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Executive Summary – Healthcare Delivery Services In

2015

1 Private & Confidential ClickExecutive to Summaryedit Master title style

DIAGNOSTICS MEDICAL MEDICAL HEALTHCARE PHARMA HOSPITALS PHARMACY SERVICES EQUIPMENTS INSURANCE IT (HIT)

Manufacture, Healthcare Businesses and Establishments Manufacturing Health insurance HIT provides the extraction, centers, laboratories that that sell medical that cover an framework to processing, dispensaries, offer analytic or medicines and equipment and individual’s manage health purification, and district hospitals, diagnostic provide drug supplies, such as hospitalization information across packaging of surgical, dental, expenses and systems and its Business chemical materials general hospitals, services information with medical Activities to be used as nursing homes, including body the help of orthopedic, secure exchange medications for mid-tier, and top- fluid analysis primary care ophthalmologic, reimbursement between consumers, humans or tier private professionals and laboratory facility incurred providers, quality animals hospitals instruments due to sickness entities, government, and insurers

Market Global: $995 bn Global: $2.7 tn Global: $1.7 tn Global: $1.7 tn Global: $260 bn Global: $976 bn Global: $55 bn Size (2010) India: $13 bn India: $54 bn India: $2.4 bn India: $1.8 bn India: $7 bn India: $1.6 bn India: $0.2 bn

CAGR Global: 5% Global: 5.2% Global: 5% Global: 4% Global: 4% Global: 4.5% Global: 10% (2010-2020) India: 18% India: 14% India: 27% India: 35% India: 15% India: 30% India: 30%

. Pfizer . HCA Holdings . Quest . Walgreen / . Johnson & . Zurich . IMS Health . Novartis Inc. Diagnostics Alliance Boots Johnson Insurance . Agfa . Roche . Universal Health . LabCorp . CVS Health . Siemens AG Group Healthcare . Merck & Co Services, Inc. . Sonic Corp . GE . Express . Carestream . Sanofi . Netcare Healthcare . Medco . Medtronic Inc. Scripts Health Inc. Global Players . Tenet Healthcare Health . Baxter . United . Cerner . Life Healthcare Solutions International Healthcare Corporation . IHH Healthcare . Omnicare Inc. Inc. . Aviva . Emdeon . Fresenius . Axa Inc. Medical Care Scope of report: AG ‘Healthcare Delivery Services’

2 ClickGlobal Healthcareto edit Master Industry title style

Industry Overview – Market Sizing, USD Billion

. Segment-wise break-up (USD billion) The market size of the global Healthcare Industry in 2010 was US 4611 $8.5 tn and is projected to be US $13.7 tn by 2020 2010 2020 . Hospitals contribute 34% of revenues followed by Diagnostics and 2826 Pharmacy at 20% each 2781 2575

1733 1740 . Health IT is the fastest growing segment 1648 1523 995 976 385 . Healthcare Delivery services – Hospitals, Diagnostics & Wellness will 260 55 143 grow at modest rate Pharma Hospitals Diagnostics Pharmacy Medical Medical Health IT Equipments Insurance

Asia’s emerging market’s healthcare expenditure . Many companies plan to focus on Asia—a trend that is likely to continue, given the lure of large underserved and increasingly Asia's emerging markets' healthcare affluent populations expenditures are forecaste to grow two to . The OECD predicts, by 2020, the spending power of the global three times faster than the global average CAGR(0 CAGR(1 middle class will reach US$35 trillion a year, up from US$21 7-11) 1-20) trillion in 2009. More than 80% of this growth is expected to 12 7% 5% occur in the Asia Pacific 10 . Over the next five years there will be greater retail orientation in Other APAC 11% 2% 8 healthcare Japan 12% -1% 6 . Primary healthcare system will evolve due to its retail orientation Indonesia 4 17% 12% . Large corporates will invest in single specialty hospitals India . Technology will play a much larger role in day-to-day interacting 2 13% 15% with healthcare China 25% 12% 0 . Consumers will become more informed of care/cost options and EMEA 4% 3% will decide the healthcare spend themselves America 6% 5% . Focus on preventive healthcare; thus shift from sick care and reduce need for hospitalization/tertiary care to primary care and retail clinics

Source: Bain & Co. 3 ClickIndian Healthcareto edit Master Industry title style

Industry Overview Indian Healthcare Industry - Segments

. Indian Healthcare is one of the largest sectors in the Indian Medical Health IT Pharmacy economy both in terms of revenues and employment. Insurance 0.2% 2% 2% . It contributes ~4% to the country’s Gross Domestic Product Medical (GDP) Equipment 9% . Hospitals are a dominant contributor to the Indian healthcare Pharma sector 16%

Diagnostics . Diagnostics, Pharmacy, Medical Insurance and Healthcare IT Hospital & Wellness are growing at much faster rate (25 – 35 % CAGR) 68% 3%

Indian Healthcare Segments – Market Sizing, USD billion

Market size (USD billion) Segment-wise market size (USD billion) 2012 2020

200  Hospitals remain the largest segment CAGR 154 ~17%  Fastest growing segments include Pharmacy, Medical Insurance, Health IT and Diagnostics 100 280 49 54 80 13 16 20 21 13 2.4 1.8 7 1.6 0.24 2 0 Healthcare Sector Pharma Hospitals Diagnostics Pharmacy Medical Medical Health IT Equipments Insurance

Source: IBEF, FICCI, EY Study 4 ClickGrowth toDrivers edit Master title style

Demographic Shift Working Demand / Supply Gap Growing Affluence Population (%) GDP Per Capita (USD) 0 - 14 yrs 15 - 29 yrs 30 - 44 yrs Hospital Beds per 4 1875 45 - 59 yrs 60+ yrs 1000 Population 1723 1583 100% 1455 7% 8% 8% 9% 11% 12% 1389 11% 12% 14% 80% 15% 16% 16% 20% 20% 20% 21% Implied gap 60% 23% 24% of 3.1 Beds 27% 28% 40% 29% 28% 26% 24% 0.9 20% 35% 32% 29% 27% 25% 23% 0% 2001 2007 2012P 2017P 2021P 2026P India WHO Recommendation 2011 2012 2013 2014 2015E % of population by age group Changing Disease Profile towards Non- Rising Penetration of Health Insurance Growing Medical Tourism Communicable and Lifestyle Diseases (INR Billion) (‘000 of medical tourists) (% of Hospitalization Cases) 520 CAGR of 14.0% 460 131 410 Lifestyle Lifestyle CAGR 115 360 Disease, Disease, of 34% 320 18.50% 24.00% 81 270 66 51 32 22 Other, 17 Other, 76.00% 81.50%

2001 2012 2010 2011 2012 2013 2014 2015E

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Source: F&S Market Research report 2012 5 ClickTrends toin Indianedit Master Healthcare title Delivery style Services

Health Two Tier Single Day Care Cities 1 Cities 2 Specialty 3 Surgery 4

Technology Unbundling Orientation 5 Real Estate 6

Medical Home Senior PPP 7 Tourism 8 Healthcare 9 Living 10

6 Click…Trends to in edit Indian Master Healthcare title Delivery style Services

1 Health Cities 2 Tier II Cities 10 . One-stop shop which offers healthcare services including wellness, 8.8 Cost of setting up hospitals per bed (Rs. Mn) education and training 7.2 6.9 . Economies of scale and scope enable collaboration of multiple specialists and improve the quality of clinical outcomes 4.7 4.5 4.2 3.8 . Resource sharing increases efficiency and allows cost reduction 3.4 3.3 3.3

Moving up the chain Project City USD # beds Name Invest ment Narayana Bengaluru 488 5,000 Health City Indian Population and Healthcare Infrastructure (2010) Health Cities Nagpur Nagpur NA 2,000 Health City Number of Hospitals 14% 19% 4% 18% 25% 20%

Medanta Gurgaon 293 1,600 No. of hospital beds 18% 24% 8% 18% 22% 10% Tertiary Care MediCity Facilities Population Global 245 1,000 5% 6%3% 5% 9% 72% Hospitals 0% 20% 40% 60% 80% 100% Fortis Gurgaon 293 800 Super Specialty Metro Tier I Tier II Tier III Tier IV Rural Hospital MediCity . Rural households constitute 70% of the population. Therefore, despite Fortis Lucknow 122- 800 lower incomes, rural household accounts for 57% of the consumption. MediCity 195 But, doctor-to-patient ratio for rural India stands at 1:30,000, well Community below the WHO’s recommended 1:1,000 Hospital Apollo 243 700 . Middle tier and smaller cities are expected to emerge as attractive Health City markets due to population numbers, increasing middle class consumers and lack of adequate healthcare facilities Local Nursing Bengal Durgapur 487 500 . Growing need for improved healthcare infrastructure in tier II & III cities home Health City . Better access owing to development of new national/international airports . Cost of setting up hospitals per bed is almost 50% lower for Tier II cities 7 compare to those in Tier I cities Source: Grant Thornton report Click…Trends to in edit Indian Master Healthcare title Delivery style Services

3 Single Specialty 4 Day Care Surgery

Day Care Surgery Market Break-up of Specialty wise market Total Surgery Volume Oncology, 9% Size (USD Mn) 100% Day CAGR: 20% 840 Women and Care 80% Children, 18% Surgery, 60% 40%

Others, 53% 40% 330 Other, 20% 60% Cardiology, Opthalmology 17% 0% , 3% 1 2010 2015E

Specialty hospitals with higher paybacks drive the investments: . Setup cost: 20-30% of full fledged 100-bed hospital . Single-specialty hospitals cater to ophthalmology, gynecological, diabetic care, eye care, cardiac care, and renal care specialties . Other factors: Customer convenience and scalability of operations

. These hospitals are relatively easily scalable because of lower land . Day care units conduct procedures and patients are discharged on requirement which is a major hurdle for large tertiary-care the same day and not hospitalized hospitals, especially in Metros . Helps hospital chains in freeing up capacity at tertiary hospitals . Single-specialty hospitals, require a low initial investment of INR while retaining patients within the network 0.25mn per bed and can offer an EBITDA margin of 25-30% with a payback period of 2-3 years . Requires lower capex, making break-even periods shorter

. Whereas, large multi-specialty hospitals require a substantial . A successful day care model for India is one wherein the center is investment of INR 4-10 mn per bed with a breakeven period of 3-5 established within the hospital and a floor can be dedicated for years operating rooms

. Single-specialty hospitals can be more investor friendly due to leaner business model 8 Click…Trends to in edit Indian Master Healthcare title Delivery style Services

5 Technology Orientation 6 Unbundling of Real Estate Telemedicine . Telemedicine is a process through which patients can consult Fortis Healthcare Institutional and doctors located at very distant places through electronic mediums (“Sponsor”) Public Investors without visiting them 28.0% 72.0% . ~80 per cent from India’s population has no direct physical access to specialist healthcare Acts on behalf of holders & provides real estate . 80% of facilities are connected in urban area, while 73% of management service Trust Manager Religare Health Trust population resides in rural area (TM) TM fees Distribution Ownership . Mobile technology and complementing apps have built the most of profits Singapore crucial roads for the advancement of telemedicine India

. Telemedicine addresses accessibility of healthcare resources and Current Portfolio Service Fee Fortis Operating lack of skilled manpower . $773 mn total valuation . 11 Clinical establishment Companies Clinical . 4 Greenfield Clinical Establishment Maintenance . Major players include Narayana Hrudayalaya, Apollo Telemedicine Establishment Management Services of medical & Enterprises, Asia Heart Foundation, Fortis Healthcare and Arvind . 2 Hospitals managed and Fee infra facilities Eye Care operated by RHT Hospital Services Internet Business Companies (HSC) . With the rising internet penetration, new healthcare management and services businesses have emerged to address healthcare needs:

Unbundling of Real Estate Assets enables focusing on core strength of delivering superior healthcare services with an emphasis on specialization and widening the access to quality medical care

9 Note: HMC = Hospital Management Company Click…Trends to in edit Indian Master Healthcare title Delivery style Services

7 PPP 8 Medical Tourism

PPP Objective Size in USD Billion

8 CAGR: ~19% Arogya Raksha Govt. of AP, New Hospitalization and 6 6 Scheme in Andhra India Assurance personal accident Pradesh Company, Private benefits to bottom 4 3 Clinics of pyramid 2 Govt. pays insurance premium of Rs. 75 0 per family to 2014 2018 insurance company (in USD) US India South Korea Thailand Telemedicine Govt. of Karnataka, On-line healthcare Coronary artery 70,000 – 133,000 7,000 31,750 22,000 initiative by Narayana initiative bypass surgery Narayana Hrudayalaya, ISRO With satellite Bypass surgery 75,000 – 140,000 9,500 42,000 25,000 Hrudayalaya in connections, main with valve Karnataka hospital monitors replacement Coronary Care Units Hip replacement 33,000 – 57,000 10,200 10,600 12,700 of distant hospitals Provides specialized Knee replacement 30,000 – 53,000 9,200 11,800 11,500 medication to . India is rising up the ranks of emerging Medical Tourism underserved or un- destinations due to the quality of services offered by its private served areas healthcare service providers. Rajiv Gandhi Super- Rajiv Gandhi Super- Super specialty, low . Cost advantage and less waiting time: High quality & Low cost Specialty Hospital, Specialty Hospital, cost healthcare for value proposition Raichur, Karnataka Govt. of Karnataka, BoP (Bottom of . Rupee depreciation: Treatment that used to cost $7,000 earlier Apollo Hospital, & Pyramid) will cost $6,000 due to rupee depreciation ( around 14% reduction financial support Govt. provides in cost) from OPEC infrastructure, land, . US insurance companies plan to encourages medical tourism. building India is poised to become a major beneficiary, given its cost Apollo provide advantage medical facilities 10 Source: KPMG Click…Trends to in edit Indian Master Healthcare title Delivery style Services

9 Home Healthcare 10 Senior Living . India’s home healthcare industry, consisting of home-based . India had 98 million elderly people population in 2011, and is medical devices and home services, is worth USD 2 billion and is expected to touch 200 million by 2018, which is the target growing at an annual rate of 20 percent audience for senior living hospitals . By 2018, India will have more than 200 million people above the age of 65; which is the target audience of these services . Globally, 60+ age is the fastest growing demographic segment . The sector is nascent, unorganized and dominated by small local agencies. However, organized players will differentiate . Affluent elderly Indians are finding care outside the family, and themselves with technology, standards and protocols chains are seizing the opening to invite an offshore clientele . Growing demand for elderly care, post-surgery rehab services and palliative care will drive the demand . These hospitals offer medical facilities, options of entertainment . Revenue streams include subscription and per-interaction fees such as libraries and TV rooms, and encourage members to live a healthy community life with regular exercise, meditation and healthy food (e.g. Max Venture’s new initiative Antara in Players: Dehradun)

. Indian companies such as Apollo Hospitals and Impact Senior Living, promoted by the founders of Fortis Healthcare, have acquired real estate and plan to open a series of elder care homes. The homes will offer infrastructure matching the West’s and caregiving with an Indian touch, all at vastly lower costs

. Increasing number of senior living projects in India is going to drive healthcare facilities for senior care. Thus, a renowned healthcare partner will cater to the healthcare requirements of the seniors . Portea Medical has raised US$ 8 – 10mn from VenturEast, Accel preferably with specialization in geriatrics and focus on preventive Partners and Qualcomm Ventures healthcare will be mandatory . Bayada, one of the largest private home health firms in the U.S., took a 26% stake in India Home Health Care (IHHC) a Chennai- based firm; which will expand to other cities . Large hospitals like Manipal, Apollo, Fortis tie up with the service providers

11 ClickIndian Diagnosticto edit Master Sector title style

Projected Growth in Diagnostic 35,000 Diagnostic Services in INR Services: Pathology & Radiology Testing Segments in USD Million Billion 30,000 USD 4.1 bn Market (INR Billion) INR USD 2.9 bn INR 180.6 25,000 254.4 bn bn 27.5% CAGR 20,000 USD 1.2 bn 15,000 USD 1.2 bn USD 0.9 bn INR 73.7 bn INR 59.1 INR 41.1 bn 10,000 bn USD 0.4 bn INR 18 bn 5,000

2009 2015 2009 2015 - Pathology Radiology 2012 2022 . Diagnostics accounts for ~4% of healthcare market. This sector is highly Genetics 55 667 fragmented with organized players having 10% market share Molecular 218 2,001 . Pathology is growing at CAGR of 28% and Radiology is growing at CAGR of 26% Histopathology 273 2,668 which is much higher than overall healthcare industry Microbiology 164 1,163 . India is becoming preferred destination for high-end pathology and other Hematology 982 5,393 diagnostics outsourcing Immunology 1,309 7,190 . Key trends: Biochemistry 2,455 10,466 o M&A by large corporate of regional or niche player o International player acquiring or entering into JV with Indian players to . Molecular and Genetic testing are expected to grow very tap rapidly growing Indian diagnostic sector strongly at CAGR 25% and 28% respectively, from a minuscule o A hospital chain acquiring diagnostic player to enter into diagnostics base. A substantial part of this growth is likely from cross- business platform switching o Diagnostics player acquiring niche players catering to genetics and molecular diagnostics . Example: o Large players entering tier II / III cities, wherein the educated middle . Molecular diagnosis of infectious disease will make primitive class population is sophisticated and prefers preventive healthcare tests obsolete/less important check-ups . Molecular diagnosis of cancers and other non-infectious conditions will supersede histopathology . Emergence of hand-held, OTC molecular diagnostics 12 ClickIndian Pharmato edit Distribution Master title & Organized style Retail Pharmacy

Indian Pharma Distribution Organized Retail Pharmacy

. Indian Pharma distribution is highly fragmented with very few . The retail pharmacy market in India has ~700,000 outlets across the organized players country. Of this, 95 per cent are in the unorganized sector, in the CFA’s will be eliminated mom and pop model, as of 2011 from distribution chain Percent of Organized Pharma Market size in USD billion Manufacturer post GST players in Pharmacy in 2013

19.9 50%

C&FA CAGR: 36% 35% (1%) 35% 30%

10% Stockist 1.8 (10% / 2%)

Sub-Stockist 2012 2020E (8%) Pharmacy Retail . Retail pharmacy is a considerably big market and has tremendous (20%) scope to grow further. This has attracted many organized players in pharmacy retailing . The organized retail pharmacies provide better consumer experience compared to the Mom and Pop retail medicine stores Consumer . Key Trends: o Wellness stores: to provide wellness products rather than just . Above is the existing pharma distribution chain in India medicines . Post GST will result in elimination of CFA’s and will bring about o Nurse station: to provide paramedic services like bandage and consolidation among distributors dressing, blood pressure etc. . Big challenge in pharma distribution industry includes logistics o Ant Time Medicines (ATM): to deliver medicines within 2 hours intricacies in India where infrastructure is still under construction and of order placing without any additional charges poor power supply in major states affects the cold chain maintenance o Compliance Pack: wherein customers are reminded of their of drugs 13 medicine schedule ClickHealthcare to editDelivery Master Services title – Transactions style by Mergers Alliance

Span Diagnostics Solor Care Group Polyclinique Saint- Medial Saude Odilon Advisors to seller Advisors to seller Advisors to seller Advisors to buyer MA UK