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HIAS: Change that is unprecedented

“Asia is going through change that is unprecedented,” said Abrar Mir, managing partner, Quadria Capital, delivering the opening keynote speech at this year’s HealthInvestor Asia Summit at the Marina Bay Sands in Singapore.

The global centre of gravity is shifting to the east, he said. By 2030 the healthcare spend in Asia will be US$4.3 trillion. “It is larger than the US and Europe combined – that is how big the opportunities are,” he said. “And many world leading companies are pivoting the future of their companies to Asia.”

He spoke about the demographic and economic underlying trends. First, the massive boost in the number of new babies born every year. Second, the rapidity of economic change. “In the generation of or parents in the 1950s, not one economy from Asia was in top five in the world. By 2030 four of the five largest economies will be Asian,” he added pointing out that even Indonesia will be larger than UK France and Germany.

The challenge of success and growing urbanisation is that the region has 65% to 70% of the world disease burden. “In Asia this used to be treatable diseases. But the nature of that burden is now chronic. It changes the nature of the burden on healthcare,” he said. Asians are now living 30 years longer than grandparents.

So what are the challenges? First and foremost Mir pointed to infrastructure. “The World Health Organisation predicts that as a minimum there should be four hospitals for 1,000 people. In fact there are 0.4 per 1,000,” he said. Affordable care is also out of reach of most. “You need to remember that 2.6 billion people in Asia live below US$2 per day. Many Asian live one accident away from financial catastrophe”

And third, he points to the fact that the vast majority of the population does not realise that there is a disease burden. “If people do not realise that they have diabetes or cardiovascular diseases, the disease burden increases and accessing that opportunity becomes harder.”

There is also a problem in the market itself. Mir is blunt when he points out that valuations in Asia are crazy. He speaks of the fact that they are unsustainable and calls out the Goldilocks syndrome. Mir mentions a healthcare company in Indonesia that listed at the same time as Facebook. “It had a valuation higher than Facebook,” he said. And the difficult of currency risk is unavoidable (“It is impossible to put into a hedging mechanism”) but for all of the negatives, underlying profitability is irreversible and remains “the wind beneath our wings”.

For companies to be successful, they need to make sure that they have the right business models. Of course there are barriers – not enough doctors, affordability and awareness – but there is opportunity. Some of the best hospital groups in the US have 12% EBITDA margins while in Europe it is typically 15%. “In Asia, despite the fact that clinics and hospitals are treating poorer and cash patients, it is 20% and can be as high as 40-50%,” Mir said.

What underlies Mir’s philosophy is that even though his caveats might sound cautious, he believes that the private sector will lead the way. “Ultimately the entire game is about bigger and better,” he said emphasising that Asia continues to represent a once in a lifetime opportunity. “In Asia I believe anything is possible, but I believe that nothing is ever easy,” he concluded.

Posted on: 18/05/2018 UTC+08:00


News

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Malaysian multinational PRG Holdings has extended the deadline for its M$18.3 million (US$4.6 million) acquisition of O&G focused private medical services provider Roopi Medical Centre.
Hong Kong-listed WuXi Biologics, a subsidiary of WuXi PharmaTech, has started the construction of an integrated biologics conjugate solution centre in Wuxi city.
RHT Health Trust, the first business trust listed on the Singapore stock exchange with a portfolio comprising healthcare assets in India, has confirmed that it has received all outstanding amounts due from India’s Fortis Healthcare for the past financial year.
Shares in Ramsay Health Care, Australia’s largest private hospital operator, slumped today after the group cut earnings guidance. It flagged up “onerous lease provisions” and asset writedowns on a number of its hospitals in the UK.
Following Monday’s 5.9 magnitude earthquake which struck Osaka, Parkway Life REIT, which is owned by IHH Healthcare, has confirmed that its Japan asset managers, operators and residents at its Japan healthcare facilities are accounted for with no reported injuries.
Singapore-listed property developer Perennial Real Estate has incorporated a new subsidiary in China. Perennial (Shanghai) Health Management will be involved in the management of its healthcare business in Shanghai.
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Analysis

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