Ccm presentation june_2012


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Ccm presentation june_2012

  1. 1. Investor PresentationJune 2012Concord Medical ServicesHoldings Ltd.NYSE: CCM
  2. 2. This presentation contains forward-looking statements that are based on the beliefs of ourmanagement, and involve risks and uncertainties, as well as assumptions, that, if theyever materialize or prove incorrect, could cause actual results to differ materially fromthose expressed or implied by such forward-looking statements. The words “believe,”“expect,” “anticipate,” “project,” “targets,” “optimistic,” “intend,” “aim,” “will” or similarexpressions are intended to identify forward-looking statements. All statements, otherthan statements of historical fact, are statements that could be deemed forward-lookingstatements, including statements regarding new and existing products, technologies andopportunities; statements regarding market and industry segment growth and demandand acceptance of new and existing products; any projections of sales, earnings, revenue,margins or other financial items; any statements of the plans, strategies and objectives ofmanagement for future operations; any statements regarding future economic conditionsor performance; uncertainties related to conducting business in China; any statements ofbelief or intention; and any statements of assumptions underlying any of the foregoing. Allforward-looking statements included in this presentation are based on informationavailable to us on the date of this presentation. We assume no obligation and do notintend to update these forward-looking statements, except as required by law.Safe Harbor
  3. 3. • Leading provider of radiotherapy and diagnosticimaging services in China- Operates a nationwide network of 130centers with 74 hospitals in 24 provinces- Establishing two proton medical centers inBeijing and Guangzhou• Unique value proposition drives hospital/patientsatisfaction- 74 hospital partners in 51 cities- Over 700,000 patient cases since 2007• Acquisition in process: 52% ownership in Chang’anHospital- Expected to close in 1H’12- Serves as a regional hub for NW China- Will establish more oncology specialtyhospitals in China• IPO December 2009 (NYSE: CCM) underwritten byMorgan Stanley, JP Morgan, CICC. Auditor: Ernst &YoungCCMRadio-therapyHospitalmanage-mentTraining& staffingDiagnosticimagingOur Service OfferingsCompany Overview
  4. 4. • 130 centers• 74 hospital partners• 51 cities•13 Tier One*•38 Tier Two• 24 provinces• Cover over 85% ofChina’s populationBeijingNote: Tier One : Cities with annual per capita income of more than RMB11,000, Source: Asia demographicsNationwide NetworkNetwork Highlights
  5. 5. DiagnosticimagingLinear Accelerator (LAC) Deliver a high-energy x-ray beam capable of treating larger tumor Advanced modalities including three-dimensional conformal radiationHead Gamma Knife System (HGK) Use multiple radiation sources (cobalt-60) to produce a beam of radiation Mostly used for the treatment of brain tumorsRadiotherapytreatmentBody Gamma Knife System (BGK) Used for the treatment of tumors inside the body Widely used in ChinaPositron Emission Tomography – Computed Tomography (PET-CT) Combine the function of PET scanner and CT scanner in one unit More precise imaging, one of the most advanced diagnostic imaging technologiesMagnetic Resonance Imaging (MRI) Use a powerful magnetic field and radio frequency pulses but not involving radiation Produce detailed pictures of internal body structures in neurological or oncology imagingOthers Includes CT scanners, ECT scanners, epilepsy diagnosis equipment, thermotherapyequipment, high-intensity focused ultrasound therapy equipment, cell knife and ophthalmicequipmentFull range of services with operational synergies between radiotherapy and diagnostic imagingFull Spectrum of Services
  6. 6. • Exclusive long-term (8~12 years) contracts withhospital partners across 24 provinces in China• Solid partnerships with top-tier hospitals tobuild flagship centers• Largest national network providing easyaccess for patients• Joint operation improves center operationalefficiency• Enhanced cost control and effectiveness• Better patient service and experience• Increases patient volume to the centers and otherdepartments of the hospitals• Provides value-added services to the hospitals, training, joint research, academicexchanges, hospital management, etc.Radiotherapy orDiagnostic CenterPatientsCCM HospitalLong-term contracts(usually 8-12 years)Patients payhospitals forservices renderedHospitals make scheduled payments to CCMCenters providepatients treatmentCCM Lease & Management Model:The Fundamentals
  7. 7. Revenue by Equipment TypeRevenue Contribution by Equipment *Number of Equipment *Mar 31, 2012Notes: * Breakdown of Lease & Management Services (excluding 7 service-only centers, which we provide management services without owning the equipment)** Include computed tomography scanners, or CT scanners, and emission computed tomography scanners, or ECT scanners, epilepsy diagnosis equipment,thermotherapy equipment, high-intensity focused ultrasound therapy equipment, cell knife and ophthalmic equipment272313142224123LAC HGK BGK PET-CTMRI Others Total**Linearaccelerators30%Head gammaknife systems20%Body gammaknife systems11%PET-CTscanners16%MRI scanners17%Others6%
  8. 8. July 2008FoundedOperated 131centers in 51citiesAcquisition inprocess: Chang’anHospitalMerged withChina Medstar, apreviously AIM-listed companyIPO on NYSE:CCMEstablished firstcancer specialtyhospital: CCICC1997Installed China’sfirst PET-CT andMM50 radiationtherapy system2002Dec 2009Dec 2011July 20101st half 2012Corporate Milestones
  9. 9. 1Unique platform of clinical support drives scalability3Clear growth strategies45Business model delivers substantial value2Solid financial performance supporting future growthLeading market position with favorable regulatory environmentInvestment Highlights
  10. 10. Key Facts Cancer is the leading cause of death in 2010 in China, accounting for 2M deaths (26.2% of total deaths) Aging population, urbanization, tobacco usage, and environmental pollution have contributed to the higherrate of cancer in China Mortality rate from cancer is almost 3 times that of advanced nations (9%), due to lack of early diagnosisand proper treatmentNew Cases and IncidenceSource: CITIC Research InstituteThousand10Cancer: No. 1 Health Threat in ChinaPollution in Beijing
  11. 11. 10.723. 2015E 2008 2015E 2008 2015ELinear Accelerator Gamma KnifeFast Growing MarketRMB BnMRI, PET-CT, CT9. Japan France UK ChinaPenetration Rate (per MM)…Penetration in China isComparatively LowSource: Frost & Sullivan 2008304MM127MM62MM 61MM1,330MMPopulation# of Linear Accelerators per MM PopulationLow Penetration of Radiotherapy In ChinaTotal market size in 2015:RMB 48.5 billionOnly 15% of cancer patients receiveradiotherapy, while the international norm is50-60%
  12. 12. Over 6,000countyhospitals~1200 Toptier hospitals~300outsourced top-tier hospitals*~70 CCMpartnerhospitals• Facts:• Uneven distribution of resources• Concentration of medical resources in bigcities (15 provinces: < 1 LAC per million)• Lack of basic medical resources, such asMRI or LAC, in vast regions• Opportunities for CCM• High-end Segment: Specialty oncologyhospital: Beijing and Guangzhou inplanning• Vast numbers of county-level hospitals:demand for basic equipments (MRI andLAC)• Over 95% of Chinese population iscovered by one of the three insuranceprograms• The current healthcare reform will provide morefavorable policy stimulus to private & foreigninvestors.* Industry survey. Management estimateThird-party radiotherapy & diagnosis market Facts & OpportunitiesLeading Market Position & Huge GrowthOpportunities
  13. 13. Concord MedicalHospitals Doctors and staff areemployees of thehospital Limited focus onpatient serviceexperienceResultsPerformance-basedcompensationschemeMarket-basedmanagement cultureFocus on patientservice and experience+Better patientservice andresulting positiveword-of-mouth+Improved centeroperationalefficiency+Doctors and staffdrive centerperformance Lack of marketingexperienceMarketing staff– Dedicated centerdirector Governmentmanagement culture+Higher patientvolumeand revenueWin-Win Partnership with Hospitals
  14. 14. Compelling Value Proposition•Financing & procurement of equipment- Relieves the hospital of upfront capitalinvestment- Expertise and specialty in medical equipmentindustry- Economy of scale in procurement and pricing•Value-added Services- Training for doctors and staff in the centers- Information sharing and database within theCCM network- Joint and distant diagnosis•Marketing- Organize marketing and education programs toincrease patient volume- Supervise and optimize the budget of marketingactivities•Staffing- Employs highly respected clinical staff inmanagement functions- Dedicated support and technical staff for eachcenter- Help hospitals to recruit high-level doctors•Largest national network provides easy access forpatients- Covers over 85% of Chinese population- Will establish oncology specialty hospitals• Advanced equipment and technology- Majority of equipment used are leadingbrands, e.g. GE (26%), Varian (10%),Siemens (9%), Elekta (8%), etc.- Opened first Cyberknife center in January2012• Affordable cancer treatment and diagnosticimaging provider- Majority of patients covered by governmentinsurance programs- Specialty hospitals will target high-endmarket•High quality medical services- Experienced doctors and oncologists in CCM’snetwork- Patient friendly environment different fromover-crowded public hospitalsIndividual PatientsHospital Partners
  15. 15. Chang’an Hospital• CCM will obtain 52% of the ownership, possess clinical license•Strategic transformation to CCM’s business model• A general hospital focusing on cancer treatment and diagnostics with 1000+ beds• Will serve as a regional hub for northwestern China• Acquisition expected to close in the first half of 2012Beijing and Guangzhou Proton Centers (in progress)• First licensed proton beam therapy system in China• Relative monopoly and competitive edge in mid-term• CCM operates the most advanced cancer treatment in China• Leverage our existing network to get patient referralsChang’an Hospital / Stand-Alone CenterExpansion
  16. 16. •A private-owned general hospitalestablished in 1998•Designed capacity of 2,000-beds, around1,000 beds opened•A full-service hospital with 51 departments•Serves over 100 million population in NWChina•In July 2010, formed CCICC by acquiringa 52% equity interests in the Chang’anscancer treatment facilities;•In January 2011, the agreement to acquirea total of 52% equity interest in Chang’an•Expected to close during the 1st half of2012Chang’an Hospital Acquisition
  17. 17. 2011 2012 2013 2014 2015 2016Revenue Growth Path5-Year Target CAGR = 25-35%Existing CentersHospitalsNew CentersKey Points•In 2012, hospitalrevenue willcontribute for asignificant portionof total revenue•Only 1 hospital,Chang’an Hospital(pendingacquisition), isconsidered in theprojection.•New centers willgraduallycontribute to ourrevenueSustainable Growth & Visibility
  18. 18. To provide the best treatment and diagnostic servicesto cancer patients in ChinaNetwork Expansion• Develop new centers with hospital partners• Focus on expanding among the 6,000 tier-IIhospitals• Acquire existing radiotherapy and diagnostic centersProfitability • Increase marketing efforts to drive patient volume• Improve profitability / efficiency of existing centersSpecialty Hospital • Develop / Enhance CCM’s brand name• Employ and retain the best doctors in the countryInnovation• Introduce new radiotherapy and diagnostic imagingtechnology to China’s cancer market• Improve network synergy through new ITtechnology, including tele-radiologyGrowth Strategies
  19. 19. Strong FinancialPerformance• $37.8 mm for FY 2011 (incl. held-to-maturity of $16.0 mm)• 24% increase from 2010SignificantOperation CashFlow• Cash and cash equivalents: $46.6 mm at 3/31/2012• Total liability to asset is 16.4% and total liability to equity is 19.6%as of Mar 31, 2012Solid CapitalStructure• Net revenue of $73.8 mm for LTM 03/31/2012• Revenue CAGR 24.1%*• Adjusted EBITDA of $51.4 mm with 69.6% margin for LTM03/31/2012Note: * CAGRs represent 2009 to 2011Financial Overview and Highlights
  20. 20. $42.8$59.0$71.52009 2010 2011Revenue (US$ m)$30.0$40.4$46.22009 2010 2011Gross Profit(US$ m)$36.1$44.8$50.62009 2010 2011Adjusted EBITDA(US$ m)$18.4$21.3$23.42009 2010 2011Non-GAAPNet Income (US$ m)Financial Performance
  21. 21. Dec 31, 2010 Dec 31, 2011 Mar 31, 2012Cash 535.8 394.4* 293.5*PP&E, Net 907.3 1,068.7 1,051.1Total Assets 2,663.0 2,393.4 2,454.1Total Bank Debt 189.0 201.2 260.3Total Liabilities 361.2 355.4 402.4Shareholders’ Equity 2,301.8 2,038.1 2,051.8Total Liabilities / Total Assets 13.7% 14.8% 16.4%Total Liabilities / Total Equity (incl.Preferred) 15.9% 17.4% 19.6%RMB MMCapital Structure*Cash, held-to-maturity, time deposit, restricted cash, current and non-current portions
  22. 22. Dr. Jianyu YANGDirector, President & CEO 9 years of management experience Former CEO of Eguard ResourceDevelopment (A-share listed) PhD in Economics from LiaoningUniversityDr. Zheng CHENGCo-Chairman & COO 19 years of industry-related experience Co-founder and former CEO of ChinaMedstar (AIM-listed) Qualified clinical surgeonMr. Steve SUNCo-Chairman & CFO 12 years of management experience Executive VP of AE Capital Markets inNew York MBA from University of Chicago GraduateSchool of BusinessMr. Jing ZHANGDirector & Executive President 13 years of industry experience Co-founder and former COO of ChinaMedstar (AIM-listed) BA from Beijing Institute of ChemicalTechnologyDr. Jianyu YangChairman & CEO 10 years of management experience Former CEO of Eguard ResourceDevelopment (A-share listed) PhD in Economics from LiaoningUniversityDr. Zheng ChengCOO & President 20 years of industry-related experience Co-founder and former CEO of ChinaMedstar (AIM-listed) Qualified clinical surgeonMr. Steve SunDirector, Chairman of InvestmentCommittee 13 years of management experience MBA from University of Chicago GraduateSchool of BusinessMr. Jing ZhangChief Administrative Officer 14 years of industry experience Co-founder and former COO of ChinaMedstar (AIM-listed) BA from Beijing Institute of ChemicalTechnologyMs. Xun LiuFinancial Controller 13 years of financial management andaccounting experience VP of Finance with Xueda Education(NYSE: XUE) CICPA memberMr. Adam J. SunCFO Over 10 years of finance and managementexperience Experience in healthcare industry in China MBA from University of Chicago, GSBManagement Team with Experience
  23. 23. 1Unique platform of clinical support drives scalability3Clear growth strategies45Business model delivers substantial value2Solid financial performance supporting future growthLeading market position with favorable regulatory environmentInvestment Highlights
  24. 24. Appendix
  25. 25. Total HealthcareMarket (BillionsUSD)AsPercentageof GDPPer CapitaSpending(USD)CAGR 2000-2009China 229 4.6% 177 17.5%Japan 420 8.3% 3,321 1.9%United States 2,287 16.2% 7,410 6.2%United Kingdom 202 9.3% 3,285 7.7%Germany 376 11.3% 4,629 7.7%France 310 11.7% 4,798 9.9%•Healthcare is the third largest expenditure for Chinese families,behind housing and education;•Chinese government has allocated RMB 800 billion to healthcareexpenditure for 2009-2011Healthcare Market in China
  26. 26. TotalVisits(millions) Numberof HospitalsClass3 760 1,137Class2 931 5,727Class1 146 5,2710%20%40%60%80%100%UnevenDistributionofResourcesWhy High-End Oncology Hospital
  27. 27. Specialtyfocusing on treatingdifficult cases, R&DSecondaryLarger regional hospital,provide emergency andgeneral hospital servicesPrimaryProvides community services, collaborationbetween doctors, private clinics and communityhealthcare centers, treat mostly outpatientsBy establishing its own oncology hospital, CCM will benefit from the“Equity and Segmentation” trend in China’s healthcare industrySpecialty hospitals are prospering:•OB•Ophthalmology•Dental•Plastic surgerySpecialty Hospitals in China
  28. 28. Types of services Likely deliverymechanismFundingmechanismMarketopportunitiesPublic healthservices•Control andprevention ofinfectious diseases,healthcare education,etc•Provided bypublic, not-for-profit healthcentersand hospitals• Governmentdirect funding orthrough socialinsurance•Closed market• Servicesprovided bygovernmentBasic healthservices•Include typicallyrequired medicalservices for treatmentand well being ofpopulation•Not-for-profithospitals•Social insuranceand companysponsoredinsuranceprograms•Partially open• Market open tofor profit hospitalsSpecialtyhealth services•Include uncommonhealth services,leveraging specialtechnology (e.g.cosmetic surgery etc.)•Provided byspecialized andfor-profit hospitals•Based on freemarket principles•Self-funded•Private healthinsurance•Open tocompetition(local and foreign)In December 2011, healthcare services was moved from “Restricted” to “Allowed”in China’s Foreign Investment CatalogueMedical Service Reform in China:Equity & Segmentation