Impact of Covid-19 on Indian Healthtech Ecosystem

Impact of Covid-19 on Indian healthtech ecosystem

• Indian Healthtech market is at its nascent stage (US$ 1.6B out of total healthcare market of US$ 159B); Expected to become an integral part of the overall healthcare ecosystem ‒ Private investment in Healthtech has risen from US$ 81M in 2014 to US$ 723M in 2019

• With the advent of Covid-19 and the consequent lockdown, healthtech has seen a mixed response; e-pharmacy and telemedicine are expected to perform better compared to wellness service providers, EMR, etc. ‒ E-Pharmacy has experienced growth due to home delivery of medicines which will drive consumer behaviour ‒ Recent push for telemedicine by Govt. of India post outbreak could lead to wide adoption of e-health services in the long run ‒ Wellness services would require to re-orient the business model - shift of focus from retail-based gym/yoga centers to virtual classes ‒ Importance of medical records in driving efficient clinical outcomes would come to light (more efficient care eliminating workload on frontline staff) which will drive growth of EMR/EHR ‒ Drivers of growth for Healthtech such as increasing burden of chronic diseases, rising internet penetration, need for higher accessibility, and increasing innovation across value chain continue to remain strong ‒ Healthtech solutions support patient access to treatment and can significantly reduce the burden on existing healthcare infrastructure during and after the pandemic

• Despite the recent economic slowdown and Covid-19 shock, Healthtech remains a significant short to medium term bet. Indian Healthtech ecosystem remains capital starved and enough dry powder is waiting to be deployed

• We recommend a 5-point agenda for Healthtech to tide over the Covid-19 challenges and emerge winners: ‒ Reduce cost and preserve cash to navigate through these troubled waters → Demand for technology enabled healthcare solutions expected to bounce back strongly in next 6-12 months ‒ Utilize the opportunity to innovate healthcare delivery channels and increase patient / customer acquisition ‒ Manage people assets: strike a balance between training / streamlining clinical and non-clinical processes and careful right-sizing ‒ Re-evaluate business model in the new normal: aspire for leadership in the new normal → Reassess GTM strategy with changing consumer behavior and plan for implementation once the uncertainty fades ‒ Communicate proactively and frequently with employees, care providers, service and value chain partners, investors, etc.

Healthcare market in India (2019) Total ~US$ 158.8B US$ 1.6B US$ 6.9B US$ 14.5BUS$ 10.6B US$ 6.7B US$ 72.2B US$ 15.9B US$ 23.3B US$ 6.9B 100% Health F&B, Home healthcare, 4% Bioinformatics, 1% Patented drugs, 6% Implants & Radiology, 90% 14% SAHI patient 42% 24% Mid-tier hospitals, 13% OTC drugs, 13% aids, 20% 80% Includes only OTC Nutraceuticals, medicines like antacids 24% etc. and does not Consumables & 70% Private nutraceuticals disposables, 27% Others, Nursing homes & insurer Biopharma, 35% 60% 72% 24% Clinics, 35% Alternative 100% 100% 50% healing, 28% Pathology, Others, 40% 58% 78% Public insurer Equipment & 30% 54% instruments, 53% Generic drugs, 45% E-pharmacy, Top-tier hospitals, 48% 20% Wellness, 10% 70-75% of Indian 35% Wearables, med devices & 10% equipment market 16% are imports 0% Consumer Public hospitals / Diagnostics Private healthcare delivery Pharmaceuticals Medical tourism healthcare nursing centers Health Medical devices HealthTech insurance

Notes: Wellness includes fitness products and services (gyms, slimming products and services, dance etc.), rejuvenation, wellness practitioners; alternative healing includes Ayurveda and naturopathy; others in health tech include personal health management products and services, remote Projected diagnostic devices, healthcare IT; nutraceuticals market only include dietary supplements; e-pharmacy market included in pharmaceuticals 10-15% 15-20% >20% market as well; public hospitals include healthcare centers, district hospitals and general hospitals; patented drugs and generics as % of growth rate prescribed drug market; pharmaceuticals exclude nutraceuticals and include exports value; medical tourism included in private and public for 2019-24 healthcare delivery; others in health insurance include premium collected by private and state-owned general and life insurance companies for health insurance policies; Top tier hospitals are large chains hospitals with more than 200 beds; US$ 1 = INR 70 Sources: Annual reports, IBEF, Invest India, Praxis analysis © Praxis Global Alliance | 3 India HC is supply-constrained both by infrastructure & medical force, trailing behind other emerging economies of Brazil, China

Availability of hospital beds in India is lower than India lacks nurses per capita (~2.1) as compared to Lack of medical force in India as shown by low global average (1.1 vs 2.7) emerging economies like Brazil (~9.7) & China (~2.3) number of doctors per capita (0.8)

Doctors per 1,000 population vs GDP Beds per 1,000 population vs GDP Nurses and midwives per 1,000 per capita per capita population vs GDP per capita 15 15 5

Germany Germany Russia Japan 4 Japan France US Brazil 10 10 Canada France Russia Russia 3 UK US Germany UK Mexico Poland Canada MDG target is 5 Poland Brazil MDG target is France MDG target is 2 China Japan 1.3 1 Poland S Africa Malaysia 5 5 Turkey Global S Africa China Turkey India (0.8) Global UK US Global Thailand Malaysia India (2.1) Mexico 1 India (1.1) Brazil Canada Turkey S Africa Malaysia China Thailand Mexico Thailand Kenya Kenya Indonesia Indonesia 0 0 Kenya 0 Indonesia 0 20 40 60 0 20 40 60 0 20 40 60 GDP per capita (US$ K) Note: MDG stands for Millennium Development Goals set by 191 UN members to be achieved by 2015 Sources: World Bank, WHO, Praxis analysis GDP growth rate (CY18) © Praxis Global Alliance | 4 Low 1 2 3 4 5 High Global <=1.4% 1.4-3.9% >3.9% Private investment in Healthtech has increased steadily from US$ 81M in 2014 to US$ 723M in 2019

Investment in 2020Q1 shows strong start to the year with the Top 10 healthtech investments point to interest in online to offline blow due to Covid yet to come platforms and e-pharmacies Private investment in healthtech companies in Amount Target Investors India (US$ M) (US$ M) Endiya Partners, Iconiq Capital, Accel, Kalaari Capital, 723 400 Chiratae Ventures, Temasek, InnoVen Capital, Oaktree Capital Management, Others

Trifecta Capital, Temasek, Avendus, CDPQ, KB Global 323 Holdings, KBIC, Eight Roads Ventures, Others

Matrix Partners India, Tencent, Sequoia Capital, Thrive 542 180 Capital, Altimeter Capital, CapitalG, Sofina Sequoia, Omidyar Network, Intel Capital, Kae Capital, 117 426 Maverick Capital, Pinpoint Venture, NewFlight, IFC M12, Lightspeed Venture Partners, WestBridge Capital 345 111 325 Partners, Pravega Ventures, Others Sistema Asia Capital, Orbimed, MAPE Advisory Group, 109 251 Daun Penh Cambodia Group

95.5 Sequoia Capital, HDFC, Zodius Capital, Sofina

Sequoia Capital, Intel Capital, GFin, Kae Capital, 89.2 81 Omidyar Network, Sofina, India Infoline, Edelweiss IFC, Accel, Ventureast, Qualcomm Ventures, Brand 82.8 Capital, Alteria Capital, Sabre Partners India Sequoia Capital, Helion Venture Partners, 2014 2015 2016 2017 2018 2019 2020Q1 54.4 deshventures.com

Sources: Galen Growth Asia, Praxis analysis © Praxis Global Alliance | 5 India Healthtech landscape

Healthcare services Personal health management

Online to offline platforms and teleconsultation Personalized healthcare

Patient aids

EHR / EMR and HIS E-pharmacies Medical supplies Therapeutic solutions

Personal health records

Diagnostics & drug discovery Home healthcare Healthcare IT and analytics Monitoring

DIY diagnostics

Online Medical tourism Emergency response Financial services information search

Wellness services

Source: Praxis analysis © Praxis Global Alliance | 6 Healthtech quintessential in addressing the three main challenges of healthcare in India → Accessibility, affordability and quality

Telemedicine, online Disease management consultations and therapeutic apps

E-pharmacies, marketplaces for supplies and equipment Teleradiology, on-demand Health diagnostics, AI based diagnostics tech

Consumer information, Drug discovery, clinical trials lifestyle management apps Affordability

HIS, EHR / EMR, Cloud based Wellness services and solutions, RCM, analytics trackers

Supply chain efficiency, Low cost devices Track and trace Fintech and Insurtech solutions

Source: Praxis analysis © Praxis Global Alliance | 7 Healthtech remains resilient as its drivers of growth continue to remain strong despite the outbreak

1 2 3 4 5 6

Increase in Need for Changing Increasing Innovation Core policy lifestyle higher consumer internet across value agenda diseases accessibility behavior penetration chain changing • Poor nutrition, high • Technology led • New consumer • India’s internet • Providers looking to • Policies attempting to stress environment solutions needed to segments like digital penetration is manage downstream support innovation and rising improve accessibility mothers, fitness expected to reach costs • DISHA (Digital environmental of healthcare enthusiasts and rural ~75% of the total • Leap frogging of Information Security in pollution increasing • Doctors per 1000 internet users are population concepts between the Healthcare Act) and burden of lifestyle and people at 0.8 (much more aware and • This can lead to developed and roll out of universal chronic diseases below WHO conscious about improving EHR developing markets healthcare coverage • This is leading to recommended 1.0 per healthcare and will penetration and wide • Technology sought for (Ayushman Bharat) requirement of 1000) continue to push for scale adoption of augmenting resources, expected to bring affordable technology • Only 27% of innovative health and digital health solutions capabilities and about significant shift interventions for early population covered wellness solutions efficiencies in functioning of diagnosis, prevention under health insurance • Mobility, awareness • Propagation of no one healthcare and and better disease • High disparity in and convenience size fits all concept for promote digital management infrastructure between seeking attitude care delivery transformation rural and urban areas Sources: EMIS, PGA Labs research, Praxis analysis © Praxis Global Alliance | 8 Workflows and demand impacted in the next 3 months, but most healthtech segments expected to make recovery in 6-12 months

Immediate (<1 month) Short-term (1-3 months) Mid-term (3-6 months) 6-12 months

• Sales growing for e-pharmacies as • Growth in sales of sanitizers/masks to • Drop in customer demand may be • Increased adoption of e-pharmacy as people avoid going out continue; HCQ demand shot up observed as lockdown eases; part of consumers are retained after E-pharmacy/ • Demand for sanitizers (>53% increase exponentially after government however, behavioural change would the virus fades recommended doctors to have it restrict churn marketplaces for in Mar), masks, hand gloves • As customer pool increases, focus of increased regularly • Supply chain disruptions will be e-pharmacy to shift towards <1-day supplies • Supply chain disruptions affect supply • Transportation issues of ancillaries for overcome → faster deliveries and deliveries of some medicines production may disrupt the entire discount policies revised to drive pharma supply chain customer stickiness • High growth in demand (>100% • Government’s revised telemedicine • Revised guidelines which enables all doctors to provide teleconsultations after growth observed in US in Feb for guidelines (by MCI and NITI Aayog) to doing an online course would increase the supply of doctors providing remote Teleconsultation telemedicine, India to have similar ease up regulations related to remote consultations (Telehealth) implication in Mar) consultation will continue fueling the • Digital solutions are suited to reduce and enable patient access to treatment and demand for online consultation significantly reduce the burden on the healthcare infrastructure post pandemic • Revenues witnessing downfall as • Revenues adversely affected as • Lockdown gets removed and cashflow • Growth rate expected to return to pre- centers are closed due to lockdowns complete / partial lockdowns get starts to recover; Monetizing Covid levels as fears of the virus fully extended freemium services launched during subside Personal health • Players ideating new products to keep customers engaged (e.g., cure.fit • However, services are going virtual to lockdown important • Customer base expected to widen management providing online live wellness cater to increasing demand providing • Controlling the customer churn critical several folds as customer awareness sessions for free) online sessions of yoga, full body • Fear of resurgence of virus still towards healthcare increases and workout, etc. affecting consumer behavior virtual classes becomes a big hit • Adoption is expected to be hit due to • Short term demand likely to be low as • Beginning of recovery with outbreak • Full recovery expected as cashflow Healthcare IT lockdowns as acquiring and servicing stakeholders in hospitals / clinics look subsiding leading to freeing up of time returns to normal and stakeholders and EHR/EMR doctors becomes difficult to preserve cash till the cashflow of stakeholders continue their journey of adopting • Lack of bandwidth with stakeholders situation improves EHR / EMR • Workflows and processes would be • Players improvise on existing • As lockdowns get removed, workflows • Demand for such solutions will AI/ML, IoT and disrupted workflows for minimal disruption to will stabilize increase as an aftermath of the Deep tech • However, new AI solutions to emerge work due to the lockdowns • Demand improved as bandwidth of pandemic as focus shifts towards making healthcare more efficient, solutions which provide risk assessment of • Make progress towards higher key stakeholders across globe starts COVID disease (e.g., Apollo247) efficiency freeing up preventive and patient centric