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.

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Contents

1 APAC Healthcare Market-Growth Drivers

2 Emerging Technologies-Innovation Platforms

3Choosing the Right Strategy-How Market

Leaders Strive

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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.

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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”.

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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.

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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

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Trend 2 : Demographics – Asia Overview

Ageing Young but ageing Young

Asian Demographics by Age Distribution

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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)

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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

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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

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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

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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

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Trend 8 : Human Resources - the Brain Drain

Source : Tekopak

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Trend 9 : Public Private Partnerships (PPP)

Public Private Partnerships (PPP) will be the way to go

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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.

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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

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Contents

1 APAC Healthcare Market-Growth Drivers

2 Emerging Technologies-Innovation Platforms

3Choosing the Right Strategy-How Market

Leaders Strive

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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

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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

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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.

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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

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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

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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

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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

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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?

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Frost & Sullivan Contacts

Nitin NaikVice President,Healthcare Asia Pacific,

+65.6890.0978nnaik@frost.com

Jasminder KaurPR ManagerHealthcare Asia Pacific,

+65. 6890 0937jasminder.kaur@frost.com