Report on Dental Services Market

www.indiabusinessreports.com

Dental Services Market in India

Sector: Healthcare Services

Mar 2014

Index

Market Size 3

Medical Data 11

Global Dental Data 15

Corporates in Global Dental business 20

www.indiabusinessreports.com 2Indian Dental Services Market

Market Size

www.indiabusinessreports.com Indian Dental Services Market

India’s dental opportunity

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Dentist Population -Statewise

105,000 dentists registered with Indian Dental Association. Total practising population believed to be 125K

Market size believed to be ~Rs. 5-6000 crore, at an average income of Rs 4-5 lakh/annum or about Rs 40-50K per month

Indian Dental Services Market

Concentration varies widely


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Population Per Dentist

From a low of 1360 persons per dentist for Goa to close to 65k for OdishaAll India average is around 9800 persons per dentist


Catchment Income affects dentist population


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Catchment versus Per Cap Income

Per Cap Income Pop/Dentist

As per capita income doubles, population per dentist falls by half (negative correlation of 0.52)


Data comparison within states


10 states with lowest pop/dentist

Average per Capita ncome (Rs/annum) 1,12,840

Average pop / dentist 7,374

Total Income of catchment (Rs cr) 765

Area of catchment (sq km) 17

10 states with Highest pop/dentist

Average per Capita Income (Rs/annum) 52,336

Average pop / dentist 26,594

Total Income of catchment (Rs cr) 1,481

Area of catchment (sq km) 115

Top 10 states with highest dentist concentration have:• Per capita income 2.2x lowest 10• Average population per dentist around 28% of lowest 10• Catchment area is 15%

Urban areas have high dentist concentration


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Dentists Pop/Dentist

Deriving Market Opportunity


• Total income of catchment half of the low income states.

– Implies higher propensity to spend in more prosperous states

• Also implies spend on dental services likely to rise faster than GDP

• Nominal GDP grew ~13.5% over FY01-13.

• Dental market can be expected to grow at min 15% over FY13-18

• This means the market will atleast double in 5 years

6,000 6,900

7,935 9,125

10,494 12,068

900 1,035 1,190 1,369 1,574 1,810

FY13 FY14 FY15 FY16 FY17 FY18

Indian Dental Market Opportunity

Dental Clinic Market (Rs Cr) Dental Lab Market (Rs Cr)

Growing dental education sector suggests underlying

demand growth


State Colleges State Colleges

Karnataka 43 Bihar 7

Maharashtra 28 Himachal Pradesh 5

Uttar Pradesh 28 Chattisgarh 5

Andhara Pradesh 20 Orissa 4

Tamil Nadu 17 West Bengal 3

Kerala 17 Delhi 3

Punjab 12 Uttranchal 2

Haryana 11 Jammu & Kashmir 2

Rajasthan 11 Pondicherry 2

Madhya Pradesh 11 Goa 1

Gujarat 9 Assam 1

30,570 dentists graduated in 2010; dentist population could be growing @15-20%Skewed geographical distribution of colleges; top 5 states have 56% of the colleges and top 10 states have 82% of colleges

Medical Data


High Prevalence of dental caries shows growth potential


Age Group Urban (%) Rural (%) Average DMFT*

5-6 yrs 67.23 46.22 56.72 2.1

12 yrs 57.94 36.9 47.39 1.6

15 yrs 55.97 43.28 49.59 1.37

30-35 yrs 45.21 39.27 42.24 1.39

60-75 yrs 79.40 61.90 70.65 -

Source: National Commission on Macroeconomics & Health; Burden of Disease in India

* DMFT: Delayed, Missing and filled Teeth

Incidence of caries in people above 12 yrs is 55% in Delhi, 78% in Mumbai, and 73% in BangaloreAs income increases, treatment rate will increase, creating positive elasticity with GDP growth

Dental disease prevalence & behaviour

• DMFT score for teenagers could be still higher • Around 35% teenagers suffer from misaligned teeth and jaws• Nearly 70% people suffer from some dental problem• As per WHO estimates, incidence of edentulousness (missing

teeth) among Indians is over 20%• According to National Oral Health Survey (by Dental Council of

India), gum diseases (Periodontal diseases) are prevalent in 67.7% of 15 year olds and as much as 89.6% of 35-44 year olds.

• 60% have never visited a dentist• Over 50% not concerned about preventing or curing dental

problems• Almost 30% do not use any oral care product


Key highlights of a dental incidence survey

• According to a survey conducted by Synovate (a research agency) and sponsored by Colgate:– 74% aware of the prevalence of cavities, but 63% are

unconcerned– 76% aware of the prevalence of stained teeth, but 66% are

unconcerned– 78% aware of the prevalence of gum bleeding, but 63% are

unconcerned– 74% aware of the prevalence of swollen gums, but 66% are

unconcerned

• Survey also revealed that 24% of consumers suffered from toothache in the past one year; 96% were aware of the problem; only 35% have taken treatment from a dentist


Global Dental Data


Dental Clinic business in the US: $167bn by 2015


This shows Indian data, which shows incidence > 60% is correctIndia’s most developed state Goa has similar dentist concentration

• Size of the US dental industry was $71bn in 2002, and $94bn in 2007, having grown at a CAGR of 5.8%.

• According to the U.S. Centers for Medicare and Medicaid, the demand for dental services is predicted to increase to $167 billion by 2015

• US dental spends are around 4.3% of total medical spends

• As of 2009, there were 186,084 professionally active dentists, ~1650 patients per dentist, average dentist earnings ~ $570K

• Percent of children ages 2-17 with a dental visit in the past year: 81.4% (2011)

• Percent of adults ages 18-64 with a dental visit in the past year: 61.6% (2011)

• Percent of adults ages 65 and over with a dental visit in the past year: 61.2% (2011)

• Despite this, more than one in five people had untreated dental caries

Dental Clinic business – other countries


China’s dental services market 6-7x larger than IndiaPopulation per dentist is not vastly different though

Germany• 83,339 practicing dentists (2008)• 1237 patients per dentist

Japan• 99,426 practicing dentists (2008)• 1280 patients per dentist

China• China’s dental services market was believed to be around $5-6bn in 2010• ~175K dentists, implying 7700 persons per dentist

UK• 2012 market estimated at £7 billion• Growth drivers are historic under provision compared to other European countries and

the positive demographics of an ageing population requiring more dental treatment

Global Dental Lab Business: $14.5bn


Global Outsourcing opportunity – at 2x US number – could be around $3.2bn in 2012 numbers, or about 25% of the total market

The world market for dental laboratories is projected to exceed $14.5 billion by the year 2015, according to a report by Global Industry Analysts

US Data

The US lab market n 2012 was ~$4.4bn

7,042 dental laboratories in the United States with a payroll in 2012, another 3,000 “one man” dental laboratories. 33,600 domestic dental technicians

Average revenue per lab appears to be $450K.

U.S. Food and Drug Administration import trade data shows around $1.6 billion in dental laboratory related sales was fulfilled by foreign dental laboratories in 2012. Some of it is getting directly outsourced, from US dentists, so may not figure in US dental lab data

US Lab business is consolidating


Outsourcing is the way forward; local technician population is shrinking

The number of dental laboratories in the United States has been steadily declining since 2008, dropping from approximately 12,000 to 7,050 dental laboratory businesses reporting a payroll in 2013

What’s driving consolidation

48% of laboratory owners are more than 55 years old and nearing retirement age

Higher cost of set up; it takes a minimum $200K to setup a lab, from $20K 15-20 years ago. The rise is due to higher dental technology

ADA-accredited dental lab technology programs down 62 percent since 1992. Today, there are 18 programs capable of producing only 300 technicians per year

Rising trend to regulate amongst US states. Four states have labelled dental prosthesis as Class II medical devices (there was no such classification earlier). More states expected to follow. Higher regulatory pressure will hurt small labs

Corporates in Global Dental Business


Dental Clinic Chains - USA


Aspen Dental

• Founded in 1964 as a dental lab, started clinics in 1981. Present in 433 locations

• Acquired by PE Fund Leonard Green & Partners in 2009 for $500mn from another PE fund Ares Management LLC, which bought Aspen in 2006 for $91mn

Smile Brands Group Inc

• Founded in 1998, now 1,300 in nearly 400 offices

• Operates under the brands: Bright Now! Dental, Castle Dental and Monarch Dental

• Has changed hands between PE firms 3 times. Freeman Spogli bought Smile Brands from Gryphon Investors in 2005 for about $340 million. In 2010, Freeman sold to Welsh Carson Anderson & Stowe

American Dental Partners (ADP)

• Founded in 1995, is among the largest US chains

• Was listed on Nasdaq till PE fund JLL Partners acquired 100% in Feb’12 for $398 million

• ADP was affiliated with 27 dental group practices, which have 282 dental facilities and about 2,400 operatories in 21 states at the time of acquisition



ReachOut Healthcare America (RHA)

• Started in 1997, specialises in mobile dental services, providing dental care at schools, workplace and military establishments

• In 2011, coordinated dental care at 8,700 schools and coordinated the processing of 488,000 children in those schools. Handles 1.5 million patients annually

• Acquired by Sentinel Capital Partners in 2007 (80% for $22mn), sold to Morgan Stanley in 2010 at reported 6-7x gains

Kool Smiles

• Founded in 2002, present in 100+ locations in the USA

• In 2011, two million patients visited Kool Smiles clinics

• Acquired by Friedman Fleischer & Lowe in 2004

Midwest Dental

• 75 clinics in 6 states

• Acquired by Friedman Fleischer & Lowe in 2011



Brighter Dental Care

• Small regional dental chain, with 13 outlets

• Was acquired by Topspin LBO and AUA Private Equity in May’12

Great Expressions Dental Centers

• 40 year old chain, with over 150 outlets

• Acquired by PE firm Audax in 2008

Dental Chains - EU


Integrated Dental Holdings, UK• Europe’s largest dental corporate company• Employs more than 2500 dental professionals in 550 dental clinics, caters to 10 million

patients• Owned by Carlyle and Palamon Capital Partners

Oasis Dental Care, UK• UK’s second largest chain with 202 outlets• FY13 revenue was £150 million, EBITDA £19mn• Owned by PE fund Bridgepoint, which acquired 100% for £219 million in 2013

Colosseum Dental, Norway• Founded in 1986, Colosseum has clinics 26 clinics across Scandinavia• Acquired by IK Investment Partners in 2010. In FY09, Colosseum had revenues of NOK

382 million and an EBITDA of NOK 38 million.

Swiss Smiles, Switzerland• Small Swiss chain started in 2002, also present in UK and India. • PE fund EQT invested CHF 44 million in Aug’10

Dental Chains - Asia


Q & M, Singapore

• Established in1996, now the largest private dental healthcare group in Singapore, with 2012 revenue of around Rs 2.80bn, net profit margin of 9%.

• 3 year CAGR of 24% for revenues

• Listed, current market cap around Rs 9.35bn, PE of 33x , and Price/Sales of 3.3x

• 52 clinics, 4 Dental Centres in Singapore, Malaysia. Starting to build business in China. Has 10 clinics spread over Beijing, Nanjing and Shanghai

• Formed JVs with two Chinese Labs: He Cheng Yiwu and Shenzhen New Perfect. Will invest S$25mn in these.

• Plans 50 dental clinics and 20 dental laboratories in China by 2015.

Tokushinkai & World Lab Inc, Japan

• Operates in 10 countries worldwide, including 41 dental clinics and 13 technical centers, employs approximately 2,500 people

• Owns World Lab Inc, a dental lab. World Lab has 7 centres – 4 in Japan, 2 in US, and 1 in China.

Dental Clinic Chains - ANZ


Dental Corporation Holdings

• Largest chain of Australia and New Zealand

• 190 dental offices with more than 450 dentists

• Revenues of A$339 million (US$357.3 million) in 2012

• Fortis sold 64% stake in DCH to BUPA at an estimated A$270 million in Dec’12, valuing the company at ~1.25x sales

1300 Smiles Ltd - Australia

• Listed on the Australian Stock Exchange since 2005

• Australia’s 4th largest dental chain with 25 units

• Revenues of A$35m and net profit of A$6.4mn in FY13

• Market cap ~ $164mn, quotes at – 25x PE (trailing) and around 21x one year forward

– Over 4.5x trailing sales, and 4x likely forward sales

Dental Clinic Chains - ANZ


Abano Healthcare – New Zealand

• Listed on New Zealand Stock Exchange

• Started in 1999, first as a diagnostics business, entered dental in 2003

• Entered Australian dental market in 2008, now the second largest there

• 138 dental clinics, 75 in Australia

• Revenue of $207mn, EBITDA $28mn and net profit $4.5mn in FY13

• Market cap of $115mn. Quotes at– Trailing PE of 25x

– EV/EBITDA of 7x

Global Dental Labs


Modern Dental Laboratory, China

• Claims it is the largest Dental Laboratory in the world and houses the largest dental technology school in the world.

• Started in 1976, from Hong Kong.

• Key production facility now in Shenzhen, China, over 3000 technicians

• Has four distribution centres in US: Chicago, Los Angeles, Seattle and Boston.

Glidewell Dental Laboratory

• Established in 1970, based in California, USA

• Invests in R&D, has patented products like BruxZir (zirconia crowns) which are globally popular

• Has more than 1000 employees

Veden Dental Laboratory

• Australian Company

• 36 years in operation, 1300 technicians, has production in Gaungdong, China

Global Dental Labs


National Dentex Corporation, USA• Founded in 1982, claims to be USA’s largest dental lab business Believes having local

labs is a better idea than a large centralised facility. • Has ~40 labs spread through USA, built largely through acquisitions• Went public in 1993 on Nasdaq, went private in 2010, when it got acquired by GDC

Holdings Inc (in turn owned by PE fund Welsh, Carson, Anderson & Stowe) for $100mn• In 2010, had annual revenues of ~$160mn

Elysee Dental • Founded in 2001, Elysee Dental operates in four European countries

(Netherlands, Belgium, Denmark and Spain).• One of the largest dental laboratories in the world with approximately 2,500 employees• Has a parter lab in Asia where it outsources for cheaper production• PE fund Synergia Capital Partners invested in 2009

The Dental Services Group or Sentage Corporation, USA• Founded in 1989, acquired by PE fund Bolder Capital, LLC in 2005• Has 26 labs in United States, Canada and Mexico• Serves 10,000 dentists with 800 technicians

Global Dental Labs


Flemming Dental GMBH, Germany

• Founded in 1996,

• 1600 employees operating in 50 locations in Germany

• Had a turnover of over €70m in 2009

• Acquired by PE fund Auctus Capital Advisors AG in 2011

Swift Dental Group, UK

• Founded in 1984. Operates from 6 sites in the UK

• Has done 6 acquisitions over the years

New Perfect Dental Lab, China

• 13 laboratories in major cities with over 1,000 college certified technicians

• Q&M of Singapore bought 49% in 2010 for S$19.2 million

Global Dental Labs


Microdental Laboratories, USA / Canada• Claims to be the fourth largest dental laboratory in the world.• Began as Total Management Services Inc. (TMSI) in Alberta, Canada in 1994• Changed name to Dental Technologies Inc. (DTI), went public on the Canadian Venture

Stock Exchange in July, 1999• Acquired by PE fund HealthpointCapital LLC in 2006• Serves 6,500 dentists in 50 states and six countries. • 15 sites and 700 employees throughout North America

Novadent Inc, USA• 9 labs and 350 technicians• Owned by PE fund Birch Hill Equity Partners

Dental Lab Holdings, LLC

• Holding company formed by PE fund Beacon Bay Holdings to acquire dental labs• Has done 2 acquisitions: daVinci Dental Studios, a nationally branded highly aesthetic

dental lab leader, and NuLIfe, a leading dental lab in the New York metro area with implant expertise

PE owned/invested dental clinics chains


Dental Clinic Chain Fund

Aspen Dental, USA Leonard Green & Partners

Smile Brands Group Inc Welsh Carson Anderson & Stowe

American Dental Partners (ADP), USA JLL Partners

ReachOut Healthcare America (RHA) , USA Morgan Stanley PE

Kool Smiles, USA Friedman Fleischer & Lowe

Midwest Dental, USA Friedman Fleischer & Lowe

Great Expressions Dental Centers, USA Audax

Brighter Dental Care, USA Topspin LBO and AUA Private Equity

Integrated Dental Holdings, UK Carlyle and Palamon Capital Partners

Oasis Dental Care, UK Bridge Point

Colosseum Dental, Norway IK Investment Partners

Swiss Smiles, Switzerland EQT

PE owned/invested dental labs


Dental Lab Fund

Elysee Dental , Netherlands Synergia Capital Partners

Sentage Corporation, USA Bolder Capital, LLC

Flemming Dental GMBH, Germany Auctus Capital Advisors

Microdental Laboratories, USA / Canada HealthpointCapital LLC

Novadent Inc, USA Birch Hill Equity Partners

Dental Lab Holdings, LLC, USA Beacon Bay Holdings

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