Investment Patterns in the Healthcare
Industry - An Analysis
Janani Sankaran, Industry Analyst
Business and Financial Services, Healthcare
October 13, 2009

Detailed Table of Contents
Significant Developments in the Healthcare Industry
Significant Developments in the Healthcare Industry
Significant Developments in the Healthcare Industry
Investment Analysis- Introduction
Investment Analysis- Introduction
Number of Deals Analyzed
Analysis of Various Investments by Time
Analysis of Various Investments by Proceeds
Analysis of Various Investments by Type of Funding
Equity Markets- An Overview
Equity Markets- An Overview
Stock Markets- An Overview
Analysis of Equity Investments by Time Period
Analysis of Equity Investments by Type of Equity
Analysis of Equity Investments by Deal Volume
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Detailed Table of Contents
Debt Markets- An Overview
Debt Markets- An Overview
Analysis of Debt Investments by Time
Analysis of Debt Investments by Geographies
Analysis of Debt Investments by Volume and Proceeds
Loan Markets- An Overview
Loan Markets- An Overview
Analysis of Loans by Time
Analysis of Loans by Pricing
Analysis of Loans by Proceeds
Analysis of Loans by extent of Leverage
Concluding Thoughts
Concluding Thoughts
Contact Information and About Frost & Sullivan
Contact Information and About Frost & Sullivan
N68F-F1 3

Focus Points
Significant Developments in the Healthcare Industry
Significant Developments in the Healthcare Industry
Number of Deals Analyzed
Analysis of Various Investments by Time
Investment Analysis- Introduction
Investment Analysis- Introduction
Analysis of Various Investments by Proceeds
Analysis of Various Investments by Type of Funding
Equity Markets- An Overview
Equity Markets- An Overview Stock Markets- An Overview
Debt Markets- An Overview Analysis of Debt Investments by Time
Debt Markets- An Overview
Loan Markets- An Overview
Loan Markets- An Overview Analysis of Loans by Time
Conclusion
Conclusion
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Significant Developments in the Healthcare Industry
Healthcare Industry : Investment Analysis (World), 2008-2009
President Obama’s stimulus package
Aging baby boomers and
increase in chronic illnesses
Falling construction costs in
the Middle East
Consolidation across Global Healthcare
healthcare verticals Medical tourism in Asia
Industry
Artificial intelligence in
Electronic health records healthcare
Transition from patents to generic
pharmaceuticals
Source: Frost & Sullivan
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Number of Deals Analyzed
Total Number of Deals Analyzed
(469)
Healthcare Equity (153) Healthcare Debt (101) Healthcare Loans (215)
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Healthcare Investments - Analysis by Time (World) 2008-2009
Healthcare Industry : Investment Analysis by time and by Volume (World), 2008-2009
100.0
90.0
31.6 30.1 27.9
80.0 43.0
Deal Volume (%)
47.4
70.0
60.0 14.6
17.9 25.0
7.5
50.0 9.2
12.6 19.5
40.0 15.0
10.5
30.0 30.9
23.2
20.0 27.6 23.4 22.4
10.0 14.7 14.7
8.1 11.2 10.5
0.0 1.5
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009
Quarter
Biotechnology Healthcare Equipment Other Healthcare Providers Hospitals Pharmaceuticals
Number of Deals over quarters (x)
Segment Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009
Biotechnology 14 10 1 12 8
Healthcare equipment 22 34 10 25 17
Other Healthcare Providers 12 24 21 16 8
Hospitals 17 18 17 8 7
Pharmaceuticals 30 37 19 46 36
Total Deals 95 123 68 107 76
Note: All figures are rounded; the base year is 2008.
N68F-F1 Source: Frost & Sullivan 7

Healthcare Investments- Analysis by Proceeds (World) 2008-
2009
Healthcare Industry : Investment Analysis by Proceeds and type of Investments (World), 2008-2009
Type of Funding Funding by Volume ($ Million)
Equity <75.0 76.0-125.0 126.0-175.0 176.0-225.0 226.0-275.0 276.0-325.0 >326.0
Biotechnology 29 1 1 1
Healthcare equipment 33 3 3 1
Other healthcare services 13 1 1 1
Hospitals 6 1 1
Pharmaceuticals 49 2 2 2 2
Total equity 130 8 4 3 2 4 2
Debt <75.0 76.0-125.0 126.0-175.0 176.0-225.0 226.0-275.0 276.0-325.0 >326.0
Biotechnology 1 3 2
Healthcare equipment 2 4 4 1 3 2
Other healthcare services 1 4 3 2 1
Hospitals 4 1 1 2
Pharmaceuticals 7 9 6 12 6 2 18
Total debt 15 17 17 14 11 6 21
Loans <75.0 76.0-125.0 126.0-175.0 176.0-225.0 226.0-275.0 276.0-325.0 >326.0
Biotechnology 0 3 4
Healthcare equipment 17 8 3 24
Other healthcare services 11 5 5 7 3 2 21
Hospitals 16 8 9 2 6 10
Pharmaceuticals 17 3 1 1 1 6 22
Total loans 61 27 15 10 10 11 81
Note: All figures are rounded; the base year is 2008.
N68F-F1 Source: Frost & Sullivan 8

Healthcare Investments- Analysis by Type of Funding (World)
2008-2009
Healthcare Industry : Investment Analysis by segments, type of funding and volume (World), 2008-2009
70 Equity volume Debt volume Loans volume 60,000.0 3%
Equity amount Debt amount Loans amount
60
Segments 50,000.0 15%
22%
50
40,000.0 34%
Value ($ Million)
44%
Volume (x)
40 Deals by Volume
14%
30,000.0
30 Deals by Value
23%
20,000.0
20
26%
10,000.0
10
13%
6%
0 0.0
Biotechnology Healthcare equipment Other healthcare
Biotechnology Healthcare Other healthcare Hospitals Pharmaceuticals services
Hospitals Pharmaceuticals
equipment services
Volume (x) Value ($ Million)
Segment Equity Debt Loans Equity Debt Loans
Biotechnology 32 6 7 955.8 1,187.3 2,402.3
Healthcare equipment 40 16 52 1,544.4 2,759.1 55,177.4
Other Healthcare services 16 11 54 719.8 1,829.5 20,157.4
Hospitals 8 8 51 412.0 1,026.3 9,847.7
Pharmaceuticals 57 60 51 4,072.6 16,968.0 54,627.6
Note: All figures are rounded; the base year is 2008.
N68F-F1 Source: Frost & Sullivan 9

Equity Deals
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Stock Markets - An Overview
Healthcare Industry : Stock Markets- An Overview (World), 2005-2009
140.0 NASDAQ Biotechnology Index Especially in the recessionary times,
the healthcare index is outperforming
S&P Healthcare Index
the benchmark S&P 500 and the Dow
130.0 Amex Pharmaceutical Index Jones Industrial Average handsomely.
Dow Jones Industrial Average
S&P 500
120.0
110.0
Indexed to 100
Biotech the standout industry
100.0
performer in terms of Sharpe's Ratio
Investment Sharpe's Ratio for Various Indices from Jan 2005
Horizon NASDAQ Biotech S&P HC Amex Pharma DJ Industrial Average S&P 500
90.0 1 year (0.2) (0.5) (0.7) (0.3) (0.4)
2 year (0.4) (0.6) (1.0) (0.4) (0.5)
3 year (0.6) (1.6) (2.6) (0.9) (1.1)
4 year (2.8) (5.7) (5.2) (4.3) (5.0)
80.0
Investment Sharpe's Ratio (%) for Various Indices from August 2002
Horizon NASDAQ Biotech S&P HC Amex Pharma DJ Industrial Average S&P 500
1 year 0.1 (0.3) (0.5) (0.1) (0.1)
2 year 0.1 (0.4) (0.7) (0.1) (0.0)
70.0 3 year 0.1 (0.4) (1.0) 0.0 0.0
4 year 0.1 (0.5) (1.1) (0.0) 0.0
5 year 0.0 (0.8) (1.7) (0.2) (0.2)
6 year 0.2 (2.5) (3.8) (1.5) (1.4)
60.0
Nov 06
Nov 07
Nov 08
Nov 05
Jan 07
Jan 08
Jan 09
Jul 07
Jul 06
Jul 09
Jan 05
Jan 06
Mar 07
Mar 08
Mar 09
Jul 05
Sep 06
Sep 07
Jul 08
Mar 05
Sep 05
Mar 06
Sep 08
May 07
May 09
May 08
May 05
May 06
Months
Note: All figures are rounded; the base year is 2008.
N68F-F1 Source: Frost & Sullivan 11

Debt Deals
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Healthcare Debt Deals: Analysis by Time (World) 2008-2009
40 Healthcare Industry : Debt Analysis by time and volume (World), 2008-2009
35 There were significant borrowings in
New legislations could cost Q1 2009 in the hope of an economic
30 more money to the hospital industry. recovery. As a percentage of the
For every billion dollars a hospital 24 total deals, pharmaceuticals industry
Deals (x)
25 17
borrows, it could cost $20 million has always dominated
20 to $30 million more in the future. the debt market. Q1 2009 witnessed a
maximum of 24 deals, which was
15 12 6 greater than the total of all deals put
3
10 together over the three quarters in 2008.
3
3 8
5 6
2 2 5
1 1
0 The Libor-OIS spread
2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009
increased significantly
Quarters
during September 2008 and
Biotechnology Healthcare equipment and supplies Other healthcare services Hospitals Pharmaceuticals it was at 311 basis points
4.5
during October 2008. Following
4.0
the declining interest rates and
3.5
with the stimulus package,
3.0 the Libor-OIS spread
Index value
2.5 declined.
Due to the narrowing LIBOR-OIS
2.0
spread, there is a likelihood of an
1.5
increase in debt offerings during 3 Month LIBOR
1.0
Q3 and Q4 2009. USD SWAP OIS 3 MONTH
0.5
Month
0.0
Jun 09
Jan 09
Nov 08
Feb 09
Mar 09
Jun 08
Apr 09
Jul 09
May 09
Dec 08
Jul 08
Aug 08
Apr 08
Sep 08
May 08
Oct 08
N68F-F1 Note: All figures are rounded; the base year is 2008.
Source: Frost & Sullivan 13

Loan Deals
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Healthcare Loan Deals: Analysis by Proceeds (World) 2008-2009
Some criterion for lending loans to corporations includes minimum
years of operations, history of profits for the last two years with a
4.0
good credit rating, ability to satisfy various covenants, and With the effective fed interest at 0.21 percent in June 2009
3.5 and with hints of economic recovery and expected reduction
satisfactory track and credit record with lenders. The interest rate
in the average time taken for the banks to sanction
would be based on credit worthiness of borrower, rating, risk 3.0
the loan, the loan off-take is likely to improve
in Q3 and Q4 2009.
Interest Rate (%)
perception, tenure of loan, and other relevant factors. 2.5
Healthcare Industry : Loan Analysis by 2.0
proceeds and loan volume (World), 2008-2009
1.5
1.0 Effective Fed Interest Rate (%)
>1000 8 3 6 1 7
0.5
0.0
Nov 08
May 08
May 09
Feb 08
Mar 08
Aug 08
Sep 08
Mar 09
Oct 08
Feb 09
Dec 08
Jan 08
Jun 08
Jan 09
Jun 09
Apr 08
Apr 09
Jul 08
500-1000 5 12 2 1 2 11
Loan Amount ($ Million)
Month
200-500 9 8 13 14 7
Levered Loans North America
Unlevered Loans North America
50-200 23 8 17 1 16 Levered Loans Europe
Unlevered Loans Europe
Levered Loans APAC
<50 4 7 2 28 Unlevered Loans APAC
Loan Volume (x)
0 10 20 30 40 50 60 70
N68F-F1 Note: All figures are rounded; the base year is 2008.
Source: Frost & Sullivan 15

Concluding Thoughts
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Conclusion
Some Interesting Facts
• A recent study by Harvard University researchers found that the average out-of-pocket medical debt for those who filed
for bankruptcy was $12,000. The study noted that 68 percent of those who filed for bankruptcy had health insurance. In
addition, the study found that 50 percent of all bankruptcy filings were partly the result of medical expenses. In every 30
seconds in the U.S. someone files for bankruptcy in the aftermath of a serious health problem.
• A new survey shows that more than 25 percent of Americans said that housing problems resulted from medical debt,
including the inability to make rent or mortgage payments and the development of bad credit ratings.
• About 1.5 million American families lose their homes to foreclosure every year due to unaffordable medical costs.
Concluding Thoughts
• Pharmaceutical, drug development, medical technologies, and other life sciences are considered to be attractive sectors
for investment from 2010 to 2015. Historical high growth rates due to increases in health expenditure, growth in the
ageing population coupled with greater incidence in chronic illness, and developments in technology are considered to
be the driving factors behind the attractive investment options.
• Niche areas such as percutaneous valve replacement, bioprosthetics with stem cell seeding on a matrix, and robotics
are expected to be the future in the medical devices industry.
• Policies toward Medicare and Medicaid are expected to have a significant impact on the general ‘health’ of the
healthcare industry.
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