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Medical Device Conference - Identifying Targets Within Emerging Markets
1. CASE STUDY: IDENTIFYING TARGETS WITHIN EMERGING
MARKETS
PRESENTED AT:
3RD ANNUAL MEDICAL DEVICE BUSINESS DEVELOPMENT:
MERGERS, ACQUISITIONS & CORPORATE STRATEGY
ATLANTA, GA JANUARY 30-31, 2017
GABRIELA I. COMAN
gcoman@rubinrudman.com
(240) 356-1508
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2. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
MANY QUESTIONS, NO SIMPLE ANSWERS
• Where to focus on internationally, what specific market & why?
• Do you have the right approach to the BRICS countries?
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3. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
MANY QUESTIONS, NO SIMPLE ANSWERS
• Do you have the infrastructure to manage integration
• What are the opportunities of success; synergies
• What are the challenges to be addressed early
• What are the legal structures, regulatory requirements
• IP protection globally
• Critical quality elements of the acquirer to maintain
• Acquisition alignment to your business needs
• Where do you see your company in the next 5, 10, 20 years?
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4. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
New Technologies in 2019-2050
• Be the Chief Visionary Officer
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5. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
ACQUIRER’S CONSIDERATIONS
• Why Invest
• Where and When
• Due Diligence
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6. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
WHY INVEST
• Potential to improve market position and growing share for the company’s core business
over the long term
• Gaining an early-mover advantage
• Long term opportunities to export out of the BRICS country back into the developed
markets
• Create a sustainable leadership position and profitable growth in a local market
Why not
• Lack of financial transparency
• Difficult due diligence
• Valuation often inflated (shortage of available assets have created inflated valuations)
• High cost of assets
• Integration and execution after the deal are complicated
• Talent is scarce
• Deep cultural gaps
• High volatility from socio-political uncertainties and fast policy changes, fragmented
regional markets, local competition, concerns over quality and compliance
• Growing in these countries requires a broad distribution network and an ecosystem that
includes regulators and other public relationships; also local teams with deep market
knowledge
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11. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
WHERE AND WHEN
• Typically, two dimensions govern the where-and-when decision
• First, acquirers should consider a country’s potential for scale, growth,
profitability and influence on external markets.
• Second, acquirers should evaluate a country’s viability—everything from the
government’s openness to multinationals, to exposure to compliance risks,
to such infrastructure issues as the number of hospital beds per capita.
Balancing potential and viability, China and India surface as the clear
leaders among Asia-Pacific markets.
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13. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
WHERE AND WHEN
• Within any given BRICS country, there is wide variability in potential across
categories (China’s pharma sector v. the orthopedics implant sector)
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15. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
WHERE AND WHEN
• Theoretically, once you identified the area, start with the strategy from top
down
• Look at the demographic aspect of the region
• Where are the regulations more beneficial to you
• Balance between strategic and realistic v. opportunistic
• Finally, timing is critical.
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18. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
DUE DILIGENCE
1) Evaluate what medical products and devices would sell
• certain medical devices are more easily accepted and sold than others
• do any of the medical products and devices need to be modified
• what is the competitive landscape
• are there any new potential products/devices that could be identified
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19. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
DUE DILIGENCE
2) Consider targets through various channels
• Assess the analytics
• Look at competitors
• Access import data
• Reach out to trade conferences, professional associations
and trade shows
• Find a local partner (sourcing and closing the deal)
• If you are there for 1st time, consider minority investment with a partner
• Access lists of distributors, agents, third party intermediaries – relationships
are crucial
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20. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
DUE DILIGENCE
3) Understand the healthcare system of the BRICS country
- government, state and local legislation
re medical devices
- hospitals, clinics, related facilities (private v. public split of healthcare
expenditures; number of registered hospitals and manufacturing
companies; percentage GDP spent on healthcare; hospital beds
per capita; public physicians per 1000 population, etc.)
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21. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
DUE DILIGENCE
4) Understand the regulatory system of the BRICS country
• Understanding the country’s laws is very important
• Regulatory framework: most countries will follow CE Mark and FDA
requirements (to a degree)
• Understanding each country/region’s regulatory standards are critical to the
success of your transaction
• Analyze the local tariff requirements and comparable technology sales to
determine market potential for any given device
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22. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
DUE DILIGENCE
5) Go Global, Think Local
• Communication: partnerships fail not because of key areas, but due to poor
planning/execution
• Face to Face is critical to executing a meaningful international deal
• Communicate the value of a transaction in terms the target company
understands will benefit the target
• Trust
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23. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
DUE DILIGENCE
6) Intellectual Property protection
• Determine how important your IP portfolio is to your company both
offensively and defensively
• Where and when to file
• What are you willing to invest over the years (maintenance fees; annuities)
• Must be willing to litigate with foreign courts in the event of infringement
• Trivia Patent Question
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25. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
CASE STUDY
• Warby Parker Example (Innovative Approach)
• Narayana Hrudyalya
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26. Healthcare – Key Challenges in Emerging Countries
Narayana Hrudyalya - CASE STUDY
The death rate has declined but birth rates continue to be high in most
of the emerging countries
Health care structure is over-burdened by increasing population
Family planning programs need to be (re)activated
India faces the twin epidemic of continuing/emerging infectious
diseases as well as chronic degenerative diseases
The former is related to poor implementation of the public health
programs, and the latter to demographic transition with increase in life
expectancy
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27. Healthcare – Global Healthcare Trends
Cost is the biggest health care issue.
Pressure to contain costs from all sides —
governments, providers, health plans, life
sciences companies, and consumers.
Transformational change is taking place
across the globe. Several dynamic market
forces, in particular are requiring providers
and health plans to rethink traditional
business models to better address shifting
or emerging health care challenges
Adoption of new digital HIT advances such as
electronic health records, mHealth applications
and predictive analytics is transforming the
way physicians, payers, patients, and other HC
stakeholders interact
The global health care regulatory landscape
is complex and evolving. The primary driver
is patient health, safety, and privacy;. Key
factors including rapid clinical and
technology changes; increased scrutiny by
governments, the media, and consumers;
more sophisticated risk-monitoring 27
28. Case Study – Narayana Hrudyalya
A Snapshot of a Revolution
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30. ATypical Day at NH
450Admissions 150 Major
Surgeries 42 Cardiac
Surgeries
4200Outpatients
250
417Dialysis
Procedures
Cardiac
Procedures
10 Surgeries
1Transplant
13200 Laboratory
Tests
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31. Serving unmet needs
More than
50%of NH patients
are from economically
weaker sections
[32.7% of the total Indian population fall
below the international poverty line of
US$ 1.25 per day (PPP) while 68.7%
live on less than US$ 2 per day]
(As per World Bank, Year2010)
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32. Assembly line approach to healthcare delivery
10% of all the heart surgeries
in India performed at NH
Unique Health City model
leveraging economies of
scale & scope for lowering
healthcare costs
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33. Health City: Agglomeration of
Centers of Excellence
“Health City” - Acampus with 2000 to 5000 beds,
spread among 4-5 hospitals, dedicated to individual
specialties
Best way to reduce the cost of healthcare
through economies of scale & scope
Improves the quality of clinical outcomes by exposing
to multiple specialists collaborating on a single patient
Sharing of resources to reduce cost
Excellent set up for research activities
Increasing volumes
Thereby reducing costs
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34. Reaching out to the Grassroots
Pioneered the concept of telemedicine in India
590 tele ECG network
150 connected Telemedicine centers
54,000 cardiac patients treated free
10,000 patients treated in various CCUs
53 locations in Africa
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35. Low Cost Surgical Hospital Model
Typically modeled as 300 bedded surgical hospitals,
located primarily in Tier II and Tier III cities
Built as a pre-fabricated structure
with minimal RCC construction
Ground floor construction thereby
reducing construction costs
Maximum utilization of natural daylight
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36. Superior Operating Strategy
Tight control on costs
Hybrid and dynamic pricing
Achieving best outcomes
Better inventory management
Pay-per-use Model
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37. Leveraging Technology
Digital Radiology
Migrated to digital
radiology for better throughput and image
quality, while working in a film less
and paper light environment.
Automation
First in India to ideate an ICU automated system
Analyzes patient parameters to assist doctors
Reduces human error
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38. Cloud ERPSystem
Integration of all NH units through an ERPSystem
deployed on a cloud
Allows real time access to data across the group
Dramatically impacts the bottom-line by taking advantage
of the pay per use concept, resulting in zero investment
and maintenance costs
First hospital group in India to have
an ERPsystem on a cloud38
39. CSR Initiatives – A promise to the society
NH is modeled as a Social Enterprise rather than a Corporate
Donations received from the philanthropic
organizations supported by NH - Used only
for the treatment of poor patients
NH created a chain of 16 primary health
centres across Amethi and Raibareilly
to offer free services including consultations &
medication to more than 30,000 patients in a
month
Udayer Pathe - Enabling poor children to
become future doctors by offering soft loans
for study
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40. Yeshaswini Micro-Health
Insurance Scheme
World‟s largest self funded micro-health insurance
scheme catering to more than 3 million people
Conceptualized by NH and launched by
the Government of Karnataka in 2003
Covering over 1600 surgeries
at a Monthly premium of 18 Rupees
Success of the model ensured replication by
2 other States covering 30 million people
Studied by Harvard Business School
Unaffordability can be
tackled when united
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41. If you have reached
NH, your worries are
over
An average of over 16 heart
operations on children every day
100 free or discounted pediatric
surgeries a month
India's largest and most advanced
Pediatric liver transplant program
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43. Udayer Pathe – making dreams come true
Enabling poor children to study to become doctors by offering soft loans
Scholarships to selected children from deprived backgrounds
NH mentors these children right from the age of 14 years
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45. IDENTIFYING TARGETS WITHIN EMERGING MARKETS
• Be the Chief Visionary Officer
• Be curios
• Start small
• Have trust
• Don’t get stuck on the escalator
THANK YOU
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