equity investments with a global dimension.doc

Public Services International Research Unit (PSIRU)

PRIVATE INVESTMENT AND INTERNATIONAL FINANCE CORPORATION INVESTMENT IN HEALTH

CARE – FROM CURRENT LINKS TO FUTURE PRIVATISATION

by Jane Lethbridge

[email protected]

This paper is part of healthcare privatisation research funded by Public Services International (PSI)

Public Services International Research Unit (PSIRU)School of Computing and Mathematical Sciences, University of Greenwich,

30 Park Row, London SE10 9LS U.K.Email: [email protected] Website: www.psiru.org

Tel: +44-(0)208-331-9933 Fax: +44 (0)208-331-8665 Director: David Hall Researchers: Kate Bayliss, Steve Davies, Kirstine Drew, Jane

Lethbridge, Emanuele Lobina, Steve Thomas, Sam Weinstein The PSIRU is part of the School of Computing and Mathematics in the University of Greenwich,

London. PSIRU’s research is centred around the maintenance of an extensive and regularly updated database of information on the economic, political, financial, social and technical experience with

privatisation and restructuring of public services worldwide. This core database is financed by Public Services International (PSI), the worldwide confederation of public service trade unions.

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mailto:[email protected]

PRIVATE FINANCE CAPITAL IN HEALTHCARE 11/03/02

PRIVATE INVESTMENT AND INTERNATIONAL FINANCE CORPORATION INVESTMENT IN HEALTH CARE – FROM CURRENT LINKS TO FUTURE PRIVATISATION.........................................................................................................1EQUITY INVESTMENTS WITH A GLOBAL DIMENSION....................................3

TABLE 1 INVESTMENT FUNDS, PRIORITIES AND INVESTMENTS.........4Table 2: COUNTRIES, COMPANIES AND VENTURE CAPITAL FUNDS.....6

United Health Capital group/ Latin Health Fund...........................................................6GE Equity.......................................................................................................................6

Venture capital funds.................................................................................................7TABLE 3 CDP INTERNATIONAL - GSSLA......................................................8

CDP International.......................................................................................................9TABLE 4: LATIN HEALTH FUND.....................................................................9

Latin Health Fund.....................................................................................................10TABLE 5: ASIA RENAL CARE. LTD (ARC)...................................................11

Asia Renal Care........................................................................................................11TABLE 6: EUROMEDIC....................................................................................12

Euromedic................................................................................................................12TABLE 7: MEDICOVER....................................................................................12

Medicover.................................................................................................................13TABLE 8: SALUTIA...........................................................................................13

Salutia.......................................................................................................................13INTERNATIONAL FINANCE CORPORATION......................................................13

TABLE 9: AFRICA IFC INVESTMENTS 1996 -2002 www.ifc.org/projects...14TABLE 10: ASIA IFC investments 1996-2001 (www.ifc.org/projects/)............16TABLE 11: CENTRAL/ EASTERN EUROPE IFC Projects 1996-2001...........17TABLE 12: LATIN AMERICA IFC projects (1996-2001)................................18TABLE13: LATIN AMERICA IFC project NOT FOR PROFIT HOSPITALS.19

MULTI LATERAL INVESTMENT GUARANTEE FUND (MIGA)........................21TABLE 14: Multi-lateral Investment Guarantee Agency (MIGA) - Brazil.........21TABLE 15: Multi-lateral Investment Guarantee Agency (MIGA) - Bosnia.......21

PRIVATE SECTOR DEVELOPMENT......................................................................22HEALTH FUTURES AND THE PRIVATE SECTOR..........................................22

RENAL HEALTH CARE............................................................................................25TABLE 16: COMPANIES RUNNING DIALYSIS CLINICS, January 2001....26TABLE 17: THREE RENAL CARE COMPANIES...........................................27

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EQUITY INVESTMENTS WITH A GLOBAL DIMENSION

The purpose of this paper is: To show the type of health care investments being made by

the venture capital and private equity sector To identify links between health care multinational companies

and investors To analyse International Finance Corporation (IFC) and Multi-

lateral Investment Agency (MIGA) health care projects

Corporate strategies in health care are influenced by how private health care companies view potential demand for health care services. Venture capital and private equity capital are two sources of private sector investment that are used to develop private companies, which are not yet publicly listed companies. The priorities for this type of investment can be seen as an indicator of future trends in the private health care sector. An analysis of venture capital and private equity investment priorities in health care will show how health care is viewed by the private sector. An analysis of International Finance Corporation (IFC) health projects highlights the links that exist between sources of development finance, private investors, and health care companies.

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TABLE 1 INVESTMENT FUNDS, PRIORITIES AND INVESTMENTS

NAME Country INVESTMENT PRIORITIES INVESTMENTSCredit Suisse Global Health care Fundwww.csam.com

Switzerland Worldwide, in mainly large to middle range capital companies - health care

Companies which operate in the fields of pharmaceuticals, hospital supplies, medical technology and biotechnology or those which provide services to the healthcare industry

Advent International www.adventinternational.com

USA Early stage venture capital and later stage private equity operations. Target sectors include financial services, business services, specialty retail, chemicals, media, pharmaceuticals, software/information technology, telecommunications, health care/life sciences and energy.

Companies that it has invested in include health care companies in Singapore, Bangkok, UK.

UK – Independent Care Ltd – private hospital group

Thailand – Thonburi Hospital Co., Bangkok – private hospital

Singapore – Transmedic Pte Ltd, - medical equipment, distribution and renal care services

MPM capital www.mpmcapital.com

USA Bioventure and bioequities family of funds including health care innovations

Health care companies in the US and Europe, particularly biotechnology, biopharmaceuticals, and medical devices

Polaris Ventures www.polarisventures.com

USA Capital partners investing in medical technology and life sciences

60 companies, mainly in the US but also in Iceland (genetics) and Israel

TA associates www.ta.com/investments/

USA A growth capital company that invests in many sectors including health care services and health care technology

A range of health care companies including Hospital Group of America, Inc, a psychiatric hospital group, which was sold in 1999 to Universal Health Services, a large health care provider with hospitals in the US and France.

United Health Capital groupwww.unitedhealthgroup.com/uhcapital With some capital invested

USA Invests in 5 venture funds including Validus Partners

United Health Group is a strategic partner of the Latin Healthcare Fund

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http://www.unitedhealthgroup.com/uhcapital

http://www.unitedhealthgroup.com/uhcapital

http://www.ta.com/investments/

http://www.polarisventures.com/

http://www.mpmcapital.com/

http://www.adventinternational.com/

http://www.csam.com/


through Validus Partners (United Health Group is a partner).

Newbridge Latin America (NLA)Also Newbridge Andean Partners LPLink to Aqua InvestmentTexas Pacific Group linked to Oxford Health PlansNAP Acquisition/Newbridge Latin America

USA Established in 1996 to make private equity investments in Latin America

Investments in Salutia – a health care connectivity company based in Argentina and Brazil.

Fidelity Ventures Far East (FVFE) http://www.fidelityventures.com/portfolio/busserv/frameshealth/asia_renal_care.htmencompasses all of Fidelity’s Venture Capital investing activities in Asia.

Based in Hong Kong, FVFE’s purpose is to extend the reach of US based venture activities to a part of the world that it considers has experienced unusual growth and produced a wide range of investment opportunities. FVFE has made investments in healthcare services, telecommunication services, pharmaceuticals, software development, and consumer service businesses.

One of its main investments in health care is in Asia Renal Care Ltd (ARC) www.asiarenalcare.com which is the leading provider of kidney dialysis and related services in Asia Pacific region. It has 20 centres in Asia and 12 affiliated centre in the US. Based in the Philippines. It has a network of centres in Hong Kong, Taiwan, Malaysia, Philippines, Singapore, Japan, and the US (Satellite dialysis centres?)Asia Renal Care Ltd is the health care subsidiary of Ayala Corporation and ARC – joint venture. Shareholders are: Fidelity Far East Ventures, Satellite Group, Investor AB – a Swedish investment group, 3i, Walden Group, Equitable Life

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http://www.asiarenalcare.com/

http://www.fidelityventures.com/portfolio/busserv/frameshealth/asia_renal_care.htm




Table 2: COUNTRIES, COMPANIES AND VENTURE CAPITAL FUNDS

COUNTRY COMPANY FUND

UK Independent Care Ltd – private hospital group

Advent International

Thailand, Bangkok Thonburi Hospital Co. – private hospital


Singapore Transmedic Pte Ltd, - medical equipment, distribution and renal care services


US and France A range of health care companies including Hospital Group of America, Inc, a psychiatric hospital group, which was sold in 1999 to Universal Health Services, a large health care provider with hospitals in the US and France.

TA associates

Israel, Iceland, US 60 companies involved in biotechnology

Polaris Ventures

Brazil, Argentina Salutia – a health care connectivity company.

Newbridge Latin America (NLA)

Chile, Brazil, Mexico International Hospital Corporation United Health Capital group/ Latin Health Fund

Health care companies, particularly biotechnology, biopharmaceuticals, and medical devices

US and Europe MPM capital

Hungary, Poland, BosniaEuromedic – leading provider of diagnostic imaging services and distribution and tendering services in hospitals in Hungary

RPM PartnersA privately held Dutch investment companyGE EquityDresdner Kleinwert Benson private equity fund

Hungary, Poland, Bosnia, Chile, Mexico, Brazil

Euromedic – leading provider of diagnostic imaging services and distribution and tendering services in hospitals in Hungary

Hospitals, pharmacies and laboratories in Latin America

Global Environmental Fund

Argentina, Brazil Salutia – a health care connectivity company

UBS CapitalMerrill Lynch Global Emerging Markets

Philippines, Hong Kong, Asia Renal Care Ltd Fidelity Ventures

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Taiwan, Japan, Singapore Far East (FVFE)

Table 1 shows the priority investments for a small sample of equity investors, some of the relationships between private investors and multinational companies and the global reach of some of these investment alliances. Table 2 shows the range of countries that private equity investments invest in.

Venture capital is invested in small and or young companies, often high risk, in return for equity ownership. Venture capitalists supply capital to companies that could not get the funds by listing on the stock market or borrowing from banks. In return for taking the extra risk, the venture capitalists look for substantial equity, a seat on the board, and possibly increasing their equity stake if performance targets are not met. Sometimes, they provide management and financial support to companies, as well as just money. They will look for an exit through a trade sale or a flotation of the company within 2-5 years. Venture capital is also known as 'risk capital'. Private equity investments are made to more established private sector companies, which are not yet publicly listed companies.

A group of 8 venture capital and equity investment companies out of a total of hundreds of funds, give an indication of the type of health care activities that have received investment funds in the last 2-3 years. This is also combined with details of venture capital and equity investment trusts that are involved in investing in International Finance Company health projects (Tables 1 and 2). These reflect some of the changing health profiles in some regions with an increase in non-communicable diseases. The main investment areas of equity investments are:

1. e-health / health connectivity – use of internet and information communications technologies

2. Telemedicine – using information communications technology to transmit information and advice about treatments

3. Biotechnology – gene therapy4. Pharmaceuticals – drugs needed for chronic conditions,

CHD/CVD, cancer treatments, mental illness5. Medical devices / diagnostic equipment e.g. treatment for

kidney diseases6. Health care services

E-health and health connectivity covers the use of internet and information communications technologies for improving a) insurance health care invoicing and payments, b) providing access to research/ information for patients and practitioners and c) linking patient records to practitioners and health insurance companies.

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Venture capital fundsTA Associates is a growth capital company and has investments in a range of health care companies including Hospital Group of America Inc, a psychiatric hospital group, which was sold in 1999 to Universal Health Services, a large health care provider with hospitals in the US and France.

Multinational health care companies also invest funding in private investors, for instance, the UnitedHealth Capital group invests in 5 venture funds and some is invested through Validus Partners, of which United Health Group is a partner. UnitedHealth is a health care company based in the US with some international operations.

Some more specific examples of how private equity investment is linked to health care companies are outlined below:

CDP International Latin Health Fund Asia Renal Care Ltd – Fidelity Far East Ventures Euromedic Medicover – Oresa Ventures Salutia

TABLE 3 CDP INTERNATIONAL - GSSLA

Caisse de dépôt et placement du Québec (CDP)CDP Capital www.lacaisse.comC$105 billion of assets under management

Subsidiaries : CDP Private

Equity CDP Real

Estate CDP Global

Asset Management

Three categories of activity:

Negotiated investments

Portfolio managements

Real estate management

CDP Capital invests in public companies (publicly traded shares – “societies ouvertes”) including:

Aetna Inc Fresenius and

Fresenius Medical Care AG

HCA The Healthcare Corporation

Health South Corporation

Companhia Saneamiento Basico de Sao Paulo (SABESP).

CDP PRIVATE EQUITYSubsidiaries include:CDP Capital d’AmeriqueFinancing for medium to large businesses

CDP Capital d’Amerique offer financial services and support to Financial institutions, distribution and services, manufacturing, energy, infrastructures and natural resources

In 2000,CDP Capital d’Amerique in conjunction with BC Partners, made a $89m investment in General Healthcare that manages a network of private hospitals in UK

CDP Capital CDP Capital CDP Capital International,

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http://www.lacaisse.com/


Internationaloffers services to Quebec companies involved in international expansion projectsCDP Capital International set up –

CDP Access Capital International which offers financing arrangements to Quebec companies wanting to operate globally

International invests in funds and directly in growth companies in Europe, Asia and Latin America. It also manages private equity funds in emerging markets in partnership with local teams. CDP Capital International has a portfolio of 56 investments valued at more than C$1.3 billion

through Accès Capital International, is investing U.S.$2.5 million in GSSLA Inc., a Latin American subsidiary of Générale de Services Santé N.A. Inc. (GSS), which owns and operates eight long-term health care facilities and senior citizen homes in Québec in addition to offering home care and support services.

CDP International Caisse de dépôt et placement du Québec (CDP) International is one of the largest investment companies in Canada. CDP International is one of its private equity subsidiaries. Access Capital International was set up by CDP International. It is investing in GSSLA through GSSNA, a subsidiary of Generale de Sante, one of the largest health multinational companies based in France. GSSNA – North America – operates eight long-term health care facilities and senior citizen homes in Québec in addition to offering home care and support services. GSSLA is a subsidiary of GSSNA and operates in Venezuela and Chile. This presents an interesting example of an investment fund investing through subsidiaries of a multinational healthcare company. This investment was explained by CDP Capital International’s President, Jean Lamothe who said "The World Bank has identified health care in Latin America as a sector suited for restructuring and development. Our investment, through Accès Capital International, will enable GSSLA to position itself competitively by forming strategic alliances with local partners to take advantage of management opportunities as they arise." (CDP press release, Wednesday December 27th 2000 http://www.cdpcapital.com) GSSLA intends to pursue its development, notably by expanding into Argentina and Mexico over the short term as outlined in 2001.

GSSLA Inc. operates various hospitals and clinics in Venezuela and Chile on its own behalf or for third parties. For example, in 1997 it obtained a contract to manage Venezuela's Coromoto Hospital, a 150-bed multidisciplinary establishment owned by the oil company

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http://www.cdpcapital.com/


Petroleos de Venezuela SA. In Chile, GSSLA is the sole manager of the largest private hospital in the country's second-largest health region.

An example of CDP’s investments in European based health care companies can be seen in the investment by another private equity subsidiary of Caisse de dépôt et placement du Québec called CDP Capital d’Amerique. In 2000, together with BC Partners, it made a $89m investment in General Healthcare, a company that manages a network of private hospitals in UK. CDP also has a large property portfolio and has recently started to rent office space in Paris to Vivendi.

TABLE 4: LATIN HEALTH FUND

ORIGINS

The Latin Health Fund (www.latinhealthfund.com)is part of Humana Ventures www.humanaventures.com, the venture capital arm of Humana Inc. a large US managed care company

LIMITED PARTNERSHIP

The Latin Healthcare Fund is a limited partnership, sponsored by :

Ascendant Health International (AHI)

Global Environmental Fund (GEF)

STRATEGIC PARTNERSHIPS

The Latin Health Fund has five strategic partners

HealthSouth -(bought by AdvantageHealth Corporation) – one of the largest providers of health services in the US which also has a network of health services worldwide for American policy holders Humana - a supra-regional managed care companyInteramerican Investment Corporation (IIC) affiliated to International Development Bank and provides “in region” support to LHF in the investment processUnitedHealthcare – an HMO (also investing through Validus venture capital company)Chase Capital Partners a global private equity investment company.

Latin Health Fund is a private-equity investment fund which invests in healthcare companies in Latin America.

Latin Healthcare Fund has $60 million of committed capital available to make direct investments of

Three major investments are:Consortio International Hospital SA – /International Hospital Corporation - a hospital company that operates in Central AmericaFarmacias Ahumada SA is the largest retail pharmacy in ChileDelboni Auriemo Medicina Diagnostica Ltda (Delboni) is the largest clinical laboratory and diagnostic imaging company in Sao Paulo.

Latin Health FundHumana Inc, a US managed health care company has a venture capital arm called Humana Ventures. The Latin Health Fund is a

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http://www.humanaventures.com/

http://www.humanaventures.com/

http://www.latinhealthfund.com/

http://www.latinhealthfund.com/


specific fund of Humana Ventures, which has three specific investments in Latin America:

Consortio International Hospital SA /International Hospital Corporation - a hospital company that operates in Central America. It develops, builds and operates hospitals and has recently opened hospitals in Hermosillo, Chihuahua in Mexico and San Jose, Costa Rica. A hospital is being built in Puebla, Mexico.

Farmacias Ahumada SA is the largest retail pharmacy in Chile with more than 140 pharmacies and market share of 30%. The company has expanded into Peru and established itself as the largest chain of retail pharmacies. The company also has the first and largest (1.15 million enrollees) pharmacy benefits management company in Latin America; one of the largest private label programs in the region. It is pursuing acquisition opportunities in Brazil.

Delboni Auriemo Medicina Diagnostica Ltda (Delboni) is the largest clinical laboratory and diagnostic imaging company in Sao Paulo, Brazil in terms of number of tests and second largest in terms of revenues. With 21 outpatient units and a large processing facility, the company has approximately 11% of the Sao Paulo laboratory market. On October 7, 1999, the investor group completed the 100% acquisition of the third largest clinical diagnostic company in Sao Paulo, Bio-Ciencia Lavoisier Analisis Clinicas (Lavoisier).

The Latin Healthcare Fund is a limited partnership, sponsored by Ascendant Health International (AHI) and Global Environmental Fund (GEF). Ascendant Health International is made up of health care managers who founded AdvantageHealth Corporation, a US health care provider (7000 employees) which was sold in 1996 to HealthSouth another US healthcare provider. Ascendant has also worked in the healthcare sector internationally, advising in Latin America and the former Soviet Union and aims to add value to the Latin Healthcare Fund by applying lessons from US health care market to Latin America. Global Environmental Fund has also invested in Euromedic, a company that provides diagnostic imaging services and distribution and tendering service to hospitals in Hungary.

The Latin Health Fund has five strategic partners and the range of these illustrates the linkages between investment funds, health care companies and international development investment agencies.

HealthSouth -(bought by AdvantageHealth Corporation) – one of the largest providers of health services in the US which also has a network of health services worldwide for American policy holders

Humana - a supra-regional managed care company

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Interamerican Investment Corporation (IIC) affiliated to International Development Bank and provides “in region” support to LHF in the investment process

UnitedHealthcare – an HMO (also investing through Validus venture capital company)

Chase Capital Partners a global private equity investment company.

TABLE 5: ASIA RENAL CARE. LTD (ARC) ASIA RENAL CARE LTD

* 20 centres in Asia - Japan,Philippines Taiwan, Singapore and China (Hong Kong)

* 12 affiliated centres in the US

OPERATING PARTNER

Satellite Dialysis Center, Inc (Satellite), * a non-profit dialysis company * close links to Stanford University* 12 centres and 1,500 patients in California.

* conducts quality audits, review technical operations and organize clinical programs on behalf of ARC* organises regular training programs for ARC staff in both Asia and the United States.

JOINT VENTURE

May 1998, established a joint venture in the Philippines with a healthcare subsidiary of Ayala Corporation the leading industrial conglomerate in the country with significant interests in real estate, telecommunications, healthcare, insurance and food.

SHAREHOLDERS

* Fidelity Far East Ventures* Satellite Group, * Investor AB – * 3i * Walden Group, * Equitable Life

Asia Renal CareOne of the main investments in health care made by Fidelity Ventures Far East (FVFE) is in Asia Renal Care Ltd (ARC), a leading provider of kidney dialysis and related services in the Asia Pacific region. It has 20 centres in Asia and 12 affiliated centres in the US and is based in the Philippines. It has a network of centres in Hong Kong, Taiwan, Malaysia, Philippines, Singapore, Japan, and the US (Satellite dialysis centres). Asia Renal Care Ltd established a joint venture with Ayala Corporation, a leading industrial conglomerate in the Philippines in 1998. Other shareholders in Asia Renal Care are: Satellite Group (US kidney dialysis centres), Investor AB – a Swedish investment group, 3i, Walden Group and Equitable Life US. Renal health care is a growing area of health care.

TABLE 6: EUROMEDIC

Euromedic Diagnostics BV and International Dialysis Centre BV- joint borrowers- both 100% owned Dutch subsidiaries

OwnershipGE Equity – private equity arm of GE CapitalDresdner Emerging

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of Euromedic International NV, a holding company of the group

Global Environment FundRPM PartnersPrivate investors led by Euromedic’s management

Hungary7 Private diagnostic imaging centres 200,00 patients per month100-150 staff (mostly doctors)

International Finance Corporation$13m loan to fund a $33m expansion programme in C/ E. Europe

Poland3 diagnostic imaging centres3 haemodialysis centres2,500 patients per month20-25 doctorsBosnia1 haemodialysis centres230 patients per month3 doctors

EuromedicEuromedic Diagnostics BV and International Dialysis Centre BV are both 100% owned Dutch subsidiaries of Euromedic International NV, a holding company of the group. It operates diagnostic imaging centres in Hungary and Poland and haemodialysis centres in Poland and Bosnia. Its investors include several investment funds GE Equity – private equity arm of GE Capital, Dresdner Kleinwert Benson private equity fund, Global Environment Fund, RPM Partners a Dutch private investment company and other private investors led by Euromedic’s management. One of the non-executive Directors of Euromedic (Janusz Heath) is the head of Central and Eastern European Private Equity Dresdner Kleinwert Benson.

TABLE 7: MEDICOVER

Medicover offers both medical insurance and a health care delivery system, to its clients. Medicover employs most of its physicians directly and provides health care through its own facilities. Pre-paid membersPoland 66,000Romania 7,000Hungary 1,700Estonia 300

Activities Health insurance for

corporations and individuals Health care delivery - directly

employs most of the physicians and other health care staff in 20 Health Centres

On-site workplace facilities for large employers

SponsorORESA Ventures

IFC loan of $7mTotal budget $22m

MedicoverORESA Ventures is an an example of a venture capital company becoming directly involved in health care investment, a Swedish company. It was so successful that it ceased to invest in new initiatives and transformed itself into the health care company. In 2001, ORESA Ventures S.A., an investment company whose

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shares are traded on the Stockholm Exchange, decided to focus its operations exclusively on the Group’s largest holding, the healthcare company Medicover. ORESA Ventures' other holdings are being divested. As a result of the new focus, ORESA Ventures' name will be changed to Medicover and it will become an operating healthcare company. Medicover is a unique health care organisation, serving Central and Eastern Europe. Medicover was established in Warsaw in 1995, and soon spread throughout Poland. Further expansion followed to Romania, Hungary and Estonia. At the end of 2000, Medicover had 75 000 pre-paid customers across 4 countries.

TABLE 8: SALUTIA

Salutia.com Inc ( www.salutia.com ) A privately held healthcare connectivity company focused on payer-provider transactions

Owned by:30 shareholders

Merrill Lynch Global Emerging Market Partners

UBS Capital NAP Acquisition/ Newbridge

L.America

IFC Equity investment $2.5mTotal budget $12.5m

SalutiaSalutia is an example of e-health or health connectivity company operating in Argentina and Brazil. It aims to make the management of medicine more effective through the use of new technologies, to improve the provision of health care through making information about the patient to be available quickly in the clinic/ surgery, to increase the consumer’s knowledge / understanding of health by providing confidential information and services. Salutia has 30 shareholders which include investment trusts Merrill Lynch Global Emerging Market Partners, UBS Capital, NAP Acquisition/ Newbridge L.America. It also has a IFC equity investment of $2.5.

INTERNATIONAL FINANCE CORPORATION

The International Finance Corporation (IFC) is a part of the World Bank Group. Set up in 1956, it is the largest multilateral source of loan and equity financing for private sector projects in the developing world. It promotes private sector development through:

Financing private sector project in developing countries Helping private companies in the developing countries to

access finance in international financial markets Providing advice and technical assistance

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http://www.salutia.com/


TABLE 9: AFRICA IFC INVESTMENTS 1996 -2002 www.ifc.org/projects

Name IFC loan/ total budget Project description Sponsor/ investorsHygeia, Lagos, Nigeria owns/ operates Lagoon hospital, Lagos1999

$581m of total budget $2,186,000

To upgrade Lagoon hospital (40 beds) existing tertiary health are services and expand managed care business

Health Partners – health management organisation based in Minneapolis. 55% shares owned by Prof. E.A. Elebute and Prof.O.W.Elebute. Other shareholders: UNIC Insurance plc 12% African Alliance Insurance Company (8.3%) Lion of Africa Insurance (8.3%)

Polyclinique les Graces, Cote d’Ivoire

Euro loan of $1.1m Total budget $3.35

Construction and operation of a 79 bed private hospital in Abidjan that contain most of the major specialties.

SIMMEQ – a corporate with share capacity set up by 12 private investors (8 medical doctors)

Bell Medical Centres Ltd, Zimbabwe

Quasi-equity $0.75 Total budget $1.61

Expansion of the Torwood Hospital and the Redcliff Medical Centre in Kwekwe with out patients departments and upgrading facilities.

Principal shareholders:Dr. Arikama Chyedzo – founder of Bell Medical Centre in Tennesse

Belvedere Maternity Home, Zimbabwe

Equity investment$0.352mTotal budget $1.54m

Belvedere Private Hospital (Private) Ltd (BPH) owns the 18 bed Belvedere Maternity Home. BPH is building a new clinic with 40 ante/post natal beds, 2 theatres and 4 delivery wards.

BPH is owned almost equally by 16 doctors (12 obstetricians, 4 paediatricians) with established private practices in Harare.

Radmed Diagnostic Centre Ltd, Lagos, Nigeria

$0.22 investment Total budget $0.55

Construction of a new building on Victoria Island to house its operations and acquire more equipment.

38 shareholders – individuals in various fields

Lesedi Private Hospital Gauteng, Soweto, S.Africa1997

Quasi-equity$0.267m Total budget $0.556m

Addition of a 9-bed ICU facility to Lesedi Private Hospital's (LPH) operations.

Kwachi Holdings Ltd (90%)Afrox Ltd (10%)

Eerste River Medical Centre, Cape Town, S. Africa

$0.72m equityTotal budget $5.0m

Building and operating a 123 bed Medical Centre, offering general inpatient and outpatient medical care

Building and operating a 123 bed Medical Centre, offering general inpatient and outpatient medical care and a range of

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http://www.ifc.org/projects


and a range of specialist services. specialist services.Mwaiwathu Private Hospital Ltd, Malawi1996

$0.77 equity Total budget$4.36m

MPH will build a 60 bed private hospital to offer general inpatient and outpatient medical care

Shareholders: Dr. Jack Wirima 7%, Malawi Development Corporation 18%, Indebank 18%, Medical Aid Society 6%, Malawi Saving Bank 9%, Medical Research Institute (MRI) 7% (a Johannesburg based private clinic management company, and other private investors

AAR Health Services Limited, Kenya - a managed health care organization with 5 clinics in Kenya & Uganda1998

IFC to provide equity financing. IFC's participation will broaden the shareholding and provide the Company with credibility and enhance AAR's ability to enter the larger East African market.

Technical Partners and/or Major Shareholders: Mr. Bengt Beckmann, the founder and Jonas Jochnick, a Swedish businessman are the major shareholders. Mr. Beckmann with the assistance of a professional management team runs the Company.

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TABLE 10: ASIA IFC investments 1996-2001 (www.ifc.org/projects/)Name Loan/ total budget Project description Sponsors/ investorsFranco-Vietnam Hospital, Vietnam 2001

$8.0mTotal budget $40.0m

A new tertiary hospital in Ho Chi Minh City.

Asian Development Bank, Bank for Investment and Development of Vietnam, Proparco (private sector arm of Agence Francaise de Developpement)

Philippines Asian Eye Institute (AEI) Total budget $4.2m

To establish the first centre providing a complete range of services for diagnosis and management of eye diseases.

Main sponsor :Lopez Group (the largest diversified conglomerate in the Philippines) through First Philippines Corporation –a holding company of the Lopez Group – and three other subsidiaries/ affiliates of the Lopez Group

Wanjie Cancer Hospital, China

$15m Total budget $59.0

Expansion of cancer centre includes the installation of a Proton Treatment System (PTS) to be housed in a new 600 bed facility.

Zibo Wan Jie Tumor a wholly owned subsidiary of Wanjie Ind Co.Ltd- a flagship company of the Wan Jie Group a non-state, limited liability company

Asian Hospital, Philippines

‘A’ loan $10m from own account‘B’ loan $10m from accounts of participating banks‘C’ loan $5 m convertible loan Total budget $91m

To construct and operate a 247-bed private tertiary hospital.

Vista Healthcare Pte.Asia LtdDr. Jorge Garcia and Ms. Evelyn Singson

Apollo Sri Lanka Hospital

Considering a $5m loan, and $1m equity/ quasi equity loanTotal budget $32m

To establish a 350-bed private hospital in Colombo

Apollo Hospital Group of India. Indian Hospital Corporation Ltd will help to design and manage the project

Duncan Gleneagles Hospital, India

$7m IFC loan and equity investment $1mTotal budget $29.4

To establish a 270-bed private hospital in Calcutta.

A joint venture between Duncans Goenka Group, India and Gleneagles Development Pte.Ltd Singapore. Gleneagles Management Services Pte Ltd will manage the hospital

Siliom-Gleneagles Hospital, Indonesia

‘A’ loan $8.3mquasi-equity loan $3.6Total budget $48m

To provide high-quality hospital care to residents of Greater Jakarta seeking private health care.

Gleneagles Hospital Company is the technical partner with 30% ownership70% owned by Lippo Land, Indonesian development company publicly traded

MedCen Samoa Ltd ‘A’ loan $8.3m and quasi A start up business which IFC’s Pacific Islands Investment facility

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http://www.ifc.org/projects/


equity $3.6mTotal budget $48m

will include 22 private bed hospital

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TABLE 11: CENTRAL/ EASTERN EUROPE IFC Projects 1996-2001www.ifc.org/projectsName Loans/budget Project details Ownership/ sponsorshipEuromedicis the leading provider of diagnostic imaging services and distribution and tendering services to hospitals in Hungary, 2001

Loan $13mTotal budget$33m

The project involves: (i) expansion of the existing network of Euromedic diagnostic imaging centres in Hungary; (ii) establishment of a network of diagnostic imaging centres in other CEE countries; and (iii) establishment of a network of hemodialysis centres in the region. Most centres are located in local hospitals and space is leased from the associated hospital.

Owned by: RPM Partners – a privately held Dutch investment companyGE Equity – a private equity arm of GE capitalDresdner Keinwort Benson private equity - a private equity arm of Dresdner BankGlobal Environment Fund – international investment fund

New Medical Centre, St.Petersburg, Russia 2000

Loan $2.25mTotal budget$9m

The new medical centre will have a range of specialist out patient clinics, clinical laboratories and a small surgical unit. The project will be managed by Tohtoritalo Oy, a Finnish company running family medicine clinics.

It is 72% owned by Scanfert Oy, a Finnish company that runs general and infertility clinics in Finland and Portugal.

Medicover offers coordinated health care services to companies and individuals, serving approx. 20,000 members, operates clinics in Poland, Romania, Hungary, and Estonia 2000

Loan $7mTotal budget$22m

The project is designed to expand the existing Medicover operations in Central and Eastern Europe through (i) establishment and operation of a network of outpatient clinics; (ii) development and marketing of new services; and (iii) upgrade of management and information systems.

ORESA Ventures (ORESA), a Swedish venture capital company with interests in health care, consumer goods, and distribution sectors. It is listed on the Stockholm stock exchange. ORESA owns 68.2% of Medicover's shares.

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TABLE 12: LATIN AMERICA IFC projects (1996-2001) www.ifc.org/projects Name of project (date approved)

Loan/ total budget Project description Ownership/ shareholders / sponsors

Salutia, Argentina - a privately owned healthcare connectivity company2001

Considering equity investment $2.5Total budget$12.5m

Providing payer/provider transactions in Argentina and Brazil

It has 30 share holders includingMerrill Lynch Global Emerging Markets PartnersUBS Capital and NAP Acquisition/ Newbridge Latin America

Innovative Health Services, Brazil- a holding company to support new ventures to provide services for health care industry1999

$6.25 loanProposed capital budget $25m

IHS will target areas such as homecare, occupational and preventive medicine, prescription benefit management, public and private hospitals management, rehabilitation centres and outsourced hospitals services such as laundry

30% owned/ by the ICATU group, controlled by the Almeida Braga Family -Brazil 30% owned by Jose de Mello Saude (JMS) part of the Jose de Mello group – a Portuguese group operating in different sectors including health

Red Sanitaria Hospiten,Dominican Republic

‘A’ loan $11.0‘B’ loan $11.0Total budget $44m

Four hospitals to be built in four tourist areas of the Dominican Republic.

Red Santiaria Hospiten, a health care network based in Tenerife Island, Spain by Dr.Pedro Luis Cobiella and family

Laboratorio deAnalises e Pesquias ClinicasGastao Fleury s/c Ltda1999

‘A’ loan $9mEquity investment $6Total budget $58m

To establish a main laboratory centre as well as building 8 new collection and diagnostic centres and renovating existing unit.

Owned by 19 physicians with equal participation in the company’s capital organised as a limited partnership. Fleury aims to become a stock company (SA). 17 of the Fleury partners are also quota holders of Transinc a company which owns the land and building in which part of the existing operations are located

CIMA Consorcio SA de CV, Mexico1998

‘C’ loan $6m to Consorcio‘C’ loan $7m Cima Hermosillo‘A’loan 47m to Cima PueblaTotal budget $20m

To restructure the debt of CIMA Hermosillo, build a medical office building near to Hermosillo Hospitals and construct a new hospital in Puebla

International Hospital Corporation

Hospital Privado de $9.6m loan To develop, renovate and reorganise The hospital is owned by the doctors

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Cordoba (HPC), Cordoba, Argentina

Total budget$20.2m

existing facilities, acquire new equipment, create satellite medical centres, upgrade information systems and refinance short term debt

who work at the hospital or families of doctors who have retired from the hospital.

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TABLE13: LATIN AMERICA IFC project NOT FOR PROFIT HOSPITALS American British Cowdray Medical Centre IAP (Hospital ABC) Mexico City, Mexico

‘A’ loan $20mSyndicated ‘B’ loan $20mStandby loan $10mTotal budget $82m

Hospital ABC is a 200 bed non-profit hospital with philanthropic objectives and whose profits must be reinvested. It offers a range of diagnostic, medical and surgical services. The project involves the construction of a new hospital facility consisting of out patient services and a specialised day centre (including surgery) related diagnostic services, 24 hour emergency services, preventive centre, 60 beds and medical offices. The facility will also include a welfare clinic to deliver services to the poor (within the Hospital ABC mandate).

Governed by a Board of volunteers, Mexican and ex-patriate individuals

Sociedade Hospital Samaritano, Sao Paulo, Brazil

‘A’ loan $20mTotal cost $20m

Sociedade Hospital Samariano is a not for profit institution. The project will allow the modernisation of existing facilities – expansion of inpatient and outpatient facilities.

64 associates including members of the American and British medical and business communities – they fulfil the role of shareholders.

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An analysis of International Finance Corporation (IFC) projects in Africa shows very limited investments by private equity investors or companies but more direct personal investments by doctors. The lack of involvement of private equity investments in Africa is probably due to the lack of financial and organisational expertise as well as limited market for private health care.

The main focus of investments is in the development of the private hospital sector. Investments cover the construction of new hospitals or extensions to existing hospitals. One project involves investing to strengthen a managed care company in Kenya.

IFC health care investments in Asia are being made in high technology and hospital health care projects. IFC investments have been made with Asian companies that can be grouped as:-

Specific health care companies , for example - Vista Healthcare Pte Asia Ltd (acquired in 2001 by BUPA), the Apollo Group of India, Gleneagles Development Pte.Ltd.

Conglomerates , for example - Lopez group (the largest diversified conglomerate in the Philippines), Lippo Land, an Indonesian Development company which is publicly traded.

The IFC hospitals projects sometimes work with a technical expertise partner which is often provided by health care management companies e.g. India Hospital Management Corporation Ltd and is separate from financial sponsorship.

Two of the IFC health care projects have been mentioned earlier: Euromedic and Medicover. Both illustrate the involvement of private equity financing as well the IFC in health care projects that are developing infrastructure for health care in Central and Eastern Europe. Euromedic is developing diagnostic centres with high technology equipment to diagnose and treat non-communicable diseases, e.g. renal care. Medicover is involved in health insurance, delivery of health care services and employment of health care staff and is an example of vertical integration in health care. The aim of both projects is to expand activities into more countries.

The third IFC project is to develop a new medical centre in St.Petersburg. The sponsor/ partner is a Finnish company, Scanfert Oy, that runs infertility clinics in Finland and Portugal. A Finnish health management company, Tohtoritalo Oy, will manage the project.

Although the majority of IFC health care projects in Latin America are hospital developments, there are also three other types of

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health care project, which are indicative of future directions in health care investment.

Two projects involve companies that have been set up to manage investments and services. The International Hospital Corporation develops and manages investor-owned healthcare facilities in Latin America and works closely with the Latin Health Fund. It works with CIMA Consorcio SA de CV and hospitals that operate under the CIMA brand name.

Innovative Health Services, Brazil, is a holding company that will support new ventures and early stage development companies to improve the effectiveness and efficiency of the health care industry. It is 30% owned by the ICATU group controlled by the Almeida Braga family, Brazil. It is also 30% owned by Jose de Mello Saude (JMS), part of the Jose de Mello group, a Portuguese group operating in different sectors including health and also involved in public-private health care projects in Portugal.

Salutia is an e-health company that has been set up to improve health care through the use of new information communications technologies and is operating in Argentina and Brazil. Set up in 1999, it has quickly attracted equity investors, such as Merrill Lynch, Newbridge and UBS Capital as well as the IFC to invest in technology, infrastructure and human resources.

MULTI LATERAL INVESTMENT GUARANTEE FUND (MIGA)

The Multilateral Investment Guarantee Agency (MIGA) was set up in 1988 as a member of the World Bank Group, to promote direct foreign investment into developing countries. MIGA encourages foreign investments into countries by providing political risk insurance (guarantees) to investors and lenders. It also works to develop the capacity of countries to attract and retain investments. It supplements the work of the International Bank for Reconstruction and Development, the International Finance Corporation and other international development financial institutions.

TABLE 14: Multi-lateral Investment Guarantee Agency (MIGA) - Brazil

MSF Funding LLC (MSF) for financing of medical equipment. MIGA issued $90m guarantee for financing of capital markets issue, providing international finance at lower interest rates.

MSF Holding was set up by IFC initially forming a joint venture with DVI Inc (a company financing leasing of medical equipment but previously owning hospitals) to form MSF Cayman. DVI Inc. is a majority shareholder of MSF Holdings. The Netherlands Development Finance Co, and Philadelphia International Equities are also shareholders.

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TABLE 15: Multi-lateral Investment Guarantee Agency (MIGA) - Bosnia

International Dialysis Centre Banja Luka, Bosnia to set up and manage a renal dialysis centre within an existing hospital.

MIGA provided $1.3m guarantee for International Dialysis Centers BV, based in the Netherlands

MSF Holding was originally set up by IFC to form a joint venture with a company DVI Inc, that finances leasing medical equipment but which had previously owned hospitals to form MSF Cayman. This was based in the Cayman Islands. DVI Inc is now a majority shareholder of MSF Holdings together with the Netherlands Development Finance Co., and Philadelphia International Equities. MIGA has provided a guarantee for $90m for MSF Funding LLC (MSF) to fund financing of medical equipment.

In Bosnia, MIGA is providing a guarantee of $1.3 million for International Dialysis Centers BV to set up and manage a renal dialysis centre within a hospital. Although the size of the guarantees are very different, both projects show how the provision of high technology medical equipment and other diagnostic and treatment facilities are investments similar to some IFC health care projects and private investment priorities.

PRIVATE SECTOR DEVELOPMENT

In many developing countries, there is a lack of corporate infrastructure to manage investments. As a result, many private equity funds have either developed alliances or partnerships with companies that have the capacity and skills to manage investments or have set up new companies to oversee the investment. In some cases, venture capital companies have become directly involved in running the investment activity. In this sense, venture capital investors can play an important role in developing the extent of the private sector. The International Finance Corporation also provides loans and equity investments for the development of holding companies and other forms of financial infrastructure.

Many governments have investment corporations linked to international development ministries that provide support for the development of the private sector. In Norway, Sweden and Finland, the international investment companies (Norrfund, Swedfund and Finnfund) have no involvement in health care investments. In the UK, the CDC (previously the Commonwealth Development Corporation) has health care as a defined priority for investment although it has not made any investments yet.

The Netherlands Development Finance Company is one of the investors in the MIGA project in Brazil. The US Overseas Private

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Investment Corporation (OPIC), is an independent federal agency that mobilises American capital for investment in developing countries. It has provided expertise for the Texas Pacific Group, which is linked to Newbridge LA, an investor in Latin America.

HEALTH FUTURES AND THE PRIVATE SECTOR

The pattern of disease is changing in many regions of the world. Infectious diseases are still major causes of mortality and morbidity in many low income countries, such as HIV/ AIDS, tuberculosis, malaria. Non-communicable diseases are major sources of mortality and morbidity in high income countries but are also becoming more widespread in low income countries. This will have major implications for health care demand and treatment in many countries. CHD/CVD and cancers require often expensive diagnostic tests and high technology treatments. The rise in mental health problems is also becoming a global health issue which will increase the demand for mental health services.

Demographic change is also taking place in many countries with a growing ageing population. In many African countries where the incidence of HIV/AIDS in the adult population is between 10-30%, the older population is unlikely to grow as rapidly as in other regions of the world. For expanding older populations, there will be an increase in non-communicable diseases often characterised by long term chronic conditions which require long term health care.

The changing patterns of mortality and morbidity and a growing older population, will influence the demand for health care. There will be a growing demand for high technology diagnosis and treatments for non-communicable disease as well as more labour intensive care for long term chronic conditions often delivered in people’s homes. This will impact on the existing costs of health care as well as the skill mix required from health care workers. In many high income countries these changes are already leading to debates on the future financing of health care and the future role of public and private provision.

The main individual risk factors linked to the three main non-communicable diseases are smoking, diet, physical activity, alcohol. Preventive health strategies for non-communicable diseases tend to stress more individually focused measures such as changes in diet and increased physical exercise. These provide opportunities for private companies to provide products and services, especially in provided in partnership with health insurance companies with the aim of reducing demand for services. However factors that also influence the determinants of health, such as improved housing or increased income, are also important for reducing demand for health care services but are the responsibility of non-health sectors.

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They are not necessarily a source of future services for private health care companies.

Demographic changes and resulting changes in the financing and demand for the health care have implications for the private health care sector and investments will be influenced by the interpretation of these changes. Investment companies often seek information on which to base their investments through private and non-profit research and consultancy centres that specialise in developing visions of the future. Futures research is used by the business sector to generate views about how economic, social, political and environmental trends will interact to shape future societies. Examples of three global consultancy groups that have contributed to developing “health futures” are outlined below.

The healthcare practice of one of the largest global consultancy groups PriceWaterhouseCoopers (PWC) published a report “HealthCast 2010 Smaller World, Bigger Expectations” in 2000. It was aimed at PWC health care clients. The report was informed by a survey of policy makers, health system managers, health care employers, doctors, insurers and medical suppliers in US, UK, Finland, Spain, Netherlands, Germany, France, New Zealand, Canada and Australia about future health trends and the implications for the health care industry.

The survey results showed that the respondents felt that the amount of money spent on health care was growing in most developed countries because societies were getting wealthier. Technical advances were perceived as being able to contribute to cutting the costs of health care but were more than offset by an ageing society, increased health consumerism, biotechnology and medical advances.

Survey respondents also felt that increasing costs of health care took away money for spending on other consumable goods. Although health expenditure was considered to contribute to economic growth, decreasing health expenditure was also seen as the key to economic growth. The prospect of an increasingly older population with a decreasing working population is viewed with some concern. The impact will be strongest between 2010 and 2040.

The report also felt that the two major systems of health care financing – health care insurance through an employer and other systems where people have a right to health care (whether from taxation or social insurance) will converge in the future.

One of the major conclusions drawn from this survey was that the customer would play a key role in health care demand in the future.

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Interestingly, this was seen as potentially problematic. Quality, efficiency and customer satisfaction will be key to accessing capital. Resources need to be allocated for health workers to be retrained to deal with more consumers. Insurers must stress prevention because early detection and intervention will decrease costs.

This report shows that there are several underlying assumptions about the private sector view of health care futures. More demanding consumers and increased consumer spending on health care are seen as opportunities but also challenges for the future. The Institute for the Future, a U.S. futures thinktank, together with A.T.Kearney (the management consultancy arm of EDS) organised the Healthcare Future Forces Leadership Roundtable in Venice, Italy, held in June 2001. It was the first of what will be an annual by-invitation-only gathering of top business leaders representing segments cross the healthcare industry spectrum, as well as top academics in the field. The three themes considered were:• Assessing the impact of care customisation on the delivery and management of healthcare • Assessing the impact of consumerism on the management and delivery of healthcare services • Assessing the impact of information and communication technology on all aspects of the healthcare system.

A third source of futures thinking for the private health care providers and investors is the Institute of the Americas. A meeting in July 2000 organised in collaboration with the International Finance Corporation (IFC) looked at ‘Financing Private Health Care in Latin America’. The supporting paper raises a number of issues and challenges about investing in Latin America. These issues provide a useful insight into the type of concerns voiced by the private sector about investing in health care. These relate to:

What are the appropriate criteria for equity financing? Are the lending terms of IFC and other financiers consistent

with the nature of the business? What are the best strategies for obtaining reliable data? How should investors determine what infrastructure

(especially IT) needs to be created or imported and what elements of local health systems be allowed to continue?

How significant is the training component (to create good management skills) and how can this training be provided?

Other questions deal with specific barriers to investing in medical equipment/devices, telemedicine and pharmaceuticals. The focus is on the delivery of high technology, curative care and not on locally based primary health care. The questions raised by the Institute

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of the Americas suggest that investing in Latin America is seen as risky because of the lack of information available about existing health care companies and the nature of the health care business. There are also doubts about the efficiency and effectiveness of the current delivery of health care. Health care investors also raised questions about the lending terms of IFC.

RENAL HEALTH CARE

Renal care is a growing area of healthcare and part of a very competitive market. There is evidence that companies that manufacture drugs and /or equipment for the treatment of kidney diseases are also involved in the provision of health care. Multinational companies involved in renal care have combined operations that include:

healthcare – clinics for treating kidney disease renal products – products used during dialysis treatment blood compound technologies and blood bank technology –

This is an example of vertical integration of activities in the health care sector.

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TABLE 16: COMPANIES RUNNING DIALYSIS CLINICS, January 2001

Company Patients (share)

US (share) Europe (share)

Rest of world (share)

Fresenius 97,000 (9%) 73,900 (26.4%) 11,350 (4.8%) 11,750 (2.0%)Gambro 47,000 (4.4%) 38,300 (13.7%) 5,400 (2.3%) 3,900 (0.6%)DA Vita 41,000 (3.8%) 41,000 (14.6%)Renal Care group

16,000 (1.5%) 16,000 (5.7%)

Baxter RTS 16,000 (1.5%) 2,000 (0.9%) 14,000 (2.3%)

Kurtorium furDialyse

15,600 (1.0%) 15,600 (6.6%)

Dialysis Clinic Inc

10,700 (1.0%) 10,700 (3.8%)

Patienten-Heimversorgung

4,200 (0.4%) 4,200 (1.8%)

NationalNephrology

3,700 (0.3%) 3,700 (0.3%)

Satellite(ARC) 2,900 (0.3%) 1,500 (0.5%) 1,400 (0.1%)Braun Eurocare

1,700 (0.2%) 1,700 (0.7%)

Total patients with care provided by companies

256,400 (24%)

185,100 (66%) 40,250(17%) 31,050(5%)

Other careProviders

823,600 (76%)

94,900(34%) 194,750 (83%) 533,950 (95%)

Total no ofPatients

1,080,000 (100%)

280,000 100 235,000 100 565,000 100

Source: www.gambro.com

Over a million people were treated for kidney diseases in 2000. About half of those treated were in North America and Europe. The breakdown of patients treated by renal care companies in regional terms shows there are several different patterns of market coverage. The two largest companies, Fresenius and Gambro have clinics in the US, Europe and Latin America/ Asia. Four companies, DA Vita, Renal Care Group, Dialysis Clinic Inc, National Nephrology only have clinics in the US. Three companies Kurtorium fur Dialyse, Patienten-Heimversorgung, Braun Eurocare, treat patients only in German speaking countries in Europe. Baxter RTS has clinics in Europe and Latin America/ Asia but not in the US although it has other production facilites in the US. Baxter RTS treats the majority of its patients outside Europe. Satellite (ARC) provide services in the US (operating as Satellite Health) and in Asia as Asia Renal Care.

The majority of renal care patients are found in Latin America/ Asia but only 5% are treated by renal care companies. In the US, 66% of patients are treated by renal care companies and in Europe, 17% of

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http://www.gambro.com/


patients are treated by renal care companies. There is obviously some scope for expansion in Europe and Latin America/ Asia.

Merrill Lynch Global Fundamental Equity Research Department published a profile of the dialysis industry in September 2001 arguing that the production of dialysis products was no longer driving the industry because there is limited product growth possible as synthetic dialyses have become standard equipment (Kidney Machinations The Dialysis Industry could get bloody 11 September 2001). As a result, major companies will become service providers, for instance, running dialysis clinics, but may expand into other aspects of health care provision. Already Fresenius and Gambro had started to offer treatment for other aspects of patients’ care. This will have implications for existing health care companies.

AstraZeneca is another example of a multinational drug company, which is involved in cancer care provision through Salick Healthcare,Inc which provides services for diagnosis and treatment of cancer and treatment of kidney failure.

There are three major multinational companies involved in all three stages of renal health care. These are:

Fresenius Gambro Baxter RTS

The profiles of Fresenius, Gambro and Baxter RTS show that all companies began by manufacturing kidney dialysis equipment and products but have expanded their activities to include health care provision for kidney patients in the last decade. Providing health care services is a major part of the business of Fresenius in terms of both sales and employment. TABLE 17: THREE RENAL CARE COMPANIES

COMPANY FRESENIUS GAMBRO BAXTERBusiness sectors

Fresenius Medical Care: – clinics and services 74% salesFresenius Kabi: - a provider of products for nutrition and infusion therapy and ambulatory medical care Fresenius ProServe:- services as project development, consulting, and

Gambro Healthcare, 58% salesGambro Renal Products 35% salesGambro BCT (blood components) 7% sales

Total sales for these three business areas amounted to SEK 22.2 billion in 2000.

Medication delivery, which develops technologies and systems to improve intravenous medication delivery and distributes medical products BioScience, which develops biopharmaceutical and blood collection and separation products and technologiesRenal, which develops products and provides services to treat end-stage kidney disease.

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staff training to hospitals and other health facilitiesFresenius HemoCare: focuses on blood treatment and infusion technology

Sales Europe 32% North America

57% South America

5% Asia-Pacific

6%

Europe 28% North and

South America 61%

Asia, rest of the world 11%

Europe/ Asia/ Latin America + 50%

United States < 50%

Labourforce

49,974 in 2000 18,300 employed in 35 countries

43,000 employed worldwide

CONCLUSIONS

The links between private equity investments and health multinational companies are strongest in Latin America and to a lesser extent in Central and Eastern Europe.

Health care investing in developing countries is seen as involving considerable financial risk. Different regions can be characterised by varied financial capacities of the private sector, which limit investment unless holding companies or health management companies are set up to spread the risk. Investments in holding companies are a first step to developing this capacity. Private equity investors and some multi-national companies are involved in this type of investment.

The International Finance Corporation invests in health care projects and is involved in extensive development of the private health care sector in many countries. Some regions are characterised by different types of investments, e.g. holding companies, although direct hospital investments are the most common type of IFC investment.

The case of the global renal care industry shows companies previously involved in equipment and product development moving into health care provision. This raises questions about a) the implications of this trend for existing health care companies, b) whether other pharmaceutical companies will become vertically integrated with health care services and c) the implications for employment of health workers.

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