Pinned straw:
i remember the interview. It was $10k per sales staff of which David was talking of 5-6X the number of staff for the same cost as one sales in the US. He did talk about the ability / capacity to pay market rate and likely discount to enable sales.
this I think is the Swami challenge, maybe he can see a volume. Growth that is exponential that can equate to similar margins in the US.
It is a heart-warming story, for sure. Swami has repeatedly made the case since first joining $PNV of the Indian market potential given high prevalence of unsafe conditions compared to developed economies. And, of course, in establishing the market presence you expect donations of product to give surgeons experience in trying out the product and building their own capability and practice. (And you might hope and expect that there will always be opportunities for charity for particularly needy cases.)
What I have no clue about, is the commercial potential in India. In the US, a $US800 piece of 20cm x 10cm BTM, has a gross margin of c. $US750, so it is relatively quick for a sales and marketing team to make a profit contribution. For a rep to cover their all in cost of $120k pa, they need to sell 160 pieces per year, or around 3 per week. We know more experienced reps are sell well over $1m a year (1250 piece, or 25 pieces per week). (I'm just using the 20cmx10cm as a reference, I know there are different sizes and different prices)
And, for sure, the sales and marketing cost in India per rep, is probably only 20-25% the cost of a US Rep., lets assume US$25k pa all in. But what $PNV have not yet given any indication of is the market's willingness to pay. The large market potential, volume-wise, lies in the segment which will have the least ability to pay, like we saw in the video
So I am left wondering whether the profit contribution potential from India is either huge or minimal.
Now I know nothing about medical device sales and marketing in developing markets. Fortunately, CEO Swami Raote does. It's maybe too early to hear about commercial success in India in September, as I suspect the sales and marketing teams are seeding a lot of free or heavily discounted trials to stimulate surgeon adoption. But perhaps in March 2024 we'll hear somethng more concrete. It would certainly be good to get a more detailed update from David and Swami at the next report, but here I guess patience will be required.
Now for some dodgey and unsourced analysis - beware - but I am just trying to get my arms around India
So, I'll finish by sharing how I got Bard to help me scratch this itch. I asked for comparisions in prices charged for medical devices between US and India market. Here's what came back.
"Here are some specific examples of price disparities between the US and India for medical devices:
If that's true (and it will be easy enough to do some proper research), then you might expect the 20cm x 10cm piece of BTM to sell in India at $200-$260, say $230, leaving a gross margin of $180.
So the Indian rep. on $25k p.a. all in cost, has to sell 139 pieces a year to cover their costs.
Their "million dollar guy in the US" is contributing $830,000 to profit and selling 1,250 pieces to do so.
The Indian equivalent of the million dollar US guy or gal (i.e., selling 1,250 pieces), is contributing $200,000 per year.
If, over time, India can get to having 100 "million dollar equivalent guys and gals", that's a $20 million contribution to proft. So that's a significant contribution when considering my 2030 forecast NPAT range of $160-200m.
Later this year, I have to do a major rebuild of my sales and marketing model. To show how far out I currently am, the existing model which pre-dates Swami's updated sales strategy has only 48 reps in developing markets by 2030! India alone could get there by end 2024 if they crack the commercial code. On the down-side, my current model assumed they would get cracking harder in the EU and Japan - high margin markets - so I'm not sure where the valuation will land.