GCC Healthcare Industry | February 16, 2016 Page | 1 Alpen Capital was awarded the “Best Research House” at the Banker Middle East Industry Awards 2011, 2013, and 2014 GCC Healthcare Industry | February 16, 2016 Page | 2 Table of Contents 1. EXECUTIVE SUMMARY ..................................................................................................... 8 1.1 Scope of the Report ................................................................................................................. 8 1.2 Industry Outlook ....................................................................................................................... 8 1.3 Key Growth Drivers .................................................................................................................. 8 1.4 Key Challenges ........................................................................................................................ 9 1.5 Key Trends .............................................................................................................................. 9 2. THE GCC HEALTHCARE INDUSTRY OVERVIEW .......................................................... 10 2.1 The Saudi Arabian Healthcare Sector ..................................................................................... 16 2.2 The UAE Healthcare Sector ................................................................................................... 18 2.3 The Kuwaiti Healthcare Sector ............................................................................................... 19 2.4 The Qatari Healthcare Sector ................................................................................................. 20 2.5 The Omani Healthcare Sector ................................................................................................ 21 2.6 The Bahraini Healthcare Sector .............................................................................................. 22 3. THE GCC HEALTHCARE INDUSTRY OUTLOOK ........................................................... 24 3.1 Forecasting Methodology ....................................................................................................... 24 3.2 Key Assumptions ................................................................................................................... 25 3.3 Market Forecast ..................................................................................................................... 25 3.4 Country-wise Market Size Forecast ........................................................................................ 27 4. GROWTH DRIVERS ......................................................................................................... 31 5. CHALLENGES ................................................................................................................. 37 6. TRENDS ........................................................................................................................... 40 7. MERGER AND ACQUISITION (M&A) ACTIVITIES .......................................................... 46 8. FINANCIAL AND VALUATION ANALYSIS ...................................................................... 47 8.1 Financial Performance ........................................................................................................... 47 8.2 Valuation Analysis .................................................................................................................. 52 COUNTRY PROFILES...................................................................................................................... 54 COMPANY PROFILES ..................................................................................................................... 61 GCC Healthcare Industry | February 16, 2016 Page | 3 Glossary Inpatient: A patient who is admitted to a hospital for treatment for more than 24 hours Outpatient: A patient, who visits a hospital, clinic, or related facility for diagnosis or treatment but is not hospitalized for more than a day Healthcare expenditure: The sum of general government health expenditure and private health expenditure in a given year Life expectancy at birth: Average number of years that a newborn is expected to live if the current mortality rates remain constant Infant mortality rate: The number of deaths of infants, who are younger than one year, per 1,000 live births Crude death rate: The number of deaths occurring during the year per capita Bed occupancy rate: The number of inpatient days of care divided by the number of bed days available during a year Average length of stay: The average number of days that a patient spends in a hospital. It is the ratio of the total number of days all inpatients spend at the hospital during a year and the number of admissions or discharges Hospital bed density: The number of hospital beds per 10,000 people Prevalence rate: The proportion of people with a particular disease at a given point in time or over a specified time period Non-communicable diseases (NCDs): A medical condition or a disease that is non- transmissible or non-infectious. Also termed as chronic diseases, this condition progresses slowly and is prolonged Long-term care (LTC): Services that meet the medical and non-medical needs of patients with a chronic illness or disability that renders them incapable of taking care of themselves for long periods Post-acute care: Healthcare services that are aimed at continued recovery or management of a patient with chronic illness or disability Primary healthcare center: A first point of contact for a person, who is ill or suffers injury. General practitioners, dentists, and physiotherapists are the common primary healthcare providers Secondary care hospital: A hospital or clinic that offer the services of medical specialists and cater to patients, who visit directly or are referred by primary healthcare centers Tertiary care hospital: A hospital that provides specialized treatment as well as care and is equipped with advanced diagnostic support and intensive care units Gross written premium: The total premium written by an insurer before deducting reinsurance and ceding commissions GCC Healthcare Industry | February 16, 2016 Page | 4 ―Private healthcare industry in the region is poised for robust growth in the years ahead. We expect to see increasing consolidation and more of institutional and corporate participation characterized by higher investments in core technology, better governance and value for stakeholders. All governments in the region recognize the increasing role of the private sector, and we are likely to see some PPP (public private partnership) initiatives which has the potential to address many of the current healthcare challenges. Patients in the region now expect not just high quality of medical care from the private hospitals, but also service excellence and highest levels of overall customer experience. Patient to hospital and patient to doctor communication and closer monitoring will be vastly improved through technologies like e-health and mobile health. Better integration of the hospitals with the Medical Insurance companies will make the administrative process faster and more efficient.‖ Mr. Sobhi A. Batterjee Founder President & Chief Executive Officer Saudi German Hospitals Group, KSA ―We have a positive outlook on the GCC healthcare industry, given the demand for more specialized services brought about by a regional ageing population, a prevalence of lifestyle diseases and increased preference to remain in the region for treatment rather than travelling abroad. On a macro scale, growth in the GCC healthcare sector will be driven by economic and political stability within each country. At an industry level, investment by strong healthcare groups will aid growth, but this is dependent on a stable regulatory framework, the removal of any obstacles in attracting top-class doctors and appropriate ROI on capital investments: these will all generate confidence in the industry. The challenges that the industry faces include lack of advanced tertiary services, absence of clear legislation regarding the definition of ethical healthcare practice and the most significant of all – cost. However, to overcome these challenges, the healthcare regulatory authorities are becoming very proactive in ensuring that the industry is run fairly and ethically. There is an increasing focus on quality, with governments introducing regulatory changes to improve efficiency and quality of services. A maturing phase will continue in the industry over the medium term, with consolidation on both insurance and provider side of the industry due to an increased complexity of e-health initiatives and new regulations, as well as increased transparency, capital requirement and levels of competition.‖ David Hadley Chief Executive Officer Mediclinic Middle East, UAE GCC Healthcare Industry | February 16, 2016 Page | 5 ―For the last 27 years, Aster DM Healthcare have been providing healthcare services through our network of 6 hospitals, 70 clinics and 200 pharmacies in the 6 GCC countries, touching the lives of millions of people. Over the period there has been significant improvement in the depth and breadth of medical services in the region with huge amounts of investments, improving the quality of healthcare. The increasing proportion of aged population, exponential increase in chronic life style diseases and increased coverage through insurance are the positive levers for the health sector and the scarcity