Conference. Opportunities in Latin America s Healthcare Sector

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2 Conference Opportunities in Latin America s Healthcare Sector

3 Presence of Global Health Intelligence Founded on 20+ years experience in Market Intelligence Latin America offices in Miami, Mexico City and Sao Paulo. Dedicated to Healthcare in Emerging Markets Monitoring of over 20 medical devices every quarter. The largest hospital demographics database in Latin America Profiles on >18,000 hospitals in Latin America.

4 Global Health Intelligence solutions HospiScope The world s largest and only hospital demographics database focused on Latin America, with verified and actionable data. SurgiScope New! The world s largest and only diagnostic, therapeutic and surgical procedures database focused on LatAm, by hospital. ShareScope A unique methodology based on the analysis of import data to deliver reliable insights in a timely manner across LatAm. In-Scope Refined with 20+ years Market Intelligence experience. Market sizing and segmentation Partner search & market due diligence Competitive profiling Pricing and cost analysis Best practices Positioning and opportunity identification

5 Opportunities in Latin America s Healthcare Sector 1. LatAm in a global context 2. Hospital landscape 3. Healthcare Mega-trends 4. Takeaways

6 Harnessing the potential of emerging markets is key to long-term growth NUMBER OF HOSPTIALS BY ECONOMY NUMBER OF HOSPTIALS BY COUNTRY Emerging markets ~75,000 Developed economies ~25,000 China India Japan Brazil Russia United States Mexico Korea Germany Nigeria France Colombia Argentina Emerging markets Developed economies There are 3x as many hospitals in emerging markets as there are in developed economies. Out of the top 10 emerging markets, 4 are in Latin America. Source: GHI analysis based on data from the OECD, CEPAL, WHO, the World Bank and certain local ministries.

7 Latin America is on the mend $1 trillion purchasing power disappeared from LatAm between 2014 and Purchasing power in LatAm bottomed out in 2016; the march back to precrisis levels begins. LATIN AMERICA NOMINAL GDP (US$ BN) $6.000 $121 $5.000 $203 $258 $377 $192 $68 $4.000 $599 $240 $195 $291 $247 $282 $611 $3.000 $1.304 $545 $1.159 $1.044 $2.000 $2.416 $1.000 $1.772 $1.697 $34 $161 $251 $119 $230 $291 $213 $28 $270 $362 $257 $344 $321 $884 $762 $648 $1.146 $1.230 $1.346 $2.029 $2.100 $2.155 FX volatility exacerbates growth cycles in LatAm 2018 will pleasantly surprise. $ Brazil Mexico Argentina Colombia Chile Peru Venezuela Source: IMF, GHI analysis

8 2003M1 2003M6 2003M M4 2004M9 2005M2 2005M7 2005M M5 2006M M3 2007M8 2008M1 2008M6 2008M M4 2009M9 2010M2 2010M7 2010M M5 2011M M3 2012M8 2013M1 2013M6 2013M M4 2014M9 2015M2 2015M7 2015M M5 2016M M3 2017M8 2018M1 Resource prices are rising again buoying currencies Advantaged Peru, Chile, Brazil Energy importers Caribbean, Central America Less advantaged Venezuela, Ecuador, Colombia, Trinidad & Tobago 300,00 250,00 200,00 Divergent Prices of Natural Resources Rising global investment into infrastructure 150,00 100,00 50,00 0,00 US supply growth (shale) + recent shocks Industrial Metals Energy Source: The Economist

9 Establishing the new normal There is a direct correlation between energy prices and local currency F/X to the dollar. The regional currency depreciation came to a halt in January 2016 and appears to have generally stabilized across all major economies. The current F/X rates are the new normal, with standard volatility in place. NAFTA negotiations, Future rate hikes in the U.S. and Presidential elections across the region may heighten volatility in the coming months. REGIONAL CURRENCY DEPRECIATION (LC:US$) 10% 5% 0% Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18-5% -10% -15% -20% -25% -30% -35% -40% -45% -50% -55% -60% -65% -70% Colombia Brazil Energy Price Index Chile Mexico Peru Argentina Sources: xe.com, IMF, GHI analysis

10 Latin America must raise productivity Growth relied on demographics and commodity exports with small productivity gains WHAT DROVE GDP GROWTH: PRODUCTIVITY OR DEMOGRAPHICS Productivity contribution Labor input contribution Avg. GDP growth, CAGR % Latin America Middle East Oceania Africa Western Europe North America Eastern Europe and Central Asia Asia Source: McKinsey

11 Opportunities in Latin America s Healthcare Sector 1. LatAm in a global context 2. Hospital landscape 3. Healthcare Mega-trends 4. Takeaways

12 The challenges of the hospital landscape Hospitals across Latin America are on average 3.5x smaller than those of the US. There is a vast size difference between between Public and Private institutions. In Mexico, Public institutions on average 7x larger than their private sector counterparts. This contrasts with the ROLA where the size difference is 2x. In Colombia, institutions associated with private care account for 50% of hospitals and 56% of beds. INFRASTRUCTURE BREAKDOWN LAC TOTAL Hospitals 58% 42% 21,750 Beds 44% 56% 975,000 O/R 62% 38% 48,330 Private Public AVERAGE HOSPITAL SIZE (BEDS PER HOSPITAL) Brazil Mexico Colombia Argentina LatAm USA 162 Source: GHI HospiScope 2017.

13 Under capacity exacerbates resources GENERAL INFRASTRUCTURE DATA Hosp. per 100k ppl Hosp. beds per 1,000 ppl O/R per 100 beds Procedures per 100k ppl 4,119 5,525 6,168 5,504 5,501 5,164 PROCEDURE BREAKDOWN Cardiovascular 1% 5% 7% 4% 4% 2% General 24% 19% N/A 7% 11% 22% Neurological 1% 1% 2% 3% 2% 2% OBGYN + Other 62% 55% 59% 64% 66% 61% Orthopedic 10% 14% 16% 14% 11% 8% Thoracic 1% 1% 1% 2% 2% 1% Urology 2% 4% 15% 5% 6% 4% The capacity of the Colombian healthcare system is on par or above the regional averages. With capacity being well established, it enables the Colombian system to give greater focus on high complexity procedures (such as cardiovascular, neurological, thoraci, and urology). In contrast, Mexico is undercapacity, translating to a greater focus on general and OBGYN (birthing) procedures, to the detriment of higher specialty cases. Source: GHI HospiScope 2017.

14 Opportunities in Latin America s Healthcare Sector 1. LatAm in a global context 2. Hospital landscape 3. Healthcare Mega-trends 4. Takeaways

15 Millions of people Latin America is the fastest ageing region in the world In 2010, 10% of Latin Americans were over 60 years old; by 2020, this number will reach 21%. Healthcare expenditure is expected to rise at 5% per year through 2018, and possibly faster after that. The elderly are the greatest burden to healthcare budgets over 80% of adults over 60 have at least one chronic disease. This is further impacted by the reduction of household size. Home care solutions are expected to demonstrate a CAGR of 8.7% from MILLION MORE ELDERLY BY under over mn mn Sources: Center for Strategic & International Studies.

16 Latin America heads the global obesity epidemic Obesity is one of the world s most concerning public health issues, with Latin America at the forefront. Governments are beginning to take action in seeking to curb the obesity epidemic. Childhood obesity is even more worrisome. Populations are starting to make more health conscious food and beverage decisions, particularly in the US. The weight issue has inertia and will continue to be a pressing topic for another 20 years, at least. Obesity leads to a series of related diseases, including heart disease, high blood pressure, diabetes, gout, amongst others. OVERWEIGHT AND OBESITY RATES AMONGST ADULTS ADULT OBESITY IN LATIN AMERICA Mexico 28,1% Chile 27,8% Argentina 16 26,3% Peru 21,1% Colombia 21,0% Brazil 20,0% 0% 25% 50% Sources: OECD Obesity Update,2017. Renew Bariatrics 2017.

17 Healthcare expenditure on the rise Highest growth seen in Chile, Peru and Colombia Healthcare expenditure is growing at a CAGR of 3.4% per year. Chile, Peru and Colombia are outpacing the market with 8%, 7% and 5% CAGR respectively. Voluntary payments (including private insurance) is the fastest growing segment. Chile and Colombia are outpacing the market with 9% CAGR each. Argentina showed growth in 2015 after 4 years of continual decline. Public sector expenditure is rising 2x faster than Private sector expenditure. Peru and Chile are outpacing the market with 11% and 8% CAGR respectively HEALTH EXPENDITURE BY TYPE OF SPEND (US$ CONSTANT 2010 MN) $ CAGR + 3.4% $ % $ % 19% $ % $ $ % 30% $ % 51% $ % $ Government Out-of-pocket Voluntary payments Source: OECD and WHO, 2016.

18 Private insurance expands to the middle class Public healthcare has some well established, highly regarded institutions. It s not just a money issue. Fiscal austerity, Red-tape, System inefficiencies, and Corruption, all limit timely market access to the public sector. Patients seek coverage in a timely manner from the private sector. Private insurance is expanding at >20% per year in some markets, looking to grow into the middle class and working class (SES C, C-). Driven by international healthcare providers. Non-traditional players are creating their own plans. Results in a proliferation of Small, Specialized Private Clinics and Hospitals. ~80% of treatments in Private hospitals are covered by insurance. INSURANCE PENETRATION BY SOCIOECONOMIC LEVEL SES % POP. INCOME US$ A/B 7% >$90K C+ 14% $55-$90K C 18% $25-$55K C- 16% $15-$25K D+ 20% $8-$15K D 18% $2.5-$8K E 7% <$2.5K Private coverage Expansion opportunity Public Source: GHI analysis based on INEGI and AMAI.

19 Changing Roles for the 5Ps Patients Physicians Professional healthcare administrators Payers Policy makers Want to be more involved in the process of care. Research: Physicians, Facilities, Payers, Devices and Equipment. Engage in the healthcare dialogue. At the crux of patient / payer interface. May work in multiple institutions. Face the current HC needs and plan for future. Private sector: Seek cost reductions; Increased volumes. Public sector: Seek efficiency gains. Deliver effective care in a timely manner. Growing importance of Quality of care. Must consider the HC needs of the future. Growing importance of Quality of care. PATIENT CONVERSATIONS ABOUT HOSPITALS IN 2017 Brazil: 38,419 Primarily: Albert Einstein, HCor, Sirio-Libanes, H. de Clinicas Mexico: 27,384 Primarily: Medica Sur, ABC, Star Medica, H. Espanol Colombia: 15,284 Primarily: Fundacion Cardio- Infantil, Clinica Las Americas Source: GHI Analysis.

20 Generating Cost Efficiencies Hospital systems are adopting a series a of measures to keep costs low, including: 1. SHIFT TO ASIAN PRODUCTS 2. VENDOR MANAGEMENT INVENTORY Vendor manages within the hospital. 3. GROUP PURCHASING ORGANIZATIONS Sustained growth of Asian products Primarily from China and India Price driven market, particularly for Providers who attribute less importance on after-sales service. Primary target clients: Independent practices, Clinics, Smaller hospitals. Increases competition amongst vendors rd PARTY LOGISTICS Last mile through FedEx, DHL, etc. Source: GHI analysis.

21 Opportunities in Latin America s Healthcare Sector 1. LatAm in a global context 2. Hospital landscape 3. Healthcare Mega-trends 4. Takeaways

22 LOW IMPACT HIGH IMPACT Driving forces that will impact healthcare MICRO (PATIENT) MACRO (SYSTEM) Obesity epidemic $ Ageing pop. Patient participation Dependency ratios Private insurance Private care Lack of Tight budgets efficiency Mobile disruption Value based care Provider consolidation Source: GHI analysis.

23 Main takeaways Demand & Cost of care will continue to increase. Particularly in the public sector. Budgets will remain tight. Public sector care will continue to prioritize mainstream procedures. $ Increasing market access is the only effective & realistic way to get more patients treated. Driving cost efficiencies through the supply chain is the only sustainable way to generate long-term savings. Source: GHI analysis.

24 Guillaume Corpart Global Health Intelligence +1 (305) x302