The Brazilian startup in the diagnostic health sector Hilab saw the demand for exams skyrocket during the COVID-19 pandemic, accelerating its growth and leading the company to think about internationalization. In 2020, the startup conducted more than 2 million individual exams and saw the number of patients grow more than 50 times by October, compared to the same period in 2019.
The healthtech, which went by the name of Hi Technologies until November, developed a small device, called Hilab, which works as a portable diagnostic laboratory, performing rapid tests with just a few drops of blood.
“We felt it was time for the company to also be called Hilab because we are creating new equipment. We had the classic Hilab, and now we have the molecular Hilab. We think it made more sense to name the company after the product name,” said Marcus Figueiredo, CEO and cofounder at Hilab, in an interview with LABS.
Founded in 2016, Hilab recently raised a $10 million Series C round, which valued the firm at around BRL 300 million.
The funding was co-led by Península Participações, the family office of the Brazilian businessman Abilio Diniz, and the North American fund Endeavor Catalyst.
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Venture capital manager Monashees (who has another Curitiba startup that recently received an investment round, The Coffee), Positivo Tecnologia, and the investment arm of Qualcomm, which already had stakes in the company, also participated in the latest round.
The startup is also preparing to raise a new Series C soon. “Normally, we raise rounds every two years. But when COVID-19 opened new paying sources for us, we accelerated very fast”, said the CEO, adding that the current stage and size of the healthtech forces it to think about internationalization and consolidation via M&A.
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“We were already one of the oldest healthtechs in Brazil, and we skipped several phases now. Thinking about this and thinking that several funds are talking to us, we are at the beginning of the next round,” he said.
The possible new contribution has to do with growth since the company has no need for cash in the short term and has already reached breakeven. “It is more a matter of finding the right investor and partner to dare more,” he added.
The Curitiba-based startup expects revenue of around BRL 200 million in 2020 and aims to reach BRL 500 million next year. “Next year is speculation, but the numbers show that we are going to achieve it,” he said.
The company doesn’t disclose revenues from last year but says that it exceeded BRL 100 million in revenue for the first time ever in 2020.
Daring to cross borders
Hilab rehearses an international expansion through pilot tests in Spain and the United States, but, according to Figueiredo, the company still has to face the regulatory challenge for tests abroad with a laboratory located in Brazil.
“Before the pandemic, we were already thinking about expanding into Latin America, it was a topic on the table. Now we start to think about things that are perhaps even more daring, we are in the process of choosing whether we continue with a strategy of Latin America or if we try a more developed market, where the technology competition is already at a more advanced stage”, he said.
Hilab’s rapid growth has to do with the startup’s agility in offering one of the first affordable COVID-19 tests for Brazilians, launched on March 13th. The methodology of Hilab’s first COVID-19 exam was the same used in other tests the company already produced to identify infectious diseases, such as dengue.
It is an immunochromatography serological test. “The process is the same, but you have the evaluation of one of the reagents there. Considering this, we are always very close to developing any new exam,” said Figueiredo.
When Chinese scientists isolated the coronavirus antigen in February, it took Hilab four weeks to replicate in a rapid test: the company already had the software, the equipment, the reader, and already dominated the chemical part of the process.
After collecting the blood drops, a blood sample from the patients is mixed with reagents provided by the company and then inserted into the device. It then reads the sample data and sends it over the internet to be analyzed by artificial intelligence algorithms in the cloud.
A biomedical team located in the company’s single physical laboratory in Curitiba validates the results and sends the report to the patient via email, message, or through their application. The complete process takes about 15 minutes.
The company already markets 20 tests performed on its device. In addition to detecting the antibody against COVID-19, there are also HIV, dengue, zika, and hepatitis.
The low logistical costs caused by the absence of sample transport, according to Figueiredo, are a great advantage for the company, which can offer exams at a competitive price.
“The speed of diagnosis, as well as the lower price, are important since 70% of medical decisions are based on the results of laboratory tests,” he said.
The company’s device is used by around 1,600 companies and institutions, including pharmacy chains, such as Pague Menos and Panvel; health plans, including Porto Seguro and Unimed; in addition to units linked to Brazil’s public Unified Health System (SUS).
Figueiredo said the company’s workforce has grown from just under 100 people to 220 over 2020, to keep pace with its expansion. “This number changes, new people onboard every time,” added Figueiredo.
Market opening by SUS
In Brazil, the health system is divided between the public sector (which serves the majority of the population) and the private sector (where around 24% have a health plan, according to data from the National Agency of Supplementary Health, ANS, from January 2019).
The size of Hilab’s growth is related to the size of the market that was opened to the company due to the adoption of tests by SUS and health plans. “Before our solution was out-of-pocket, we depended on the patient who could pay for the exam. Now the exam is being paid by SUS or by supplementary health, the competition is fairer with other laboratories at the moment.”
With COVID-19 and the rush for diagnostic tests, negotiations with SUS (which were expected to happen in two or three years) were underway in a short time. The market crash has even changed Hilab’s target audience.
“Before we aimed at a market that represented not even 2% of the total market, which were the people who were going to pay for exams, and suddenly it increased 50, 100 times. COVID-19 not only generated the first big demand that exists until today, but it has opened up space for other tests. We have grown in all tests, from pregnancy, cholesterol, infectious diseases in general. COVID-19 has opened up new payment sources for us.” In one year, Hilab left 250 cities to operate in about 1,000.
The company is launching the second generation of its device, the Hilab Molecular, which performs exams through molecular biology, also using saliva samples and samples obtained through the nasal swab.
In the new model, the test that detects the coronavirus antigen will be able to determine if the virus is active in the patient. “It is equivalent, from the point of view of methodology to the traditional molecular PCR test. The difference is that it happens next to the patient in 40 minutes”, said Figueiredo.
Asked about a long-term IPO, Figueiredo said that when it comes to a startup on the investment path, it is natural for the founder to think about filing for IPO. But he doesn’t like to think of it as a company goal.
For him, Hilab plans to democratize people’s access to health, which, according to him, the company has already achieved this year, with tests being carried out from upper classes in Avenida Paulista, Faria Lima, and high-end clinics in Brazil to slums such as Rocinha, the prison system in São Paulo, and Kayapós Indians in the Amazon, through a partnership with Brazil’s Ministry of Defense.
“There is no global laboratory in the world, nobody has ever done that before. And there is no laboratory that serves rich and poor patients with the same service. This is what we are trying to do”.