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1
Growth, Innovation and Leadership Insights in
APAC Healthcare Industry
June 18, 2009
This document contains highly
confidential information and is the sole
property of Frost & Sullivan.
No part of it may be circulated, quoted,
copied or otherwise reproduced without
the written approval of Frost & Sullivan.
2<GPS>
Contents
1 APAC Healthcare Market-Growth Drivers
2 Emerging Technologies-Innovation Platforms
3Choosing the Right Strategy-How Market
Leaders Strive
3<GPS>
Gap between envisioned change and past success at managing it.
HEALTHCARE CEO’S GLOBAL CEO’S
Source: IBM Global CEO Study 2008
Gap between envisioned change and past success at managing it.
8 in 10Healthcare leaders anticipate substantial change ahead.
29%
HEALTHCARE CEO’S GLOBAL CEO’S
Change is Inevitable.
4<GPS>
10 Key Trends in the Global and Asian Health Care Ind.
1) Cost & Quality, & Demographics of Healthcare1) Cost & Quality, & Demographics of Healthcare
2) Changing Demographics – Aging Population2) Changing Demographics – Aging Population
3) Changing Business Models 3) Changing Business Models
4) Evolving and Unique Disease Profiles4) Evolving and Unique Disease Profiles
5) Medical Tourism & Wellness5) Medical Tourism & Wellness
6) Insurance : Increasing Accessibility6) Insurance : Increasing Accessibility
7) Technology as a Driver7) Technology as a Driver
8) Human Resources : The Brain Drain8) Human Resources : The Brain Drain
9) Private Public Partnerships9) Private Public Partnerships
10) Increasing M&A/ Private Equity Activity10) Increasing M&A/ Private Equity Activity
“Globalization has radically altered
the business model for service and
manufacturing industries.
Health, traditionally regarded
as a local industry, is becoming
global as well. It’s changing
the way the Chinese think about
financing hospitals, Americans
recruit physicians, Australians
reimburse providers for care,
Europeans embrace competition,
and Middle Eastern governments
build for future generations”.
5<GPS>
Trend 1 : Cost & Quality, Demographics of Healthcare
� Healthcare is challenged by three interlocking
crises that make present healthcare systems
unsustainable:
� Rising Costs
� Quality of Care
� Changing Demographics
� 15% of patients admitted to hospital
suffer an adverse event.
� 8% of adverse events result in death.
� 6% of adverse events result in
permanent disability.
� 10-20% of all adverse events is caused
by medication errors.
� 10-15% of hospital admissions occur
because providers do not have access to
previous care records.
� 20% of laboratory tests are requested
because the results of previous
investigations are not accessible.
6<GPS>
By 2050 Healthcare spending will double, claiming 10 – 15% of GDP
Public Per Capita Spending – India : $ 12, Vietnam : $ 42
Trend 1 : Cost & Quality, Demographics of Healthcare
7<GPS>
Trend 2 : Demographics – Asia Overview
Ageing Young but ageing Young
Asian Demographics by Age Distribution
8<GPS>
Trend 3 : Paradigm shift in business model :
pharmacogenics will shape the future
Past Future
Disease definition by symptoms Mechanism
Uniformity of disease Heterogeneity
Uniformity of patients Variability
Universal Treatment Individualized therapy
SicknessPredictive/preventative care/
(wellness)
9<GPS>
Trend 4 : Diseases – Best Asian Opportunities
A competitive Benchmarking: Scores based on Parameters
Methodology:
• The seven key factors mentioned in previous slide have been considered to allocate the score to various diseases to find the attractiveness of the disease. The diseases are measured on a scale of 1 to 5 where a perfect score would be 35.
• Although infectious diseases ranked low, there is major potential in certain areas such as avian flu etc.
#1#2
#3#4
#5#6
10<GPS>
Trend 5 : Medical Tourism & Wellness
Singapore Medical Tourism Medical Tourism Overview
Steadily Growing Healthcare Tourism in Singapore
• The number of foreigners that seek medical care in Singapore surged with a CAGR (2001-2006) of 18.8% driven by the influx of foreigners (and their families) that work, study, and live in Singapore, as well as patients from other countries that seek medical treatment in Singapore.
• In recognition of the importance of quality assurance, 10 public hospitals and 4 private hospitals in Singapore have already been accredited by JCI as of 2008.
• Furthermore, the provision of competitively priced medical packages further strengthens the position of Singapore being one of the leading medical tourism hotspot in the region.
• Asia has high concentration of HNWI’s.
• Predictive and preventative medicine will help Wellness segment grow.
CAGR (2001-2006) : 19%
Asia had 2 million medical tourists in 2008
11<GPS>
Trend 6 : Increasing Access to Insurance
MEDISHIELD
MEDISAVE
The Private Health Financing Schemes helped reducing Out-of-Pocket Expenditure and Increased Demand in Hospital Care
•Medisave, Medishield and health insurance provided by the private sector have raised the demand for medical care, as measured by the number of hospital admissions; from 265,828 individuals that were hospitalised in 1980 to an estimated 416,000 individuals in 2006.
•Inpatient admission to private hospitals grew at a faster rate; they posted an admissions CAGR (1980-2006) of 4.5% versus 1.2% in public hospitals.
•According to MOH, residents have used Medisave for out-patient consultation for a total of S$2M withdrawals and paid for about 60% of their medical costs. In this aspect, Medisave and Medishield has reduced out-of-pocket payment among residents.
Paradigm shift towards private health insurance
Broadened Insurance Coverage Increases Patients’ Eligibilities to the
more costly Private Hospitals
Singapore Hospital Admissions
12<GPS>
Trend 7 : Technology opportunities
Asia Healthcare Spend by Area, 2009-2020
• Major opportunities within
diagnostics and monitoring
• Products and services will not
be standalone but will be
“packaged” to target specific
diseases.
• Example : predict avian flu,
diagnose, treat, monitor
13<GPS>
Trend 8 : Human Resources - the Brain Drain
Source : Tekopak
14<GPS>
Trend 9 : Public Private Partnerships (PPP)
Public Private Partnerships (PPP) will be the way to go
15<GPS>
Trend 10 : M&A Spend and Private Equity Infusion
• Focus on Late Stage Companies
• Focus on life sciences companies with late stage assets (late phase II / phase III)
• Pharmaceutical companies will need access to assets that can provide value in the medium term
• Company Cash Position is Critical
• Companies with low cash positions should be avoided
• Companies with low cash reserves are likely to become insolvent in 6-12 months
• Biotechnology vs. Pharmaceutical
• Biologic assets will continue to attract high valuations
• This is due to limited generic competition and high product margins
• Potential Product Cost Benefit
• Strong pressures in 2009 to restrain the growth of healthcare expenses
• In this environment products that provide superior cost benefits will be preferred
Opportunities in the Life Sciences
Sector
• Early stage life sciences companies in Asia will benefit from this trend
• Strong opportunities for companies targeting growth diseases in the emerging markets – Oncology, Cardiovascular Disease and Diabetes
In 2009 we believe there will be an increase in M&A activity between pharmaceutical and Medical Technology companies.
16<GPS>
Closing Statement – Market will start to recover by Q3’09
“The only thing we have to fear is fear itself.”-- Franklin Roosevelt
Subprime mortgage market
collapse
Media talks about recession
Reduced investment flows
Global financial panic
17<GPS>
Contents
1 APAC Healthcare Market-Growth Drivers
2 Emerging Technologies-Innovation Platforms
3Choosing the Right Strategy-How Market
Leaders Strive
18<GPS>
Top-10 Medical device based platforms
for the next decade
New innovations in In
Vitro Diagnostics like
Mircoarrays and Lab-
On-A-Chip have
brought a revolution in
the field diagnostics.
New innovations in In
Vitro Diagnostics like
Mircoarrays and Lab-
On-A-Chip have
brought a revolution in
the field diagnostics.
Growth Rate
Opportunities
Preventive as well as
personal care devices
and Home/Self
therapy devices will
have a very high
growth rate and
opportunities in
entire spectrum of the
market.
Preventive as well as
personal care devices
and Home/Self
therapy devices will
have a very high
growth rate and
opportunities in
entire spectrum of the
market.
Intelligent/Automate
d devices, Robotic
devices for surgery
and diagnosis will
reshape the modern
face of the
healthcare sector
Intelligent/Automate
d devices, Robotic
devices for surgery
and diagnosis will
reshape the modern
face of the
healthcare sector
2005 2010 2015 20202005 2010 2015 2020
Tissue generated
devices and site-
specific drug
delivery devices are
being developed for
more sophisticated
healthcare delivery
Tissue generated
devices and site-
specific drug
delivery devices are
being developed for
more sophisticated
healthcare delivery
Infection control devices/Wound care
Home/Self therapy devices
Total disc replacement
Robotic devices
Advanced In Vitro Diagnostics
Virtual reality
Intelligent/Automated devices
Electrical stimulation
Site specific drug delivery
Tissue generation devices
Upcoming medical device technology platforms
19<GPS>
Projected
Impact on the
Healthcare
sector
High Impact
Low Impact
CertaintyLow High
Developing countries in Asia: China, India,
Thailand, Malaysia
1. Infection control devices/Wound care
Developed countries in Asia: Singapore, Japan,
Taiwan, S. Korea, etc.
2. Home/Self therapy
3. Total disc replacement
4. Robotic devices
5. Advanced In Vitro Diagnostics
6. Virtual Reality
7. Intelligent/Automated devices
8. Electrical stimulation
9. Site specific drug delivery
10. Tissue generation devices
1
1
2
34
5
67
8
910
2
3
45
6
7
8
9
10
Emergence of medical device technology platforms in the next
decade
20
The Future of Health Care
What does the most effective model of health care for the future look like?
How can we found and lay the foundation for health care practice that integrates health promotion and prevention?
Can prevention specialists learn from other scientific and practice fields?
How can we lay the foundation for this new practice?
Paradigm Shift in the Asian Healthcare Sector
21<GPS>
Influencing Factors – Hospitals
Source: Hospital interviews; Frost Analysis
Question : Kindly rank the following factors in the order of importance ( 1- most important) when considering the
purchase of equipment?
Ranked 1st
Ranked 2nd
Ranked 3rd
Product Quality is ranked as the second most important factor.
Any impair on the performance and quality of image obtain will impact the hospital’s revenue and reputation. Hence the
emphasis on this area.
Number of Hospitals which ranked 1st, 2nd and 3rd
1
2
5
1
2
7
1
4
1
3
3
1
2
2
7
4
3
1
1
2
5
1
1
2
3
1
1
1
4
4
1
2
1
4
1
1
3
1
2
1
3
1
3
1
1
1
2
2
1
1
4
1
1
3
1
2
3
4
1
8
3
3
Brand Name
Product Features
Product Quality
Equip. Technology
Price
Delivery Time
After Sales Support
Warranty Length
Training Provided
Machine Eff iciency
After Sales Support is emphasized as the most important influencing factor as any
potential disruption of service translates to a lost of revenue to the hospital.
22<GPS>
Contents
1 APAC Healthcare Market-Growth Drivers
2 Emerging Technologies-Innovation Platforms
3Choosing the Right Strategy-How Market
Leaders Strive
23<GPS>
Range of Strategies to Consider
Successful examplesWhat they doStrategies
• Sell flagship products globally by leveraging brand
Brand
builder
Brand
builder
Market
maker
Market
maker
• Create a new category or popularize an out-of-the-ordinary value proposition that addresses an unmet local consumer need
ReplicatorReplicator
• Leverage company capabilities to duplicate a successful business format in many local markets
Scale
generator
Scale
generator
• Build leading position by leveraging scale and operational know-how
• Cultivate relationships with regulators to ensure favored market positionStandard
setter
Standard
setter
24<GPS>
Japan-Formula to Sustain Growth in Revenues and Profits
Strategic Dimension Value Innovation Logic Example
Segment of
Focus
Industry Assumption Industry's conditions Toshiba Medical Diagnostic Imaging
can be shaped
Strategic Focus Competition is not the Olympus Medical Devices
benchmark. Pursue
quantum leap to dominate
the market
Customers Target mass buyers based Teijin Home Care
on key commonalities. Willing Chemistry
to let some customers go
Assets and Capabilities Not constrained by what the company Daiichi-Sankyo Pharmaceuticals
already had. Pose the question
what we would if we were starting anew?
Product and Service Offerings Pitch in terms of total solution even if Goodman Co. Ltd Health IT
it is beyond indutry's traditional offerings
25<GPS>
CASE STUDIES – MARKET MAKER
How
• Leverage capabilities across markets• Build expertise in JV/alliance management • Cultivate strong local partners
Source: Interviews; articles; team analysis
Globally
Results
Key
Learnings
Approach1. New medical technologies and new ways to
capture and use medical data to make health systems better.
2. Focus to work with Health organizations to choose wisely within limited budgets when it comes to how and what technology they buy.
1. Make technology a reason to collaborate2. Move information, not people3 Customize care to patients’ genetic needs 4. Value technology’s impact on productivity and lifespan
26<GPS>
At concrete level the Senior Management Team has to
focus attention and developed practical solutions in areas
clustered in 5 workflows
Value Proposition
Sales & Marketing Priorities
Organisation
Knowledge
Management
Business Planning
& Control Tower
2008 2010 2015 2020
ACHIEVE NO. 1 POSITION
Market
Facing
InternalPrimary
focus so far
27<GPS>
Cost Effectiveness
(overall industry impact)Product
Performance
Support of
Influencers
Cost
competitiveness
Product Development
Process
Market Reach
Local/Regional
Strategic
Alliances
Acquisition thru
Product/R&D
SMART
S:Customer Satisfaction M:Margins R:Revenue Growth
Concluding Remarks-How to stay SMART in your business?
28<GPS>
Frost & Sullivan Contacts
Nitin NaikVice President,Healthcare Asia Pacific,
Jasminder KaurPR ManagerHealthcare Asia Pacific,
+65. 6890 [email protected]