This document provides an overview of building proton therapy centers in China. It discusses the technology behind proton therapy and how it has overcome barriers to become commercially viable. The market potential in China is large, as cancer cases are growing rapidly and proton therapy can treat many of the most common cancer types. The projected market size is 150 proton therapy centers needed to meet demand. Currently China has two centers in operation and several more in development.

1. Building Proton Therapy In
China: A Due Diligence Report
Yanfeng Alex Wang
yanfeng12@hotmail.com
May 28, 2016

2. • How To Build A Proton Therapy Center
• Technology
• What is proton therapy?
• Proton therapy emerges as the latest option to improve
radiotherapy delivery
• Proton therapy overcomes key barriers and becomes commercially
feasible
• Proton therapy centers in U.S.: 23 in operation, 13 in development
or under construction
• Market
• Rapid growth of cancer cases demands increased capacity of
treatment
• China grows fastest in cancer cases
• Proton therapy will cover nine of top ten cancers in China
• Exponential growth of demand on proton therapy
• Projected market size of China: 150 proton therapy centers
• China has two centers in operation
• Finance
• Investment in proton therapy: revenue
• Investment in proton therapy: investment IRR
• Investment in proton therapy: sensitivity test
• Pricing: how much would people pay for proton therapy?
• Price vs. patient throughput: how do they affect investment return?
• How to improve patient throughput?
• Operating margin: a key consideration during negotiation
• Five or one: large center or single unit?
• Human & Organization
• Proton therapy investment: stakeholders analysis
• Proton therapy investment: key hospitals for collaboration --- cancer
specialty hospitals
• Proton therapy investment: key hospitals for collaboration --- top 50
general hospitals
• Case study: a tier-3 city’s ambition to own proton therapy
• Project & Planning
• Proton therapy investment: structure of a possible deal (example)
• Access potential market: how do overseas investors engage in
business development?
• Proton therapy investment: project by phase, risk & solution
• Readiness of proton therapy project
• Appendix: top 50 general hospitals in China
Outline
Outline

3. Outline
How To Build A Proton Therapy Center
Real Estate
Healthcare
Technology
Investment
Choice of location, approval of land, construction planning and design
Hospital operation, medical staff training, patient referral
Vendor support, equipment installation, image & IT support
Funding resources, investment modeling, transaction/tax advisory
Building proton therapy center requires expertise of multiple dimensions. All those expertise need to be
carefully orchestrated for successful outcomes. In order to build proton therapy center in China, synergy of
resources from both China and United States can facilitate success of investment.
Culture Negotiation, relationship development, risk management

4. • A frontier radiology technology to treat cancer
• It uses proton beam to kill tumor cells
• It has advantage over conventional radiation, with little damage to
surrounding healthy tissue
• For 30% of all cancer cases, proton therapy has significant advantage
over conventional radiation. For the remaining 70% cases, conventional
radiation works as effectively as proton therapy for now
• Proton therapy was invented in late 1980s. There are 23 proton therapy
centers in U.S. and more to come (refer to “technology: PT centers in
U.S.”)
Technology
What Is Proton Therapy?
• Conventional proton therapy facility needs large construction area of 100,000 square feet. A latest compact version including a single
treatment room uses much less construction area of 2,800 square feet
• Proton therapy center operates like a nuclear plant. Its equipment accelerates proton beam to 2/3 of light speed for treatment. The center
is always built in ground floor and underground like a nuclear bunker, with wall fortification required to block radiation
• Navigated by magnet, photon beam can be guided into up to 5 treatment rooms. Which means the maximum capacity of a center is five
treatment rooms
• Patient will lie still on a treatment bed, while the equipment can be rotated 360 degree in order to orient proton beams to tumor foci. Its
precision can reach 0.5 mm (tumor won’t be totally still because it moves along with breathing and heart beating)
• Among 5 treatment rooms, a popular setup includes 4 rotational and 1 fixed beam room. It reflects breakdown of treatment types,
because some patients won’t need rotational beam

5. Technology
Proton Therapy Emerges As The Latest Option
To Improve Radiotherapy Delivery
HDRT: high dose radiotherapy
Due to advantage of its
technology (proton vs.
photon), proton therapy
represents the latest trend
of radiotherapy(RT) by
delivering high dose
radiation precisely, to
achieve faster, better, and
safer therapy

6. Since the technology was invented nearly three decades ago, how come it hasn’t
been popular until recently? There are a few key barriers:
• Debate about advantage of proton therapy over conventional radiotherapy. It’s not
until recent two years when accumulated data show convincing outcomes
• Proton therapy can focus on tumor without radiating surrounding tissue. The
figure on the right compares radiated areas by proton therapy and
conventional radiotherapy in a heat map. Proton therapy can focus on tumor
alone, while conventional radiotherapy affects unintended nearby organs
such as heart
• 30% of all cancer cases can significantly benefit from proton therapy. Doctors
can advise patient whether his/her case should be subject to proton therapy
or conventional radiotherapy
• Scope of investment. Construction of a proton therapy center used to take four
years or longer. Total investment can be $200 million for a 5-treatment room center.
Investors hesitated on large amount of money, long time line, and uncertain buy-in
from patients and providers. Those hurdles can be overcome, which results in
acceleration of investment to new proton therapy centers
• Reimbursement. Medical insurance doesn’t always have a complete coverage of
proton therapy. For example, if conventional radiotherapy receives $2,000
reimbursement, while proton therapy costs $5,000, medical insurance will only
cover $2,000 for proton therapy. The remaining $3,000 will come from patients or
providers. Large patient volume is the key to drive down operating cost. Now
proton therapy is almost on par with conventional radiotherapy if managed properly
Proton Therapy Overcomes Key Barriers
And Becomes Commercially Feasible
Technology
Proton therapy can be less expensive
than surgery and chemotherapy

7. Technology
PT Centers In United States: 23 In Operation,
13 In Development Or Under Construction
Robert Wood Johnson
Northwestern Medicine
U.Florida Health (UFPTI)
U.Florida Health Cancer
Center Orlando
S Lee Kling, St. Louis
TPTC Provision Healthcare
Ackerman Cancer
Center
Procure, Oklahoma City
Procure, Princeton
Willis Knighton
Cancer Center
Hampton Univ.
Loma Linda (LLUMC)
Maryland MPTC
Mayo Clinic Arizona
Mayo Clinic Rochester
MD Anderson
U. Penn
Scripps, San Diego
SCCA Seattle
Texas Center for PT (Baylor)
Mass General (MGH)
CDH
St. Jude Children’s
Oklahoma Univ.
University Hospital
Georgetown Univ.
Georgia PT (Emory)
Cincinnati Children’s
Beaumont Health
Baptist Health South FL
McLaren Health, Flint New York PT Center
Dallas PT Center (UT Southwestern)
UCSF Ocular
Los Angeles PT Center
Scott Hamilton PT Center
Johns Hopkins Sibly
Center in operation
Center in development
or under construction

8. Market
Rapid Growth Of Cancer Cases Demands More
Capacity Of Treatment
Cancer ranks No.2 as cause of
death. Aging population and
improved life expectancy result in
rapid growth of cancer cases. By
2030, new cancer cases will be 80%
higher than current level, reaching
25 million per year

9. • China has 3 to 3.5 million of new cancer cases per year.
Because of its fast aging population (300 million over 65
years old by 2030), by 2030 China will have 5.6 million
new cancer cases a year
• The top three cancer types are lung, stomach, and liver
cancer, which correlates with sustaining social-
environmental health factors such as smoking, air
pollution, diet, and high incidence of hepatitis
Market
China Grows Fastest In Cancer Cases
• Different cancer type has its geographical distribution.
For example, liver cancer incidence is high in southern
coastal provinces where people consume a lot
seafood. Geographical distribution of cancer types will
become a factor when investors choose sites of new
proton therapy centers
• Geographical difference of wealth can implicate
affordability of premium treatment. According to GDP
per capita, coastal provinces and some inland regions
are more likely to pursue premium health technology
than provinces in Midwest
Geographical Distribution Of
Cancer Types
Blue: stomach cancer
Yellow: esophagus cancer
Green: liver cancer GDP Per Capita By Province

10. Proton therapy has been used to treat 9 out of top 10 most prevalent cancers in China. Liver cancer is the only
exception. Besides cancer, proton therapy has potential to treat other medical conditions.
Market
Proton Therapy Will Cover Nine Of
Top Ten Cancers In China

11. Market
Exponential Growth Of Demand On Proton
Therapy
A conservative estimate projects 4X growth of number of treatment rooms in 10 years. Purchase of proton therapy equipment
has accelerated since last year. Some PT vendors have reported backlog of orders.

12. • China has 3.5 million of new diagnosis cancer cases per year. This number will increase to 5.6
million by 2030 due to aging population, equivalent to 3% annual growth
• Between 20% to 30% (average 25%) of cancer cases should be treated by proton therapy: 3.5
million X 25% = 875K cases per year
• Assuming 10% of all patients can afford and would pay for proton therapy: 875K X 10%
= 87.5K cases per year
• Therefore, market size of proton therapy in China is 87.5 thousand cases per year
• If there are 87.5 thousand cases per year, how many proton therapy centers does China
need?
• China needs to build 150 proton therapy centers (or 350 treatment rooms total) to fulfill
demand (refer to finance, table of revenue projection), with 3% annual growth
• Assuming China will take 5 years to build 150 centers (30 per year), and every center costs
$100 million, the nation needs to invest $3 billion per year in proton therapy centers
• Reality check: is China willing to spend $3 billion per year to improve its cancer treatment?
• In 2013, 5.4% GDP or $511.3 billion was spent on healthcare in China. The nation could pay
$6 billion by itself, but would be more willing to attract non-government investment for such
projects
Market
Projected Market Size Of China: 150 Proton
Therapy Centers
3.5 million new
patients per year
Market size: 87.5
thousand patients will
need and can pay for
proton therapy
Market demand:
around 150 proton
therapy centers

13. In operation
• Wanjie Center, Zibo (Shandong Prov.) has been in operation since 2004. Because
of management and other issues, Wanjie has not fully realized its marketing
potential
• Shanghai Proton and Heavy Ion Center uses technology provided by Siemens, and
is co-managed with Fudan University. It opened in 2014. Because carbon cation
instead of proton is used, strictly speaking it does not belong to proton therapy. The
center is for research, not for commercial purpose
In development or under construction
• Beijing 301 Military Hospital is planning a proton therapy facility (5 treatment
rooms). The center may be designated for privileged citizens due to its military
background. The facility will locate in Zhuozhou (Hebei Prov.), 30 miles southwest
to Beijing. Zhuozhou is chosen because there’s no land in downtown Beijing. The
center will use IBA technology
• Tianjin Cancer Hospital signed a deal, pending for approval. It will use IBA
• Shenyang (Liaoning Prov.) signed a deal, pending for approval. It will use Varian
• Shiyan (Hubei Prov.). The hospital will expand to 3,000 beds, and become a cancer
hospital. It will use Varian
• Guangzhou is planning a 3-room proton therapy center, and expected to open in
late 2018. It will use IBA
Market
China Has Two Centers In Operation
Major vendors:
• Varian (U.S.)
• IBA (Belgium)
• Hitachi (Japan)
Center in operation
Center in development
or under construction
Shenyang
Zhuozhou, Hebei
Tianjin
Weifang, Shandong
Shanghai
Shiyan, Hubei
Guangzhou