healthcare market dynamics
DESCRIPTION
Study on Current Healthcare Challenges by George BickerstaffTRANSCRIPT
George Bickerstaff Managing Director, M.M. Dillon Executive Chairman of The Global Leaders [email protected] +1.203.570.0478
Healthcare Market Dynamics
Overview - Executive Summary
§ The global healthcare market is broken
§ A key issue is the gap between innovators who need money and big players who have money but need innovation
§ Most innovators are in the West and most growth is in the East
§ Biotech's have innovations, and big Pharma has money, but they don’t effectively connect
§ The opportunity is to connect innovation with resources, efficiently
§ Connect, share, evolve
3
The Issues
The Global Healthcare market is broken, but there are investment opportunities
✔ Regulatory hurdles • Approval processes and delays
✔ Competition • Branded, generics, consumer, traditional
✔ Financial crises • Investments, debt, payers and exits
✔ Innovation • Biotech and VC survival challenges
4
Healthcare Industry Statistics
§ Market Size – $2.6 trillion, growing 11% pa over past five years – 3,000 public companies and 90,000 private companies – Dominated by pharmaceutical and biotechnology
§ Market Value – $3.6 trillion market cap, growing 9% pa over past five years – PE multiple and ROE of 18; TEV / EBITDA = 8.4x – Gross margin of 60% and net margin of 11%
§ Other Statistics – 5.9 million employees – $260 billion net debt (and increasing) – 10,000 patents issued – 900 products in pre-registration
5
Innovation and Influence Pyramid
$$$
Big Pharma
Biotech Companies
Universities, Scientist, Lab
6
• The entrepreneur • N: > 1 million
• Underfunded consolidators
• N: ~ 2,000
• Regulators • N: > 20
• Money but no innovation
• N: ~ 50
Market / Numbers
Innovation Landscape
8
Low Innovation High Innovation
Resource Poor
Resource Rich
Education Regulators
Biotech Big Pharma Big Pharma
Value creation – Proper mix of innovation, operations and capital
Biotechnology Companies: > 2,000 Cost of Capital: > 40%
Big Pharma Companies: ~ 50 Cost of Capital: < 10%
Opera@ons (Cri@cal Mass)
Innova@on (Scien@fic Risk)
Cost of Capital
9
What is capital and why does it matter?
Assets
Cash & Securities Receivables Inventories Plant & Equipment Intangibles
Liabili@es & Equity
Accounts Payable Accrued Liabilities Short Term Debt Long Term Debt Equity (Shares)
Low Cost
High Cost
Capital
Assets and liabilities should be matched, and currency exposures balanced..
10
The Opportunity
§ Match innovation with capital – Late stage biotechnology and medical devices – Carve out of mature products from big Pharma – Match IP with cash flowing businesses – Collaborate with universities
§ Mitigate risks – Match assets and liabilities and currencies – Proper corporate governance and transparency – Expert network systems
§ The future – Public private partners, and philanthropy – The “Drug Exchange” – a commodities type exchange – Networking with purpose – The Global Leaders
12
The way forward – The Global Healthcare Forum
13
Global Healthcare Forum San Francisco, CA January 10, 2012 Contact: George Bickerstaff ([email protected]) or Chensun Mills ([email protected])
The Global Leaders is proud to host its 2nd annual healthcare forum in San Francisco; the theme for the 2012 event is “Eliminating the Gap Between Innovation & Resources”. The conference will focus on connecting CEOs and other senior executives with institutional investors and business development executives who can help bring the pieces together in a rapidly changing landscape. The conference structure provides an opportunity to interact at all levels with keynote speakers, panel discussions and tables hosted by industry experts. Issues that will be addressed include: • Matching innovation with capital • How to mitigate risks; both financial and regulatory • The future of healthcare in a global market
Seating is limited; so register now at http://tglhealthcaresymposium.eventbrite.com/
About the Author
14
George Bickerstaff, Co-Founder and Chief Executive Chairman The Global Leaders Holdings LLC George Bickerstaff is the Co-Founder and Chief Executive Chairman of The Global Leaders Holdings LLC. The company is a digital community for senior level executives in Business, Government, Education and Philanthropy. There are over 400,000 members in the TGL network who have held senior executive leadership positions in companies that drive over 25% of the world’s GDP. In addition, he is also a Managing Partner a M.M. Dillon & Co. as Managing Director in 2005. M.M. Dillon & Co. is an investment bank focused on funding and supporting domestic and international private and public companies. Prior to joining M.M. Dillon & Co., George was Chief Financial Officer of Novartis Pharma AG located in Basel, Switzerland. George has been instrumental in establishing the strategic, operating and financial direction of numerous private and public companies. During his career he has provided financial leadership for mergers and acquisitions valued at more than $50 billion and has funded and operated various venture capital businesses. George has a broad range of operating and finance experiences. After receiving engineering and business degrees, he started his career at General Electric in manufacturing and then moved into finance. He subsequently joined The Dun & Bradstreet Corporation where he held various senior finance positions including Chief Financial Officer of IMS Health, the largest global publically traded healthcare information services provider. George has been on the board of directors and board of trustees of more than a dozen international private and public companies and philanthropic organizations. He has been a guest speaker on global finance at various international industry associations and graduate business schools, including Harvard Business School. George has lived and worked in five countries on four continents.
Global Healthcare Sector – Top Ten Public Companies
18
Sorted in declining revenue Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
McKesson Corporation (NYSE:MCK) Healthcare Distributors 1 16 5 1 114,614 18,091 8 0 17 18
Cardinal Health, Inc. (NYSE:CAH) Healthcare Distributors 1 17 4 11 102,644 14,520 8 0 15 27
Unitedhealth Group, Inc. (NYSE:UNH) Managed Healthcare 5 19 9 10 98,364 50,816 6 1 11 31
AmerisourceBergen Corporation (NYSE:ABC)
Healthcare Distributors 1 23 3 9 79,525 10,280 7 0 15 18
Pfizer Inc. (NYSE:PFE) Pharmaceuticals 13 10 9 2 67,587 148,553 7 2 18 7
Medco Health Solutions, Inc. (NYSE:MHS) Healthcare Services 2 34 7 (30) 67,343 18,938 8 0 15 (8)
Johnson & Johnson (NYSE:JNJ) Pharmaceuticals 18 20 1 18 63,396 177,356 9 3 15 2
WellPoint Inc. (NYSE:WLP) Managed Healthcare 5 12 (1) 2 59,293 24,189 6 0 9 16
Novartis AG (SWX:NOVN) Pharmaceuticals 18 16 16 20 56,629 141,885 9 3 14 (2)
Roche Holding AG (SWX:ROG) Pharmaceuticals 18 92 (11) 59 54,800 135,553 8 3 15 8
Total / Average (equal weight) 3244 Companies 31 (134) 157 46 2,497,584 3,273,688 17 10 25 17
Global Pharmaceutical Industry – Top Ten Public Companies
19
Sorted in declining revenue Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
Pfizer Inc. (NYSE:PFE) Pharmaceuticals 13 10 9 2 67,587 148,553 7 2 18 7
Johnson & Johnson (NYSE:JNJ) Pharmaceuticals 18 20 1 18 63,396 177,356 9 3 15 2
Novartis AG (SWX:NOVN) Pharmaceuticals 18 16 16 20 56,629 141,885 9 3 14 (2)
Roche Holding AG (SWX:ROG) Pharmaceuticals 18 92 (11) 59 54,800 135,553 8 3 15 8
Bayer AG (DB:BAYN) Pharmaceuticals 4 8 11 (0) 52,646 51,265 6 1 24 (20)
Merck & Co. Inc. (NYSE:MRK) Pharmaceuticals 6 5 21 0 46,951 101,605 6 2 36 (11)
Sanofi (ENXTPA:SAN) Pharmaceuticals 13 9 (2) 0 46,441 94,758 6 2 16 (1)
GlaxoSmithKline plc (LSE:GSK) Pharmaceuticals 12 36 (7) (1) 43,869 108,209 6 3 22 5
Abbott Laboratories (NYSE:ABT) Pharmaceuticals 14 22 13 32 37,299 82,078 9 2 16 (1)
AstraZeneca PLC (LSE:AZN) Pharmaceuticals 25 36 (2) 7 33,237 62,868 4 2 8 (11)
Total / Average (equal weight) 919 Companies 14 (23) 187 65 896,348 1,913,532 19 8 25 28
Global Biotechnology Industry – Top Ten Public Companies
20
Sorted in declining revenue Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
Amgen Inc. (NasdaqGS:AMGN) Biotechnology 30 19 2 11 15,322 53,126 7 3 12 1
Gilead Sciences Inc. (NasdaqGS:GILD) Biotechnology 34 42 2 (8) 8,000 31,190 8 4 12 7
Biogen Idec Inc. (NasdaqGS:BIIB) Biotechnology 22 18 5 16 4,796 25,002 12 5 23 79
CSL Ltd. (ASX:CSL) Biotechnology 22 24 (6) (14) 4,493 16,367 12 4 17 (1)
Celgene Corporation (NasdaqGS:CELG) Biotechnology 24 19 38 22 4,290 30,419 18 7 30 14
Cephalon Inc. (NasdaqGS:CEPH) Biotechnology 19 19 21 47 2,971 6,351 6 2 12 28
Actelion Ltd. (SWX:ATLN) Biotechnology (7) (8) (4) (16) 2,227 4,411 6 2 (35)
Grifols, S.A. (CATS:GRF) Biotechnology 6 6 22 121 1,653 5,892 32 4 45 24
Talecris Biotherapeutics Holdings Corp. Biotechnology 11 24 6 34 1,617 10 2 21 20
United Therapeutics Corporation (NasdaqGS:UTHR)
Biotechnology 20 16 48 28 689 2,340 8 3 17 (28)
Total / Average (equal weight) 720 Companies 99 (270) 354 54 65,926 318,490 28 25 31 (8)
Global Healthcare Equipment Industry – Top Ten Public Companies
21
Sorted in declining revenue Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
Medtronic, Inc. (NYSE:MDT) Healthcare Equipment 19 20 4 12 16,209 34,953 8 2 12 (1)
Baxter International Inc. (NYSE:BAX) Healthcare Equipment 16 32 6 19 13,542 31,777 9 2 15 15
Covidien plc (NYSE:COV) Healthcare Equipment 17 19 8 17 11,166 22,703 8 2 13 13
Olympus Corporation (TSE:7733) Healthcare Equipment 0 2 (5) (17) 10,412 7,057 12 1 147 (3)
Stryker Corp. (NYSE:SYK) Healthcare Equipment 16 17 11 15 7,823 19,424 7 2 16 2
Boston Scientific Corporation (NYSE:BSX) Healthcare Equipment 8 6 (2) 6 7,818 8,710 7 1 14 (7)
Becton, Dickinson and Company (NYSE:BDX)
Healthcare Equipment 18 24 6 3 7,651 16,154 8 2 14 (2)
St. Jude Medical Inc. (NYSE:STJ) Healthcare Equipment 16 21 10 27 5,413 12,679 9 2 14 (4)
Zimmer Holdings, Inc. (NYSE:ZMH) Healthcare Equipment 15 11 4 5 4,353 10,088 7 2 16 3
Terumo Corporation (TSE:4543) Healthcare Equipment 10 10 7 8 4,248 9,868 11 2 23 (2)
Total / Average (equal weight) 510 Companies 11 (26) 98 39 179,666 377,954 16 10 25 35
United States Healthcare Sector – Top Ten Public Companies
22
Sorted in declining revenue Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
McKesson Corporation (NYSE:MCK) Healthcare Distributors 1 16 5 1 114,614 18,091 8 0 17 18
Cardinal Health, Inc. (NYSE:CAH) Healthcare Distributors 1 17 4 11 102,644 14,520 8 0 15 27
Unitedhealth Group, Inc. (NYSE:UNH) Managed Healthcare 5 19 9 10 98,364 50,816 6 1 11 31
AmerisourceBergen Corporation (NYSE:ABC)
Healthcare Distributors 1 23 3 9 79,525 10,280 7 0 15 18
Pfizer Inc. (NYSE:PFE) Pharmaceuticals 13 10 9 2 67,587 148,553 7 2 18 7
Medco Health Solutions, Inc. (NYSE:MHS) Healthcare Services 2 34 7 (30) 67,343 18,938 8 0 15 (8)
Johnson & Johnson (NYSE:JNJ) Pharmaceuticals 18 20 1 18 63,396 177,356 9 3 15 2
WellPoint Inc. (NYSE:WLP) Managed Healthcare 5 12 (1) 2 59,293 24,189 6 0 9 16
Merck & Co. Inc. (NYSE:MRK) Pharmaceuticals 6 5 21 0 46,951 101,605 6 2 36 (11)
Express Scripts Inc. (NasdaqGS:ESRX) Healthcare Services 3 47 24 (50) 45,002 19,616 9 0 16 (17)
Total / Average (equal weight) 1245 Companies 22 (251) 265 48 1,422,819 1,642,594 17 10 24 31
Switzerland Healthcare Sector – Top Ten Public Companies
23
Sorted in declining revenue Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
Novartis AG (SWX:NOVN) Pharmaceuticals 18 16 16 20 56,629 141,885 9 3 14 (2)
Roche Holding AG (SWX:ROG) Pharmaceuticals 18 92 (11) 59 54,800 135,553 8 3 15 8
Galenica Ltd. (SWX:GALN) Healthcare Distributors 6 26 3 14 4,096 3,712 11 1 15 13
Lonza Group AG (SWX:LONN) Life Sciences Tools and Services
10 11 (3) (10) 3,056 3,382 8 1 12 (30)
Actelion Ltd. (SWX:ATLN) Biotechnology (7) (8) (4) (16) 2,227 4,411 6 2 (35)
Sonova Holding AG (SWX:SOON) Healthcare Equipment 14 18 8 7 1,765 5,733 14 3 22 (32)
Nobel Biocare Holding AG (SWX:NOBN) Healthcare Equipment 3 5 (0) (17) 830 1,286 10 2 58 (41)
Straumann Holding AG (SWX:STMN) Healthcare Equipment 18 20 0 9 790 2,613 10 3 18 (21)
Tecan Group Ltd. (SWX:TECN) Life Sciences Tools and Services
14 26 1 32 445 723 9 2 12 (7)
Siegfried Holding AG (SWX:SFZN) Life Sciences Tools and Services
(2) 0 18 (5) 419 359 7 1 (1)
Total / Average (equal weight) 34 Companies 2 (12) (11) 4 126,277 302,661 10 5 28 19
Brazil Healthcare Sector – Top Ten Public Companies
24
Select Public Companies Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
Cremer SA (BOVESPA:CREM3) Healthcare Supplies 6 11 0 115 251 265 9 1 21 (22)
Diagnosticos da America (BOVESPA:DASA3)
Healthcare Services 5 6 25 304 1,162 2,729 12 3 45 (28)
Biomm Sa (BOVESPA:BIOM4) Biotechnology 44 1 21 39 (28)
Profarma Distribuidora De Produtos Farmaceuticos S/a. (BOVESPA:PFRM3)
Healthcare Distributors 1 5 3 5 1,724 191 8 0 13 (43)
Fleury S/A (BOVESPA:FLRY3) Healthcare Services 15 13 13 9 592 1,600 11 3 21 (4)
Tempo Participacoes SA (BOVESPA:TEMP3)
Managed Healthcare 3 11 16 11 629 279 5 0 120 (44)
Baumer SA (BOVESPA:BALM4) Healthcare Supplies 6 10 7 10 62 23 5 0 7 17
Dimed S.A. Distribuidora de Medicamentos (BOVESPA:PNVL4)
Pharmaceuticals 3 19 12 15 814 224 6 0 12 27
Odontoprev S.A. (BOVESPA:ODPV3) Managed Healthcare 32 37 38 34 501 2,811 20 6 20 12
Amil Participacoes SA (BOVESPA:AMIL3) Managed Healthcare 2 11 30 9 5,256 3,489 18 1 41 (9)
Total / Average (equal weight) 10 Companies 8 14 19 57 10,993 11,631 11 5 33 (12)
China Healthcare Sector – Top Ten Public Companies
25
Sorted in declining revenue Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
Sinopharm Group Co. Ltd. (SEHK:1099) Healthcare Distributors 2 13 38 32 13,126 6,098 12 0 28 (38)
Shanghai Pharmaceutical Co., Ltd. (SHSE:601607)
Healthcare Distributors 4 12 28 153 6,815 6,218 11 1 16 (23)
NanJing Pharmaceutical Company Limited (SHSE:600713)
Healthcare Distributors (0) (2) 1 (2) 2,435 593 16 0 3
Shenzhen Accord Pharmaceutical Co., Ltd. (SZSE:200028)
Healthcare Distributors 2 27 15 29 2,169 540 14 0 11 (41)
Harbin Pharmaceutical Group Co., Ltd. (SHSE:600664)
Pharmaceuticals 9 20 15 8 2,111 2,479 8 1 13 (36)
North China Pharmaceutical Company Ltd. (SHSE:600812)
Pharmaceuticals 0 7 116 6 2,099 1,375 28 1 158 (25)
Yunnan Baiyao Group Co., Ltd. (SZSE:000538)
Pharmaceuticals 10 24 31 25 1,647 6,200 32 4 37 (5)
S&P Pharmaceutical Co Ltd (SHSE:600869) Pharmaceuticals 3 40 674 1,639 1,627 1,637 20 1 29 48
Huadong Medicine Co., Ltd. (SZSE:000963) Healthcare Distributors 4 31 13 12 1,534 1,768 18 1 32 6
Inner Mongolia Yili Energy Company Limited (SHSE:600277)
Pharmaceuticals 4 7 29 2 1,470 1,615 16 1 27 (23)
Total / Average (equal weight) 245 Companies 13 15 25 50 75,729 194,461 29 8 37 (12)
India Healthcare Sector – Top Ten Public Companies
26
Sorted in declining revenue Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
Ranbaxy Laboratories Ltd. (BSE:500359) Pharmaceuticals 9 13 (5) 14 1,921 4,327 14 2 32 (22)
Dr. Reddy's Laboratories Ltd. (BSE:500124) Pharmaceuticals 15 25 13 14 1,737 5,272 17 3 22 (13)
Cipla Ltd. (BSE:500087) Pharmaceuticals 16 16 13 13 1,432 4,716 16 4 23 (22)
Lupin Ltd (BSE:500257) Pharmaceuticals 15 19 28 1,346 4,149 18 3 23 (4)
Sun Pharmaceutical Industries Ltd. (BSE:524715)
Pharmaceuticals 29 27 21 1,341 10,086 26 8 28 6
Cadila Healthcare Limited (BSE:532321) Pharmaceuticals 16 21 33 1,026 3,133 16 3 21 (1)
Aurobindo Pharma Ltd. (BSE:524804) Pharmaceuticals 13 27 22 34 984 764 6 1 7 (49)
Wockhardt Ltd. (BSE:532300) Pharmaceuticals 2 9 3 129 844 971 10 1 53 24
Jubilant Life Sciences Ltd. (BSE:530019) Pharmaceuticals 7 (8) (1) 800 636 9 1 13 (44)
Glenmark Pharmaceuticals Ltd. (BSE:532296)
Pharmaceuticals 16 20 (14) 701 1,640 16 3 16 (12)
Total / Average (equal weight) 191 Companies 3 15 25 36 25,946 58,819 14 3 22 (30)
Russia Healthcare Sector – Top Six Companies
27
Sorted in declining revenue Source: CapitalIQ 10.14.2011
Company Name Primary Industry
Net Income Margin %
Return On Equity % (LC)
Total Rev 1yr Growth
%
Common Equity 1yr Growth %
Revenue, mm (USD)
Market Cap, mm (USD)
TEV / EBITDA
Market Cap /
Total Rev P / E
1 Year ROI in USD
PROTEK Group (MICEX:PRTK) Healthcare Distributors 1 4 6 4 3,656 382 4 0 14 (62)
OJSC Pharmstandard (LSE:PHST) Pharmaceuticals 23 36 43 14 1,313 2,759 7 2 10 (22)
Veropharm Co. Ltd. (RTS:VRPH) Pharmaceuticals 23 21 23 20 211 270 5 1 6 (28)
Pharmsynthez Open Joint Stock Company (MICEX:LIFE)
Pharmaceuticals 11 10 216 22
Human Stem Cell Institute JSC (MICEX:ISKJ)
Biotechnology 22 (13)
DIOD Plant of Ecological Technics And Ecomeals Joint Stock Company (MICEX:DIOD)
Pharmaceuticals 71 (28)
Total / Average (equal weight) 5 Companies 15 21 24 13 5,190 3,720 6 6 10 (31)