Asia Pacific Healthcare OutlookFocus : Malaysia

Analysis of Best Opportunities

4th February 2010

2

AGENDA

1. Overview of Healthcare Market : Key Takeaways

2. In-depth Sectoral Analysis, APAC and Malaysia

3. Summary : Best Opportunity Analysis, APAC and

Malaysia

3

AGENDA

1. Overview of Healthcare Market : Key Takeaways

2. In-depth Sectoral Analysis, APAC and Malaysia

3. Summary : Best Opportunity Analysis, APAC

4

Setting the Scene Outlook for Healthcare Industry from 2010-12

Source: Frost & Sullilvan ,2010)

Global Healthcare Market : 2009

• US and Europe were impacted in a major way by global crisis

• Asia also slowed down but not as much as the West

• Valuations were low and M&A was high, many smaller Biotech companies struggled

• Major organizational restructuring

occurred, along with portfolios being

reassessed

Global Healthcare Market : 2010-12

• Recovery of the markets to a large extent with strong growth in Asia

• Start of major patent expiries

• M&A activity down in the West but could be important in Asia, restructuring will continue

• Asia becoming increasingly important as a market and outsourcing hub

• 5Ps to drive market: Preventive, Preemptive, Personalized, Predictive, Personal Responsibility

5

Global vs. APAC: The New FrontierBy 2012 APAC expected to be close to 27% of global market

Source: Frost & Sullilvan ,2010)

247 277 311 348

815 880 906 934

0

200

400

600

800

1000

1200

1400

1600

1800

2009 2010 2011 2012

10621157

12181282

23.9% 27.2%23.2% 26.4%

CAGR

12.2%

CAGR

12.2%

CAGR

6.47%

CAGR

6.47%

Global & APAC Healthcare Revenues US$ Bn, 2009-2012

• By 2015 APAC could represent ~40% of global market!

Source: Frost & Sullivan

Rest of the World

APAC

6

Asia is however transitioningMoving toward a Multi–Polar World Order

Source: Frost & Sullilvan ,2010)

Asia Pacific Market : 2009

• Slowing down of GDP in mature markets – Japan and Australia took a big hit

• Global consolidation left a difficult mess for integration on a local level – job losses and portfolio realignment

• Price cutting and playing the margins game

• The bubble burst for Medical Tourism

• Asia started to set up infrastructure for offshoring and outsourcing for US/EU companies

Asia Pacific Market : 2012

• A shift in the center of the worldeconomically and strategically to Asia

• Asia to move from export led developmentto consumption led growth

• APAC the fastest growing pharma market and API production hub

• Increased government attention to primary and community based healthcare.

• Increased use of mobile technology in healthcare service delivery

• 2010 : Malaysia Innovation and Creativity year

7

AGENDA

1. Overview of Healthcare Market : Key Takeaways

2. In-depth Sectoral Analysis, APAC and Malaysia

3. Summary : Best Opportunity Analysis, APAC

8

APAC Pharmaceuticals & Biotechnology MarketEarlier diagnosis improves disease management and length of therapy

Note: All figures are rounded; the base year is 2009. Source: Frost and Sullivan

Market Drivers

Market Restraints

� Long term use of multiple and specialized drugs for the ageing population

� Government support for generics and biosimilars

� Enhanced diagnosis and management in oncology, cardiovascular, pain etc

� Unresolved political and regulations issues

� Quality concern of generics & counterfeits

�Government tenders favour local manufacturers

180 203.5 230 260

570 621.5 636 649

0100200300400500600700800900

100011001200

2009 2010 2011 2012

Rest of the World

APAC

24.6% 28.5%

CAGR

6.6 %

CAGR

6.6 %

CAGR

12.9 %

CAGR

12.9 %

Pharma & Biotech Revenues, US$ Bn, 2009-2012

APAC Share

750825

866909

9

Malaysia Pharmaceuticals & Biotechnology MarketGrowth of cancers and lifestyle diseases propel the market

Pharma & Biotech Revenues, US$ Mn, 2009-2012

Market Drivers

Market Restraints

� Large number of counterfeits and concern for quality of generics

� Growing usage of traditional/herbal medicine

� Push of clinical studies for Bioequivalence

• Growing demand for lifestyle diseases drugs

e.g. cancer, cardiovascular, diabetes

• Drug price controls lacking in private sector

• Strong government support for generics

10

� Malaysia Cardiovascular market 2010 :~ US$ 100mn. Over 16% of all deaths caused by heart and pulmonary circulation disease

� Malaysia Alimentary tract & Metabolic diseases market 2010 ~ US$ 95 mn

� Prevalence of diabetes : 2010 : ~1.8 mn. Large potential for diagnosis and treatment as nearly 80% of persons with diabetes are undiagnosed

0

�0

�0

Source: Frost & Sullivan.

GenericsGenerics

Cardiovascular and metabolic

diseases

Cardiovascular and metabolic

diseases

NutraceuticalsNutraceuticals

OncologyOncology

� Malaysia Herbal/Traditional products market 2010 : ~ US$ 165 mn; CAGR ~ 15%

� Strong potential to develop novel nutraceuticals from inadequately investigated biodiversity

� Push for clinical studies for proof of efficacy

Top Growth Opportunities : Malaysia Pharmaceuticals and Biotech Market

� Malaysia generics market 2010 : ~ US$ 416 mn; CAGR ~ 8%

� 80% in terms of volume but only 40% in terms of sales revenues

� Opportunities for domestic manufacturers of good quality generics to expand or consolidate for greater economies of scale

� Malaysia Oncology market 2010: ~US$ 30 mn

� Growth from early diagnosis of cancers and targeted therapy in top 3 types of cancer: lung cancer, breast cancer and colorectal cancer

11

APAC Medical Devices MarketTransition to a mindset of monitoring

Note: All figures are rounded; the base year is 2009. Source: Frost and Sullivan

46.5 51.3 56.5 62.3

156.5 163.7 171 178.4

0

50

100

150

200

250

300

350

2009 2010 2011 2012

Rest of the World

APAC

203 215 227.5 240.7

23.8% 25.8%

Market Drivers

Market Restraints

•Safety, accuracy, efficiency, cost

•Silver industry devices

•Convergence of devices and pharma products

•Regulatory and reimbursement hurdles

•Lack of sufficient distribution networks

•Inadequate training/certification for allied staff

Medical Devices Revenues, US$ Bn, 2009-2012

APAC Share

CAGR

5.8%

CAGR

5.8%

CAGR

10.2%

CAGR

10.2%

12

Malaysia Medical Devices MarketGrowing demand for disposables buoys up market

Medical Devices Revenues, US$ Mn, 2009-2012

Market Drivers

Market Restraints

• Growing global demand for disposable surgical products• Growth in cardiovascular disease and orthopedic procedures• Strengthening of legal framework for IP for medical devices manufacturers

• Medical Devices Act to be fully implemented in 2010- unregistered companies may no longer be able to supply products

•Distribution challenges in rural areas restricts growth

13

� Increasing number of infectious diseases & hospital acquired infections e.g. H1N1, MRSA, resulting in a strong move toward disposables

� Malaysia manufacturers already implement technological advances in disposables esp. medical gloves, catheters, etc�0

�0

�0

Top Growth Opportunities : Malaysia Medical Devices Market

Self monitoringdevices

Self monitoringdevices

Disposables Disposables

Implants Implants

�Opportunities to set up design & manufacturing innovation clusters for high end medical devices e.g. cardiovascular, orthopedic implants, etc

� Under Industrial Malaysian Plan 3 US$ 234 M (RM 800 mn) targeted as investment in medical devices/equipment for 2010

Source: Frost & Sullivan.

� Paradigm shift towards wellness and prevention drives the market for health monitoring products e.g. glucose meters, blood pressure meters, etc

� Silver industry needs drive self monitoring segment ; in 2010~ 1.3 mnMalaysians aged 65 years +

14

Note: All figures are rounded; the base year is 2009. Source: Frost and Sullivan

APAC Clinical Diagnostics Market Shift in business model from instrumentation to service revenues

6.9 7.3 7.8 8.5

31.7 33.6 35.6 37.5

0

10

20

30

40

50

60

2009 2010 2011 2012

Rest of the World

APAC

38.640.9

43.446

17.8% 18.5%

Market Drivers

Market Restraints

�Lab automation

�Home care monitoring

�Emphasis on early detection

�High cost of genomics and proteomics tests

�Mutually exclusive target customers

�Reimbursement issues

Clinical Diagnostics Revenues, US$ Bn, 2009-2012

APAC Share

CAGR

7.3%

CAGR

7.3%

CAGR

6%

CAGR

6%

15

Malaysia Clinical Diagnostics Market Screening for infectious diseases

Clinical Diagnostics Revenues, US$ Mn, 2009-2012

Market Drivers

Market Restraints

� Market still centered around secondary and tertiary care providers; lack of infrastructure for testing at primary care level� Lack of R&D expenditure on diagnostics for new diseases e.g. Avian flu, chicunguniya� Continued reliance on imported products and low competition from domestic players

� Growth in chronic and metabolic diseases drives increased use of molecular testing

� Increased number of screenings for infectious diseases e.g. HIV, tuberculosis, dengue

16

�0

�0

�Opportunities in laboratory automation in the hospital and pathology laboratory sectors for greater reliability, precision and cost efficiencies : total lab automation, automated analyzers, automated pre and post analytical processes

Clinical Chemistry

Clinical Chemistry

Molecular Diagnostics

Molecular Diagnostics

Diagnostics for Infectious Diseases

Diagnostics for Infectious Diseases

Top Growth Opportunities : Malaysia Clinical Diagnostics Market

�Partnerships and alliances to commercialize newly developed diagnostics for diseases such as: tuberculosis, HIV, malaria, dengue, H1N1

Source: Frost & Sullivan.

� Fastest growing clinical diagnostics sector in APAC : CAGR ~ 18%

�Market is driven by growth in biomarkers for cardiovascular diseases & oncology.

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Note: All figures are rounded; the base year is 2009. Source: Frost and Sullivan

*Healthcare IT includes: Software, Hardware, IT services and Lifesciences IT

Asia Pacific Life sciences and Health IT Market*Interoperability challenges hinder adoption

7.1 7.9 8.8 9.8

43.5 46.7 49.6 52.7

0

10

20

30

40

50

60

70

80

2009 2010 2011 2012

Rest of the World

APAC

14.5% 15.7%

Market Drivers

Market Restraints

�Operational efficiency �Strong and sustained demand for healthcare services �Consumer demand for quality and access to information

�Interoperability

�Integration

�Lack of skilled resources

Lifesciences & Healthcare IT, US$ Bn, 2009-2012

CAGR

7%

CAGR

7%

CAGR

11.3%

CAGR

11.3%

APAC Share

50.654.6

58.462.5

18

Malaysia Health IT Market Government focus on improved healthcare delivery

Health IT Revenues, US$ Mn, 2009-2012

Market Drivers

Market Restraints

*Health IT includes: Software, Hardware, IT services, Networking

� Emphasis on improved patient care , decision making and reduced medical errors� Need for efficient data management, cost effective work flow processes�Thrust on medical tourism

� Absence of well defined standards and reforms i.e. HIPAA

� Inadequate end user compliance to rapidly changing technology

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�0

�0

�0Healthcare IT Software,

Hardware & Services

Healthcare IT Software,

Hardware & Services

ERP,SCM

Systems

ERP,SCM

Systems

Healthcare Standards

Healthcare Standards

Top Growth Opportunities : Malaysia Health IT Market

� Malaysia market 2010 (backoffice ERP) : ~US$ 35 mn; CAGR ~7.5%

� Demand from new and current hospitals, clinics, specialty centers

� Malaysia’s 2020 Multi-Media Super Corridor project aims to enhance healthcare standards like HL7,SNOMED,ICD10 with telemedicine and medical informatics as crucial components

� Funds allocated to expand tele-Health and tele-consultation services, sharing of health records and setting up a National Health Informatics Center

� Spending on core clinical applications 2010 : ~ US$ 10 mn; CAGR : 23.6%

� Spending on departmental systems 2010 :~ US$ 17mn; CAGR : ~18.9%

� Growing need for hardware and systems integration and consulting services with continued investments in clinical applications and departmental systems

ERP : Enterprise Resource PlanningSCM : Supply Chain Management

Source: Frost & Sullivan.

20

APAC Medical Imaging MarketTurnkey projects drive double digit growth in Asia

Note: All figures are rounded; the base year is 2009. Source: Frost and Sullivan

6 6.8 7.7 8.6

13.8 14.2 14.6 15

0

5

10

15

20

25

30

35

40

2009 2010 2011 2012

Rest of the World

APAC

19.8 21 22.3 23.6

Market Drivers

Market Restraints

�Rise in turnkey projects

�Increasing corporate wellness programs

�Integration of Imaging with information systems

�New customer sets to be addressed

�Price erosion

CAGR

6%

CAGR

6%

CAGR

12.7%

CAGR

12.7%

Imaging Market Revenues, US$ Bn, 2009-2012

21

Malaysia Medical Imaging Market Focus on digitization

Medical Imaging Revenues, US$ Mn, 2009-2012

Market Drivers

Market Restraints

*Health IT includes: Software, Hardware, IT services, Networking

• Price erosion

• Inability to adapt to rapid technology changeshinders adoption and usage

•Long purchase process prolongs replacement cycle (mainly public sector)

• Move towards digitized solutions to enhance workflow efficiency•Increased wellness awareness encourages private health screening• Malaysia is destination of choice for patients from Islamic nations seeking medical services

22

�0

�0

�0

PACS PACS

Digital Imaging(CR /DR/CAD )

Digital Imaging(CR /DR/CAD )

MammographyMammography

Top Growth Opportunities : Malaysia Medical Imaging Market

� Malaysia market 2010 : ~US$ 3.1 mn; CAGR ~9.4%�Both private and public hospitals move towards digitized solutions,

creating opportunity for digital radiology solutions

�APAC market 2010: ~US$ 1.6 bn; CAGR ~11%�Penetration of entry level PET/CT �Continued efforts by College of Radiology to increase breast cancer

awareness

�Malaysia PACS market 2010 : ~US$ 5.6 mn; CAGR ~ 12%� Focus on PACS as institutions continue to integrate Imaging with IT and

transition to Digital Radiology Systems to enhance workflow efficiency, patient throughput and patient care

� Launch of new products; PACS vendors expand in Malaysia

Source: Frost & Sullivan.

23

IMPACT

DRIVER TYPE OF DEMAND Private Public 2010 - 2012 2013 - 2015 2016 +

Medical tourism General & Specialty Hospitals √√√√ High High High

Medical Suites √√√√

Changing Disease

Pattern

Specialty Centres/ Hospitals √√√√ √√√√ High High High

Rising Life Expectancy Long-term Care Facilities √√√√ Medium Medium High

Specialty Centers/ Hospitals

Geriatric Centers

√√√√ √√√√

Health

insurance & its

coverage

General & Specialty Hospitals √√√√ √√√√ Low Medium High

Primary care Facilities √√√√ √√√√

Government policy Medical teaching institutions

and/ or Universities

General & Specialty Hospitals

√√√√ √√√√ High High Medium

Primary Clinics √√√√ √√√√

Malaysia Healthcare Services MarketOpportunity in Healthcare Real Estate Market

24

Projected Valuation Trend for Malaysian

Private Hospitals (2007 - 2010)

948.5

845.4749.0

690.2

0

100

200

300

400

500

600

700

800

900

1000

2007 2008 2009 2010

Year

HC

RE

Valu

e (U

SD

Million)

Projected Valuation Trend for Malaysian Private

Clinics (2007 - 2010)

3.54 3.924.38

4.90

8.66%

8.3%

8.1%

0

2

4

6

8

10

2007 2008 2009 2010

Year

Rental Income

(USD Millions)

7.8%

8.0%

8.2%

8.4%

8.6%

8.8%

Rental Value

Growth %

Rental Value Rental Value Growth

Malaysia Healthcare Services MarketOpportunity in Healthcare Real Estate Market

Note: Market valuation for private hospitals include maternity and nursing homes, and are based on the annual reports provided by the hospital owners, and estimated value per bed. Valuation for clinics is based on the average commercial shop houses rates and assumptions within the cluster locations.

25

AGENDA

1. Overview of Healthcare Market : Key Takeaways

2. In-depth Sectoral Analysis APAC

3. Summary : Best Opportunity Analysis APAC and

Malaysia

26

Where to place your bets in 2010- 2012 : APAC and Malaysia

Time

Gro

wth Molecular

Diagnostics

Silver Industry/

CV, Orthopedic

POCT/Self Monitoring

Vaccines/

Biologics

Endoscopy

EMR/

EHR

Wellness

Products

Oncology

Value based

Imaging

INNOVATIONTRIGGER

SUPERGROWTH

NORMALISATION LEADERSHIP

IndiaChina

S.Korea

SingaporeMalaysia

Vietnam

Healthcare

Services

Source: Frost & Sullivan.

APAC

Malaysia

Generics

27

Thank You