Donald Tang

SCI Advanced Technology Fund

May 2016

1

China is An Extremely Large Health Care Market

Significant Demand over Supply

Extremely Weak Local R&D

In dire need to incorporate with high-end

technologies

Major Changes are happening

SCI is helping the paradigm shifting

What an Israel Start-up can do?

Contents

2

Aging of Population

Chronic Diseases

“Two-Child-Policy”

Overcrowded Public Hospitals

High Net Worth Individuals

China is An Extremely Large Market

3

Definition: 10% of the overall population are 60 or above/7% of the overall

population are 65 or above

China Census 2010: 13.26% and 8.87% Chinese are above 60 and 65

respectively.

Until 2020, the aging population in China is going to reach 248 million,

17.17% of the whole population.

China will have the largest Aging Population

in the world by 2030

4

According to the data of 9 Chinese provinces

Sickbed Rate:

60 yrs ~ 69 yrs: 3.16%

70 yrs ~ 79 yrs: 4.22%

80 yrs: 4.3%

Over 90% of people who are 60 or above have at least one chronic diseases.

Hypertension: 31.3%

Cataract: 44.3%

Chronic Bronchitis: 16.4%

Coronary Disease: 13%

Chronic Diseases became a major problem

5

Type of Diseases Prevalence of illness(10K)

Costs (100 million)

Cardiovascular and Cerebrovascular Diseases

29000 705

Cancer 271 907

Nerve System Disease 592 233

Genitourinary system Disease

1111 916

Chronic Diseases became a major problem

6

Major diseases that cause death in rural and

urban areas

41.90%

25.50%

12.40%

6.30%

13.90%

Urban Area

Cardiovascular Disease

Tumour

Respiratory Disease

44.80%

22.40%

11.50%

8.70%

12.60%

Rural Area

Cardiovascular Disease

Tumour

Respiratory Disease

Injure/Toxication

Other

7

Cardiovascular Disease Death Rate

8

Neonatology

New born will increase by 6

million every year due to the new

policy.

Gynecology and Obstetrics

Reproduction

Prevalence of infertility in China

is 12.5% ~ 15%, which means

1/8 couple in China have

reproduction problems.

“Two-Child Policy”

9

The number of HNWIs and disposable income are growing fast.

Growth of Wealthy Population

10

In 2014, there are 7.8 billion hospital visits.

It increased by 590 million and 1 billion compare to 2013 and 2012

respectively.

Accommodation: 4.55/thousand people

Doctor-Patient Ratio: 2.06/thousand people

Chinese Healthcare System – Hospitals , the

supply side

11

Public hospitals are extremely overcrowded!

Public Sector

Visiting Rate: 89.8%

Accommodation Rate: 93.5%

Public VS Private – Overcrowded Public

Hospitals

Visiting Rate = visits in private or public/overall visits 12

Private Sector:

Visiting Rate: 10.6%

Accommodation Rate: 60%

Problems with private sector

Mid-level income people cannot afford the price needs public insurance

choose public hospital

Prices are equal among public sector more confidence in public sector

Private Hospital cannot provide full clinical service rich people go to public

hospital too

13

Public VS Private – Chinese people are less

willing to choose private hospitals

Number of Hospital Number of Beds per hospital

Level 3 hospital 1,728 600-2000

Level 2 hospital 6,667 200-500

Level 1 hospital 5,882 100-200

Hospital not ranked 9,578 50-100

Medical centers below

county level56,370 20-30

Total No. 80,22527

Total Population : 1.4 billion

Population of Major cities: Shanghai 30 Million, Beijing 25M, Guangzhou

15M

Number of Cities with more than 1 million people: 200 cities

Number of Hospital and Medical Centers in

China (2013)

14

Medical devices: only small scale of local production

and very low market share locally and globally; slow

upgrading; very few original innovations.

Medicine: development of new drug not comparable

with developed countries

Critical diseases: survival rate of critical diseases is

low

Medical service: extreme complex medical system.

Technology is a Big Weaknesses (lack of

Advance Technologies)

15

16

Per 1 million people, Japan owns 20 times more CT Scanner devices than China.

The CT demand is quickly growing.

Number of CT per

million people from

2008 to 2013

0

2

4

6

8

10

12

2008 2009 2010 2011 2012 2013

6.77.5

8.39.2

10.6

11.6

Number of CT per million

people in 2006, across

countries

Example: Number of CT Scanner per million

people in China and other countries

16

Number

of

Hospital

Number of CT

Owned per

hospital（2013）

Forecast of CT

to purchase

（2016E）

Demand of

CT in

China

Level 3 hospital 1,728 3 3.5 864

Level 2 hospital 6,667 1.4 2.19 5,266

Level 1 hospital 5,882 0.2 0.6 2,353

Hospital not

ranked9,578 0.03 0.052 211

Medical centers

below county level56,370 0.005 0.012 395

Total No. 80,225 9,089

Drivers: Replacement of old devices , Increase of use CT,

Improvement of treatment tech

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Example: Demand of CT in 2014-2015 in all

levels of hospitals in China

17

By Department of Industry and Information: Total value of production of

the whole medical device industry in China in 2014: RMB 379.8 bn

(ILS235.4bn)

By Trade Association’s Estimation : Total value of production around RMB

500 Billion (USD 90Billion).

1

8

Total Production of the Medical Device

Industry in China in 2014

Category Total RevenueGrowthAnnual

Medical Devices and Equipment

RMB 213.6bn(ILS132.43bn)

14.63%

Expendables and materialsRMB166.2bn(ILS103.04bn)

15.48%

Major channels for medical devices are : Hospitals and Retail

pharmacies

In 2013, 78.75% medical devices are sold through hospitals,

16.36% are sold through retail pharmacies, 4.69% through

other channels.

By Oct 2013, there are 177 online retail stores are certified by

the Chinese authorities. The sales value in 2013 was estimated

to be about RMB2.5 BN。

Profit Ratio of medical device companies are 22%.

Off-retailers has a profit ratio of 26%

On-line retailers has profit ratio of 3-4%

Sales Channel of Medical Devices in China

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There is huge space for medical producers to grow in China.

2

0

Comparison of Medical Industry between

China and Developed Countries

USA/Japan/EU China

Healthcare Industry to GDP >10% <5%

Sales value of Devices to Drugs About 1:1 About 1:3~4

Global Market shares About 72% About 7~8%

Local Market Share (In China) 70% 30%

Concentration high Very Low

Privatization of public hospitals

Emergence of independent physician groups

Shifting of profit center: from drug to diagnosis and

surgeries

Increasing of specialized independent medical centers and

hospitals

Unified EMR (Electronic Medical Records)

Independent diagnosis centers (imaging, blood test)

Localization of productions medical devices

Upgrading to high-end devices

Extensive JVs with foreign startups with good technologies

21

The Major Coming Changes in the China

Medical System

SCI is helping the

paradigm Changing!

22

Originally founded in 2006, SCI (Shanghai Creation Investment)

Management Co, Ltd. in Shanghai, China (“SCI” in below) is one of the

most active investment funds and IPO consulting companies in China.

In the past 9 years, SCI successfully made investment in medical domains

and other sectors. SCI provided well recognized consulting services for

enterprises at different stage and under difference scenarios.

SCI has made extensive researches in many fast growing industries,

including advanced equipment, automobile, consumer goods, medical, and

new material.

By May 2016, SCI has successfully helped about 30 China and USA

enterprises in private financing, M&A, or public listing. The amount of

private equity financing is totaled at more than USD 500 Million.

Intro of SCI

23

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Business of SCI

Private

Placement +

IPO Advisory

Direct

Investment

•Industry research

•Comparison of

companies

•Choice of IPO

market,

•Optimization of

the IPO

preparation.

•Due diligence

•Fund raising

Funds:

• Angel Stage

• Round A stage

Domains:

• Medical

• Advanced

Manufacturing

• New material

(Polymer)

Technology

Transfer

• For Technology

Founders

• For Technology

Requests

Alltech Medical Systems

Alltech Medical Systems (“AMS”) is an international

medical imaging-tech and product supplier, which is

engaged in the R&D, manufacture, sale and relevant after-

sale service of high-end medical imaging diagnostic

equipment, such as superconducting magnetic resonance

imaging system with two major operation centers, one

locates in Cleveland, America and the other in Chengdu,

China.

25

2006, Alltech Medical Systems, USA

Private Placement of USD35M

FMI is committed to high-end high resolution diagnostic imaging

technology research, drug and molecular isotope detector for neurological

disorders with early detection and monitoring.

FMI Medical Systems core technology and products are ScintStar 16 slice/

64 slice CT and PET/CT, 128 Slice CT, etc.

FMI launched its first 16 slice CT in 2015 and first PETCT in China in

March 16. 2016

26

2010-2015, FMI Imaging Systems, USA

M&A of USD 10M + Private Placement of

USD35M

明峰医疗

中国第一家全球

第四家PETCT

整机生产商

并购顾问

27

FMI launched its product of PETCT in China

on 20160316 in Hangzhou

The launching ceremony

A very famous case of M&A and JV of medical

companies in China and USA

No.4 in the whole world to own its own

complete IP as a PETCCT producer

28

FMI launched its product of PETCT in China

on 20160316 in Hangzhou

29

SCI helps the sales of CT scanners of FMI

On Jan 20th, 2016, SCI called up meeting among

Stanford Medical Center, Chongqing Pharmaceutical

Holding and FMI Imaging, to plan to launch a JV

between CPH and FMI, for CT distribution.

Wolwo is an innovative pharmaceutical

producers , focusing anti-allegy drug for

dust mite.

SCI invest USD5MM in Wolwo.

Wolwo was listed in Growth Enterprise

Market of China on Jan 21st of 2014.

SCI liquidated all stocks on May 26th of

2015, with a return of 17X.

30

2011-Investment of USD5MM into Wolwo

Pharmaceutical

Surgical Theater was found in 2010，based in Cleveland, Ohio, USA

SNAP and Planning System obtained FDA in Feb 2013 and June 2014

March 2015, SCI invested USD 2.6MM and August 2015, HTC invested

USD5MM. More investors are coming in.

31

201503 –Investment USD 2.6MM in to Surgical

Theater, Advanced 3D Navigation System in Surgery

SCI is building a medical Eco-system

32

SCI Tech

Funds

Innovative

Portfolio

Companies

Incubators

Distributors and

Marketing

Top Hospitals

and Doctors

Top Research

Organizations

33

SCI is building a medical Eco-system --

working with top research organizations

Standford UCLA

Sandhill Road of Silicon Valley

34

SCI is building a medical Eco-system -- SCI

Fund visits Israel 4 times a year

God’s places

Hebrew Univ Tel Aviv TV Medical Project

35

SCI is building a medical Eco-system -- SCI

Advanced Technologies Exhibition Hall in

Shanghai (permanent display)

36

SCI is building a medical Eco-system

(incubator in China)

37

SCI is building a medical Eco-system

(incubator in China)

38

SCI is well-received in USA media

Find the real investors and real advisors

What is real ? Find someone who :

understands medical technologies and loves technologies

helps clinical trials

helps regulatory applications

helps sales channels

helps you talking to Chinese top doctors

helps you build a JV

helps next financing

helps you get to a right place (corporate park or incubator in

China)

39

Suggestions to Start-ups about going to China

Genuine Demand – not by hypothesis

Genuine innovation v.s. education of market ,

insurance, approval of sale price

3 milestones : R&D, Clinical Trial, Mass Production

Sales model : Direct V.S. Channel

Cost v.s. profit, be cautious to anything with less than

20% net profit

Fair valuation v.s. cooperation with stragetical

resources

General Suggestions to Medical Start-ups

40

China is An Extremely Large Health Care Market

Significant Demand over Supply

Extremely Weak Local R&D

In dire need to incorporate with high-end

technologies

Major Changes are happening

SCI is helping the paradigm shifting

What an Israel Start-up can do?

Review of Contents

41

Thank You!

Mr. Donald Tang

Managing Partner

SCI Advanced Tech Fund

donaldtang@scivc.com

+86-15901999998

SCI means Science & Tech

42

Is the market too niche?

Is there any threats from replacement of other

technologies?

Is the target company a planform tech company or

only has one application?

Is there clearly logic in the execution of the

management?

Is the valuation fair enough?

Some General Suggestions to Medical

Investors

43