CHALLENGES AND OPPORTUNITIES IN HEALTHCARE IN INDIA

THE TWENTY FIRST CENTURY REMEDIES LLC EXPERIENCE

SUKDEB DATTA, MD, MBA

CEO

STANDIFORD HELM, MB, MBA

CHIEF MEDICAL OFFICER

Twenty First Century Remedies

“Supercharging Indian Healthcare to International Standards by

active collaboration between United States Board Certified

Physicians and Indian Partner Hospital(s) with superior Cost-

effectiveness and equal Clinical effectiveness.”

MISSION STATEMENT

Table of Contents

Executive Summary

Capabilities Roadmap

Key Financial Metrics

Competitive Landscape

Funding Requirements

Operational Timeline

Executive Summary

Perceived lack of excellence by the Indian consumer of the Indian Healthcare market when compared to U.S. Standards.

Demand in the market within India and South East Asia for Branded American Medical Services.

Opportunity for capturing market share in affluent regions of the subcontinent by providing branded services.

Primary revenue streams from diagnostic, interventional procedure, pharmaceutical and in-patient hospitalization.

Current scenario

95% of new hospital beds from private sector

300 million strong middle class

AIG, Alliance, Sunlife, Standard, Prudential, ING, New York Life, Metlike, Lombard have local partners

Cigna, United and Aetna

Pathology, radiology and BPO (business process outsourcing) are already major businesses.

Molecular diagnostics and pharmacogenomic testing new growth drivers

Indian IT services

Focus areas for the future

Clinical Research

Nursing Schools

Medical Schools

Growth trajectory

Health insurance penetration less than 2%

Growing at 32% per year

Entry of private players in the insurance sector and

spread of TPA (Third Party Administrators)

Lower overheads

Surgery India ($)

Far East ($) US ($)

CABG 8,500 16,000 40,000

TOTAL KNEE

REPLACEMENT

7,000 17,000 48,000

SPINAL

DECOMPRESSION/

FUSION

8,500 14,000 60,000

GASTRIC BYPASS 9,500 22,000 65,000

HIP RESURFACING 8,500 16,000 45,000

Lower Cost Structure

Valves, stents, joint implants, prosthesis, pacemakers,

AICD lower prices due to volume discounts

Lab tests: blood tests, ECG, Chest X-Ray, Lung tests,

abdominal ultrasounds

US $1300 India $84

What do we bring to our U.S. Partners?

US Physicians looking to capitalize on international revenues in the wake of declining domestic incomes

Lack of medical autonomy in clinical care – opportunity to practice medicine in the manner that the physician desires

Diversification in the face of a difficult healthcare environment.

Opportunities to perform high quality ethically performed in clinical trials.

Medical Education- opportunities for developing a Medical School.

What do we bring to the Indian physicians/healthcare sector?

TFCR will bring International Standards of Care for

both Indian and International patients.

Indian Healthcare facilities/providers looking to

acquire leading edge medical technology and

expertise (“Real time technology transfer”)

Indian Patients: Growing demand for access to

premier US Board Certified Physicians providing

services locally

Hospitals Device Manufacturers Research Companies

Insurance Payers Software and IT

Super Specialty Care / Hospitals Networking consult ing physicians

Payer relat ionship management Patient management and care

Partner Physicians (International) Partner Physicians (In country)

Imaging Solut ions Pharmacy Solut ions

US STANDARDS IN SUPER SPECIALTY CARE AT OFFSHORE RATES

Hospital and Partner Physicians Clinical Research Organizat ions

Insurance Companies Corporate Clients

In country self pay & insurance patients Int’l self pay & insurance patients

Imaging referrals

Domest ic and Int’l promotional campaign (Web, Print, TV etc.)

Physician Network Marketing Insurance Company campaign

Capabilities roadmap

KEY PARTNERS

KEY ACTIVITIES

KEY RESOURCES

VALUE

PROPOSITION

CUSTOMER

RELATIONSHIP

CUSTOMER

SEGEMENTS

CHANNELS

Competitive landscape

Apollo Hospital Enterprise Ltd. 50 specialty hospitals

and clinics with bed capacity of over 9,000

Fortis Healthcare: 26 Hospitals; bed capacity 3000.

Global Hospitals- has invested $36.58 million to set up “BGS Global Hospital” in Bangalore.

Manipal Health System

Max Healthcare: Delhi with 800 beds.

Indian Revenue from Imaging

MRI $

BRAIN 180

SPINE 150

NECK 97.50

KNEES 97.50

ABDOMEN 187.50

CHEST 142.50

CT SCAN

BRAIN 142.50

SPINE 120

ABDOMEN 165

KNEE 102

64 SLICE ANGIO WITH

CONTRAST

142.50

BRAIN ANGIO WITH

CONTRAST

187.50

• Cheaper cost of MRI

and CTs

• However, much

lower overheads

• Cost of technicians and cost of

providing service

lower

• Throughput much

higher (upto 30 patients per day)

KEY INPUTS

Anticipated Yearly Expenses

Year 2016 2017 2018

General and Administrative $50,000 $52,000 $54,080

Marketing Expenses $475,661 $317,010 $364,562

Professional Fees and Licensure $10,000 $10,300 $10,609

Insurance Costs $40,000 $42,000 $44,100

Facility Maintenance Costs $0 $0 $0

Medical Equipment Leasing Costs $384,000 $384,000 $384,000

Miscellaneous Costs $310,264 $126,804 $145,825

Totals $1,269,925 $932,114 $1,003,175

Product Name Cost Per Unit Profit Per Item Revenue Per Item

In Patient Revnues $600.00 $3,400.00 $4,000.00

Outpatient Revenues $5.00 $15.00 $20.00

Medical Imaging Revenues $81.00 $81.00 $162.00

Pharmacy Revenues $75.00 $25.00 $100.00

Implant revenue $1,000.00 $750.00 $1,750.00

Clinical Trials $0.00 $0.00 $0.00

Personnel Summary

Position Growth (%) 2016 2017 2018

Senior Management 3.0% $120,000 $123,600 $127,308

Physicians/Surgeons 3.0% $100,000 $103,000 $106,090

Nurses and Medical Aides 3.0% $0 $0 $0

Accounting 3.0% $48,000 $49,440 $50,923

Administrative 3.0% $12,000 $12,360 $12,731

Total 3.0% $280,000 $288,400 $297,052

REVENUE FORECAST

Monthly Sales Analysis - Revenue

Month 1 2 3 4 5 6 7 8 9 10 11 12

In Patient Revnues $144,000 $148,000 $152,000 $156,000 $160,000 $320,000 $324,000 $328,000 $332,000 $336,000 $340,000 $344,000

Outpatient Revenues $6,500 $6,820 $7,160 $7,520 $7,900 $12,500 $13,120 $13,780 $14,460 $15,180 $15,940 $16,740

Medical Imaging Revenues$438,048 $438,048 $438,048 $438,048 $438,048 $438,048 $438,048 $438,048 $438,048 $438,048 $438,048 $438,048

Pharmacy Revenues $23,100 $24,200 $25,300 $26,500 $27,700 $57,500 $59,500 $61,500 $63,700 $65,900 $68,300 $70,800

Implant revenue $7,000 $7,000 $7,000 $7,000 $7,000 $14,000 $14,000 $14,000 $14,000 $14,000 $15,750 $15,750

Totals $618,648 $624,068 $629,508 $635,068 $640,648 $842,048 $848,668 $855,328 $862,208 $869,128 $878,038 $885,338

Monthly Sales Analysis - Units

Month 1 2 3 4 5 6 7 8 9 10 11 12

In Patient Revnues 36 37 38 39 40 80 81 82 83 84 85 86

Outpatient Revenues 325 341 358 376 395 625 656 689 723 759 797 837

Medical Imaging Revenues 2704 2704 2704 2704 2704 2704 2704 2704 2704 2704 2704 2704

Pharmacy Revenues 231 242 253 265 277 575 595 615 637 659 683 708

Implant revenue 4 4 4 4 4 8 8 8 8 8 9 9

Totals 3300 3328 3357 3388 3420 3992 4044 4098 4155 4214 4278 4344

Monthly Sales Analysis - Cost of Sales

Month 1 2 3 4 5 6 7 8 9 10 11 12

In Patient Revnues $82,800 $85,100 $87,400 $89,700 $92,000 $184,000 $186,300 $188,600 $190,900 $193,200 $195,500 $197,800

Outpatient Revenues $1,625 $1,705 $1,790 $1,880 $1,975 $3,125 $3,280 $3,445 $3,615 $3,795 $3,985 $4,185

Medical Imaging Revenues$219,024 $219,024 $219,024 $219,024 $219,024 $219,024 $219,024 $219,024 $219,024 $219,024 $219,024 $219,024

Pharmacy Revenues $17,325 $18,150 $18,975 $19,875 $20,775 $43,125 $44,625 $46,125 $47,775 $49,425 $51,225 $53,100

Implant revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Totals $320,774 $323,979 $327,189 $330,479 $333,774 $449,274 $453,229 $457,194 $461,314 $465,444 $469,734 $474,109

Monthly Sales Analysis - Gross Profit

Months 1 2 3 4 5 6 7 8 9 10 11 12

Totals $297,874 $300,089 $302,319 $304,589 $306,874 $392,774 $395,439 $398,134 $400,894 $403,684 $408,304 $411,229

PROJECTED FINANCIAL STATEMENTS

Proforma Profit and Loss (Yearly)

Year 2016 2017 2018

Sales $9,188,696 $10,567,000 $12,152,050

Cost of Goods Sold $4,866,493 $5,353,142 $5,888,457

Gross Margin 47.04% 49.34% 51.54%

Operating Income $4,322,203 $5,213,858 $6,263,594

Expenses

Payroll $552,000 $671,560 $691,707

General and Administrative $50,000 $52,000 $54,080

Marketing Expenses $475,661 $317,010 $364,562

Professional Fees and Licensure $10,000 $10,300 $10,609

Insurance Costs $40,000 $42,000 $44,100

Facility Maintenance Costs $0 $0 $0

Medical Equipment Leasing Costs $384,000 $384,000 $384,000

Miscellaneous Costs $310,264 $126,804 $145,825

Payroll Taxes $0 $0 $0

Total Operating Costs $1,821,925 $1,603,674 $1,694,882

EBITDA $2,500,278 $3,610,184 $4,568,712

Federal Income Tax $728,915 $1,113,151 $1,449,118

State Income Tax $0 $0 $0

Interest Expense $291,446 $237,000 $177,446

Depreciation Expenses $0 $0 $0

Net Profit $1,479,917 $2,260,033 $2,942,148

Profit Margin 16.11% 21.39% 24.21%

PROJECTED FINANCIAL PERFORMANCE SUMMARY

Proforma Profit and Loss (Yearly)

Year 2016 2017 2018

Sales $9,188,696 $10,567,000 $12,152,050

Operating Costs $1,821,925 $1,603,674 $1,694,882

EBITDA $2,500,278 $3,610,184 $4,568,712

Taxes, Interest, and Depreciation $1,020,360 $1,350,151 $1,626,564

Net Profit $1,479,917 $2,260,033 $2,942,148

FUNDING OPTIONS

Cash on Cash Return

represents investors

cash distributions

(dividends) on the

original cash investment

SOURCE OF FUNDS

SCENARIO

#1 SCENARIO #2 SCENARIO #3

EQUITY $1,500,000 $2,000,000 $3,500,000

DEBT $3,500,000 $3,000,000 $1,500,000

TOTAL SOURCES: $5,000,000 $5,000,000 $5,000,000

IT applications and infrastructure $200,000 $200,000 $200,000

Working Capital $1,200,000 $1,200,000 $1,200,000

FF&E $0 $0 $0

Facility Improvements $0 $0 $0

Security Deposits $200,000 $200,000 $200,000

Pre-Development Costs $300,000 $300,000 $300,000

Medical Equipment $2,500,000 $2,500,000 $2,500,000 Marketing Budget $600,000 $600,000 $600,000

Miscellaneous and Unforeseen Costs $0 $0 $0

TOTAL USES $5,000,000 $5,000,000 $5,000,000

Return on Investment

Cumulative Cash Flows (3 years) $6,700,000 $6,700,000 $6,700,000

Less Interest 3 Years @ 10% $1,050,000 $900,000 $450,000

Owner Cash Distributions $5,650,000 $5,800,000 $6,250,000

Cash on Cash Return 377% 290% 179%

Debt options

Loan with annualized returns of 15%

Loan convertible to equity at year 3.

Operational timeline

PHASE1 (SEPT 2016)

• DIAGNOSTIC (CT, MRI, CATH LAB) KICKOFF ; IMMEDIATE CASH FLOW

•SINGLE LINE OF SERVICE (PAIN AND SPINE CARE)

•KICK-OFF GLOBAL CME EVENT

•GLOBAL EQUIPMENT/DISPOSABLES PARTNERSHIPS

•MARKETING KICKOFF

PHASE 2 ( JUNE 2017)

•SECOND AND OTHER LINES OF SERVICE ADDED)

•PROTOCOLS STANDARDISED FOR INTERNATIONAL COLLABORATION

•JCI ACCREDITATION

•SECOND HOSPITAL WITH ANOTHER 100 BEDS ADDED

•4 MORE OPERATING THEATER

PHASE 3 (JUNE 2018)

•MODEL TESTED AND VETTED

•200% INCREASE IN PHYSICIANS FROM U.S.A

•200 BED SUPERSPECIALTY.

•MEDICAL SCHOOL AND NURSING SCHOOL

Dr. Helm’s Journey

Interventional Pain Physician

Anesthesia background

Private Practice in Orange County, CA

Worked with Dr. Datta for over a decade at the

American Society of Interventional Pain Physicians

First approached in about 2012

Concept was to provide Indian physicians and patients access to American skills and technology

Myself and another physician were initially involved.

Interested at multiple levels

Entrepreneurial allure

Growth is a the interface

In line with the move of economic activity away

from the US

Diversify from pressure on fee-for-service practice in the US

Ability to teach a sophisticated population.

Opportunity for research

Questions about initial concept

the provision of professional services at Indian

pricing

support bringing in American physicians on a

rotating basis

2013 Trip to India

One week

One city

One hospital

Proof of concept that we could work collaboratively

with Indian physicians

Interest both to work and learn

My role was professional, not financial

Financial Basis of Project

Structure of project same as in US:

Capture multiple income streams beyond just

professional services

2nd Indian Trip

Project delayed because of financial issues of

previous owner

These problems were resolved.

We have in the interim been offered a rare opportunity to partner with a branch of the Indian

government

Strong local partner

Good basis for education and teaching

Sustainable competitive advantage

Original reasons for getting involved remain intact.

Barriers to entry/OPPORTUNITIES

Multiple governmental barriers to collaboration

Intellectual Capital (IP) Protection

Establishing a two way collaboration

Tax implications

200 Bed Hospital Facility: Key statistics

Private- Public (PP) partnership model

Revenue sharing model

Long term lease options

80,000 to 100, 000 square foot total usuable area

4 operating rooms

1 OR for General cases, 1 for emergency cases, 1

OR for specialty case and 1 additional clean O.R.

Cath Lab

Non-invasive cardio (Echo, Holter and Treadmill)

Ancilllary Services

Diagnostics: pathology, Microbiology, Histopathology, full range of laboratory services including new tests for pharmacogenomics

Critical Care 20 beds (Cardiothoracic 10 beds and Non-cardiac critical care 10 beds)

1000-1500 outpatient visits per month initial

60-70 per month of major surgery

Pain interventions: 1,000 per month

Spine surgery: initial target of 40-60 per month

Cath lab- 50 cases per month , 500 outpatient visits