APPROACH
INVESTMENT PHILOSOPHY
Quadria believes that to achieve superior returns, it is critical to understand the local, regional and global fundamentals of the healthcare industry in which we invest. We follow a sector-focussed, fundamentals-driven approach that leverages the strong growth dynamics of Asian healthcare to identify healthcare companies with the potential to build scale and become regional leaders.
Creating value for its investors in a responsible and sustainable way is core to Quadria’s investment philosophy. As a sector specialist, our operating experience, domain expertise and global network give us the ability to provide unique insights to deal with complex business issues faced by growing companies and help accelerate our portfolio company's growth.
Maximisation of returns for its investors is central to Quadria’s investment philosophy. We only invest in an opportunity where there is a clearly defined pathway for exit and align with the entrepreneur to achieve that. During the course of the investment we groom the company to be able to create a sustainable platform that would benefit all our partners.
With changing lifestyles and urbanisation, rise in chronic diseases and a huge demand supply gap, the challenge of bringing high quality healthcare at affordable prices could not be more acute as is in Asia. We are committed to responsible investing that encourages environmental sustainability, social responsibility, and effective corporate governance.
As a sector specialist, our operating experience, domain expertise and global network give us the ability to help accelerate our portfolio company's growth.
FOCUS SECTORS
Asia’s healthcare industry is diverse, complex and, in most markets, highly specialised in one sub-segment or the other. There exist pockets of excellence across the region, such as an evolved pharmaceutical industry in India or the strong medical consumables industry in Malaysia. We believe that to navigate and succeed in these markets, it is vital to have a strong understanding of the industry and on-the-ground knowledge of every market we operate in. We believe that our specialised healthcare industry knowledge, experience and relationships are valuable to entrepreneurs as they pursue growth in ever-changing and highly competitive markets.
The healthcare services sub-sector accounts for c. 60-65% of the total spend
Asia’s spend on healthcare services is expected to grow at over 15% through 2020 to cross US$ 1.5 trillion as compared to US$ 800 billion currently. The healthcare services sub-sector accounts for c. 60-65% of the total spend.
Increasing disposable incomes, sedentary lifestyles, increase in chronic diseases and ageing population is leading the demand for quality healthcare services in Asia. However, there exists a huge demand supply gap in terms of both clinical talent as well as supply infrastructure. Due to low public spending on healthcare, more than 70% of new hospital beds are expected to be provided by the private sector, creating a huge investment opportunity.
Asian Pharmaceutical market is expected to grow at approximately 14% through 2020 to cross US$ 600 billion
Asian Pharmaceutical market is expected to grow at approximately 14% through 2020 to cross US$ 600 billion as compared to US$ 281 billion currently. The share of emerging markets in the global pharmaceutical market is expected to increase significantly over the next decade.
Several factors such as increasing patent expiries in the regulated markets, shift towards differentiated & specialty products and increasing trend of consolidation is expected to create attractive growth opportunities for Asian players, many of whom are amongst the largest generics drug companies globally.
Asia's medical technology market is poised to grow at over 15% over the next 4 years
Asia’s medical technology market is poised to grow at over 15% over the next 4 years to reach over US$ 100 billion by 2020 as compared to US$ 60 billion currently. Local firms are aiming for broader range of patient interactions through redrafting their business models by offering appropriate products and services that are tailored to meet the local needs of each market.
Frugal innovation, low cost environment and desire to move up the value chain by shifting from manufacturing of medical supplies and consumables to more complex devices would lead the growth of the sub-segment in the region.
It is moving away from being a mostly provider driven industry to a consumer driven industry
The healthcare ecosystem is witnessing a paradigm shift in the way the services are being delivered and consumed. It is moving away from being a mostly provider driven industry to a consumer driven industry.
All these changes are driven by an underlying need to provide empowerment, convenience and an enhanced experience to the patients and the proliferation is fuelled by technology and entrepreneurship. All these factors are coming together to create specific pockets of opportunities such as home healthcare, health insurance and healthcare retail chains.
KEY MARKETS
Asia accounts for approximately 40% of the global population, 55% of the world’s disease burden and yet commands only 20% of global healthcare expenditure. With increasing ageing population, expanding middle class, urbanisation and higher disposable incomes, the healthcare needs in the region are on an exponential rise. Additionally, with lower than average spending on healthcare by the various governments in the region and a large demand supply gap, there exists a large opportunity for the private healthcare system to expand.
By 2030, Asian healthcare spend is expected to be US$ 4.3 trillion, surpassing the current healthcare spend in U.S. and Europe. South and Southeast Asia’s healthcare markets remain well positioned for growth with the Indian and ASEAN healthcare markets expected to grow by 15% and 11% per annum respectively.
Quadria’s strategy is to focus on high growth healthcare markets within South and Southeast Asia that not only have strong underlying fundamentals, but more importantly, favourable market dynamics where the private sector is leading the way.
At Quadria, we see a greater role for us as private, quasi strategic investors to not only provide capital but also expertise in creating accessible and affordable healthcare.
INDIA
INDIA
HEALTHCARE LANDSCAPE: Healthcare sector in the country is estimated to be US$ 100 billion and expected to grow at over 20{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851} over the next 5 years. There is high dispersion in penetration and quality of healthcare infrastructure across provinces. Key drivers of the sector include rising income and ageing population, explosion of lifestyle diseases, medical tourism and increasing penetration of insurance cover
INVESTMENT CLIMATE: FDI inflows across the healthcare segments stood over US$ 14 billion. Improvement in healthcare infrastructure and cost competitiveness will additionally help medical tourism grow
CHALLENGES: Additional 3 million beds needed for India to achieve the target of 3 beds per 1,000 people by 2025 which would entail capex of US$ 50 billion. Additional 1.5 million doctors and 2.4 million nurses required to meet the growing demand for healthcare
BANGLADESH
BANGLADESH
Healthcare landscape: Lack of adequate public healthcare facilities and rising disposable income is leading the growth of private healthcare. Approximately 6 beds per 10,000 people, low public healthcare spend (at c.1.1{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851} of GPD) and rising out of pocket health expenditure by people are shaping the private investment opportunity
Investment climate: Private sector mainly leading the growth of the sector supported with international donor agencies. Medical tourism and PPP initiatives from the government are expected to add to the growth of the sector
Challenges: Health insurance and government spend is extremely limited, covering only a quarter of the population. There is a high dependence on the private sector
MALAYSIA
MALAYSIA
HEALTHCARE LANDSCAPE: The Malaysian healthcare system is evolving with a number of healthcare facilities, especially in the private sector. There are an estimated 358 hospitals in the country, 209 of which are managed by the private sector
INVESTMENT CLIMATE: Opportunities in Malaysia possibly lie outside of healthcare delivery. The government outlined six focus areas for healthcare: private health insurance for foreign workers, creating a clinical trials hub, pursuing generic opportunities, promoting medical tourism, building teleradiology services, and developing a medical metropolis. Malaysian medical devices sector is possibly the most developed compared to rest of Southeast Asia
CHALLENGES: Healthcare delivery sector is dominated by 2 key players, there is a lack of mid-sized groups which match our investment criteria. Pharmaceutical sector is dominated by government linked companies
INDONESIA
INDONESIA
HEALTHCARE LANDSCAPE: Indonesia’s healthcare requires further investment in infrastructure, access to quality medicines, and increase in skilled manpower. The lack of infrastructure, at 6 hospital beds per 10,000 people, compared to emerging market standards of 17, has led to government initiatives to provide a public payor system with collaboration from the private sector
INVESTMENT CLIMATE: Plans were unveiled for looser restrictions on foreign investment in 2016 in nearly 50 sectors, including healthcare. Fiscal challenges to fund the universal healthcare scheme, with government covering only 39{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851} of national healthcare spend, will require private sector to adapt to changing payor landscape
CHALLENGES: Shortage of funding, facilities and training opportunities for qualified doctors remain key challenges to healthcare provision. Accessibility to quality, affordable healthcare in rural areas also remain a challenge in a country with over 17,000 islands
SINGAPORE
SINGAPORE
HEALTHCARE LANDSCAPE: Singapore’s healthcare system is well recognised internationally, and its healthcare infrastructure is ranked 4th in the world according to the World Competitiveness Yearbook. Moreover, the government has launched various initiatives to facilitate increased private sector participation in the healthcare industry
INVESTMENT CLIMATE: Singapore’s healthcare market is poised for good growth given the rapidly aging population and increased chronic disease burden. In addition, government initiatives to develop Singapore as a leading destination for medical tourism has attracted international patients that seek a wide range of medical care procedures
CHALLENGES: Rising healthcare costs pose a key challenge for the sector’s growth, contributed by administrative functions, expensive innovative treatment options and inefficient use of medical and healthcare services. New hospitals and long-term care facilities also face manpower shortages which has resulted in higher salaries for healthcare professionals in order to continue to attract and retain talent
PHILIPPINES
PHILIPPINES
HEALTHCARE LANDSCAPE: The national government enacted a universal healthcare scheme raising over US$2 billion in funds from tax revenue to provide support for private sector healthcare delivery. Corporatised healthcare services are still in the early days of implementation, with only two groups managing over 1,000 beds
INVESTMENT CLIMATE: The Department of Health seeks to develop hospitals through Private-Public Partnership initiatives. The PPP programme has allocated US$120 million for the modernisation of public hospitals. The program is also subsidising costs of critical life-saving services, such as dialysis, to promote private investment
CHALLENGES: Healthcare practitioners are often drawn overseas for higher wages. Those who remain, concentrate in the metro areas rather than the provinces, causing an uneven distribution of physicians. Drug pricing and availability of trusted generics still remain areas for improvement. According to the WHO, only 30{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851} of the population in the Philippines enjoy unrestricted access to essential drugs
THAILAND
THAILAND
HEALTHCARE LANDSCAPE: The level of healthcare infrastructure in Thailand is relatively better, but considerable regional disparities remain of concern. Bangkok accounts for just 9{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851} of the population but has 20{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851} of hospital beds and 25{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851} of physicians in Thailand
INVESTMENT CLIMATE: Demand for private healthcare in Thailand continues to grow from both domestic and international patients. As such, hospital groups are expanding clinical offerings and infrastructure capacity organically and inorganically. Thailand probably offers the most opportunities in healthcare delivery in Southeast Asia
CHALLENGES: Ensuring an equilibrium in price and quality offering is key to a hospital’s success due to the intense competition. A separate challenge is the low cost of debt funding in Thailand. This makes our proactive value add initiatives to our portfolio companies even more important as a key differentiating factor to other forms of capital and investors
SRI LANKA
SRI LANKA
HEALTHCARE LANDSCAPE: Sri Lanka’s healthcare system has an effective public delivery system, which provides both preventive and curative care at low cost but are concentrated in a few cities. Alimentary & Metabolism, Cardiovascular, Anti-infectives and Respiratory are among the main therapeutic categories in the life sciences segment experiencing highest growth
INVESTMENT CLIMATE: Private sector spending grew by 12{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851} a year, while government spending increased by 10{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851} a year over 2005-2012. To attract investment in the region, the government provides tax rebates for medium scale and large scale enterprises
CHALLENGES: Currently, Sri Lanka needs an additional 14,000 doctors and 25,000 nurses to bring it to international standards. With a growing population and increasing spend on healthcare, the government will face challenges to continue to provide universal low-cost healthcare to the population
VIETNAM
VIETNAM
HEALTHCARE LANDSCAPE: Inadequate health facilities at many provincial hospitals leave them unable to cope with patients’ demands. Since 2004, hospitals have increasingly faced chronic overcrowding, with the hospital bed occupancy rate exceeding 100{3163b34706130b4e1cf64e8c1b910e982a843cab25723611cf66e26b48765851}
INVESTMENT CLIMATE: Rising income, increasing health awareness and severe overcrowding at public facilities leading to liberalisation of the sector by the government, point to vast opportunities in private healthcare in Vietnam. The relatively low level of competition in private healthcare also provides the opportunity to create a national leader
CHALLENGES: The public’s preference to seek treatment at public hospitals limits attempts by private sector to build patient volumes. Life sciences sector is dominated by government owned entities and MNCs. Recent reversal of intentions by the state to divest of its stake in these companies, removed the opportunity to invest in high caliber pharmaceutical companies
FOCUS ZONE
STRONG MARKET GROWTH FUNDAMENTALS
Quadria focuses on companies operating in markets that exhibit strong growth fundamentals with low overall macro risks that include political risks, regulatory and economic risks.
POTENTIAL TO EMERGE AS REGIONAL LEADERS
Quadria looks for business models and firms that exhibit scalability and growth potential, poised to emerge as regional leaders.
STRONG STABLE FREE CASH FLOWS
Business should have a strong financial track record, and show evidence of generating strong and regular cash flows over a period of time such that their underlying risk is low.
EXPERIENCED AND ALIGNED MANAGEMENT TEAM
The target business should also have a strong management with successful track record of leading the company. In addition, Quadria looks for alignment with the target business management team as this is crucial for the execution of our strategy to transform these businesses into leaders in their respective markets.