.
EDITOR: Looking ahead, how can you leverage Neuberg, not just in the other countries, but in the United States, as a value-added testing partner?
VELU: Even though the US spends a lot of money on healthcare, and it has all the clinical advancements in place, healthcare providers there are still looking for cost-effective solutions. Even some of the biggest names—such as Massachusetts General Hospital—are looking for cost-effective partners to work with on clinical trials. Otherwise, it costs a lot of money for them to go to these large players to do clinical trials or niche testing.
EDITOR: That means you believe Neuberg Diagnostics’ menu of lab testing services in the United States will be fully competitive.
VELU: That’s our niche: cost-effective clinical laboratory testing without compromising quality by having all our accreditations in place. That’s how we can provide value-added laboratory testing to pharma companies, or any company doing clinical research activities, such as large hospital groups.
“We see a lot of opportunities in the United States and elsewhere to collaborate with pharmaceutical companies, clinical research organizations, and even large hospital groups. All those companies are looking for cost-effective niche testing.”
EDITOR: What level of interest are you getting here in the United States?
VELU: Our team is having discussions about collaborating to do laboratory testing for clinical research with all of these potential partners. We see a lot of opportunities in the United States and elsewhere to collaborate with pharmaceutical companies, clinical research organizations, and even large hospital groups. All those companies are looking for cost-effective niche testing. Mostly, that testing will be NGS focused, and later we may think about using mass spec for such testing. But for now, most of our product offerings are going to revolve around NGS-based platforms.
EDITOR: Dr. Velu, thank you for providing us these insights into lab testing in India, Africa, and the Middle East, as well as your strategies for your new lab in North Carolina.
VELU: You are welcome. We are excited to have a clinical laboratory now operating in the United States and we welcome inquiries from anyone interested in our services.
Neuberg Diagnostics of India Expands Steadily,Opening Labs in US, Africa, and Middle East
JUST A HANDFUL OF COMPANIES OWN AND OPERATE CLINICAL LABORATORIES IN MORE THAN ONE NATION. The newest lab player with a multinational strategy is Neuberg Diagnostics, founded in 2017 and headquartered in Chennai, India. This young lab company rapidly expanded across India, while also establishing lab facilities in the United Arab Emirates, South Africa, and the United States. The map below shows where Neuberg has existing labs and the countries it plans to enter soon.
Neuberg Diagnostics At-A-Glance
• Headquarters: Chennai, India
• Founded: January, 2017
• CEO: GSK Velu, PhD, BPharm
• 4,000 employees
• 120 laboratories
• 1,200 collection centers
Despite Surging Volume, Labs in India Get Low Payment for COVID-19 Tests
ONE OF THE FIRST CLINICAL AND PATHOLOGY TESTING LABS IN INDIA to gain approval for COVID-19 testing was Neuberg Diagnostics. That approval came in the spring of 2020. Since then, Neuberg has started doing COVID-19 polymerase chain reaction (PCR) testing in 20 labs nationwide, said GSK Velu, PhD, MBA, BPharm, Chairman and Managing Director of Neuberg Diagnostics.
“When we wanted to do COVID-19 testing, we aimed to do it more for the social obligation than anything else because what the government was paying for this testing was very low. Plus, in those first few months, India was importing the testing kits and one of our companies, is one of the largest suppliers of COVID-19 kits here,” he said.
“Still, we’ve been doing the PCR COVID-19 testing for over a year now in our Neuberg Diagnostic labs,” he added. “Some days, we do as many as 80,000 to 90,000 tests per day in our network labs. That makes us the largest COVID-19 testing laboratory chain in the country.
Low Test Reimbursement
“In India, one of the challenges all labs face is that government has fixed the rate as low as maybe US$7 to $10 for one PCR test,” he explained. “That’s all you can charge, but it costs about $7 to do the test.
“If that’s the maximum that labs charge a patient, how do we innovate? It’s very difficult,” said Velu.
“Fortunately, some of the suppliers we use have stepped up to give us a different price than they would normally charge,” he noted. “Our suppliers are both international companies and companies based here in India.
“But even after that, we need to optimize our processes. Our average realizations—meaning what we collect—is only US$6 or $7 per test,” Velu reported. “With that amount, we need to collect the samples, transport the samples to the lab, get the results and report them to patients. At the same time, of course, we must follow all the quality protocols that we normally follow. All those processes are very costly.
Success Through Innovation
“Initially, the government said we could charge patients as much as US$60 for each PCR test, but that was too high for many patients,” he noted. “Therefore, what we can charge has come down to $6 now, and that’s all been in the past year. The only way to succeed at such a low rate is through innovation, because in a country with a population of 1.4 billion people, and a high infection rate, we had to increase our operating efficiency.
“Fortunately, the infection rate and the number of deaths due to COVID-19 have both come down slightly as more people get vaccinated,” he said.
“We are like a lot of countries in that we had a first wave and during that time India did reasonably well,” he explained. “Then, there was a level of complacency and a lot of COVID-inappropriate behavior that probably led to the second wave, which was painful. Many labs in India—even our own labs—were overwhelmed to some extent. We could not meet the demand for testing in some cities, such as in Delhi and other places.
“In that time we had a real problem, meaning we had to stop taking samples, and that lasted for at least a week or two,” he commented. “Now, as we come out of the second wave, I think we’ll be fine.”
Recent news reports from India indicate that the pandemic is moderating and has come down from earlier peak levels.
Contact Andy Bhattacharjee, PhD, at 978-821-6172 or Andy@neubergdiagnostics.com.