, GROUP CEO, AMERICAN ONCOLOGY INSTITUTE, ON HIS ENDEAVOUR TO BRING WORLD-CLASS CANCER CARE TO SOUTH-EAST ASIA

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1 WPP license no. MR/TECH/WPP-76/North/2017 License to post without prepayment Postal Registration No. MCN/242/ Published on 27th of every previous month. Posting date: 30th & 31st of every previous month. Posted at Patrika Channel Sorting Office, Mumbai Registered with Registrar of Newspapers under RNI No. MAHENG/2012/ Total number of pages 48 Aligning business and healthcare in India July 2017 Vol 5 Issue 10 `50 KERALA SPECIAL PRIVATE HEALTHCARE BOOM IT LEVERAGING IT FOR HOME HEALTHCARE BEST OF THE WEST DR LLOYD NAZARETH, GROUP CEO, AMERICAN ONCOLOGY INSTITUTE, ON HIS ENDEAVOUR TO BRING WORLD-CLASS CANCER CARE TO SOUTH-EAST ASIA Published by ITP Publishing India

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3 Asian Voyage Dr Lloyd Nazareth, group CEO, Cancer Treatment Services International, and Vishal Bali, senior advisor, TPG Growth, on creating a protocol-driven oncology network in south-east Asia BY RITA DUTTA When former Fortis group CEO, Vishal Bali, was roped in as a senior advisor and Asia head for the healthcare arm of TPG Growth in April 2014, all eyes were on the lucrative deals that the PE firm would start scooping up in Asia. But TPG Growth, the middle market and growth-equity investment vehicle of TPG, was in no hurry. News that TPG Growth could be investing in Cancer Treatment Services International (CTSI) streamed in the second quarter of 2015 and gained momentum after Dr Lloyd Nazareth, Bali s team mate and COO in Wockhardt Hospitals and Fortis Healthcare, joined TPG Growth as a consultant. In January 2016, TPG Growth made a significant investment in Asiri Healthcare, Sri Lanka s largest healthcare delivery network. However, in India it was only in April 2016, after evaluating an array of potential investments, TPG Growth announced an acquisition of 65% stake in for $33 million (Rs 220 crore) in CTSI. Pittsburgh-based CTSI forayed in India in 2012 with threepronged business segments. Its core brand is American Oncology Institute (AOI) that is pivotted around specialised oncology care. The other two segments are Citizens Hospital, which is a multi speciality hospital in Hyderabad, and AmPath, which is a pathology diagnostics provider with a niche focus on oncology diagnostics. CTSI was founded by renowned oncologists, Dr Jeffery Shogan and Dr Stanley Marks, along with a host of other clinicians from the University of Pittsburgh Medical Centre (UPMC), one of the leading oncology centres in the US. Their endeavour was to make innovative and protocol-driven cancer treatment available to patients outside of the US, particularly in the developing world. They teamed up with Dr RP Raju, a radiation oncologist, to start the 1. Dr Lloyd Nazareth and Vishal Bali have earlier worked together in Wockhardt Hospitals and Fortis. 19

4 2 CO-FOUNDERS & EXECUTIVE DIRECTORS OF CTSI Joe Nicholas Andrew Shogan 2. The group is constructing a 200-bed oncology hospital in Bangladesh along with AFC Healthcare. first centre in Hyderabad. The company was also co-founded by Joseph Nicholas and Andrew Shogan- the duo relocated to India from the US to launch CTSI in the region and to expand its network. TPG is one of the leading global investors in healthcare and for TPG Growth this was its third healthcare/med-tech investment out of India. In September 2013, the fund had made a minority investment of Rs 145 crore in Sutures India, a manufacturer of medical consumables. It has grown that platform exponentially beyond India and now owns 52% of the company. TPG Growth also owns 29% stake in Asiri Healthcare, Sri Lanka. TPG Growth s investment in CTSI was on the back of its thesis around single speciality healthcare delivery platform. "With rising incidence of cancer in the region, more than 7 million cancer patients are expected to suffer from the disease in India alone by 2020 which demand the establishment of more comprehensive cancer care centres. TPG perceived the investment in CTSI as an opportunity to craft a high quality integrated oncology programme as well as be the architect of a network of oncology centres in India and other countries of south-east Asia," explains Bali. TPG realised this as a scope to create a brand under AOI that had its roots in the quality standards of a university level oncology delivery programme, UPMC in this case. A diverse strategy to erect a differentiator in oncology care was fleshed out during the investment process. The yawning demand supply gap in cancer treatment was the centre piece of this strategy. We wanted to carve out a brand that introduced US-based protocol driven oncology care in India, as the US has always been at the forefront of oncology care in the world, whether it is clinical competence, technology or research, says Bali. Also, AOI wanted to constitute a treatment planning system and an international tumour board of repute, both of which have a significant role to play in treatment outcomes. Today, I can proudly state that we have the best international tumour board in the country, helmed by clinical experts from the UPMC, says Bali. Another USP of AOI is the centralised radiation treatment planning (CTP) system that is buoyed by an internationally trained team of radiation oncologists, medical physicists and dosimetrists, based at the hub centre in Hyderabad, who support the treating oncologists with the most 20

5 effective radiation therapy course of cancer treatment for patients within the AOI network. The CTP is powered by a decision support system software to ensure uniformity of care. Prior to TPG Growth s majority investment, AOI had merely two functional cancer facilities in India- one nestled in the 300-bed Citizens Hospital in Hyderabad and another chemotherapy OPD centre at Vijayawada s Andhra Hospital. A comprehensive cancer centre with radiation therapy at the 200-bed NRI Medical College, Guntur, Andhra Pradesh was under way. In the last one year, AOI has rapidly expanded its footprint across India and has a pipeline of projects in south Asia which are under implementation. Besides launching the centre at NRI Medical College, in December last year, it commenced operations of an 80-bed dedicated oncology centre at Royal Care Super Speciality Hospital in Coimbatore. Around two months back, it started a dedicated oncology block with medical, surgical and radiation oncology at the reputed Dayanand Medical College & Hospital in Ludhiana. Coming up next is a 100-bed oncology and specialty hospital in Nagpur, spread over 90,000 square feet which would serve the entire Vidharbha region of Maharashtra. The hospital in Nagpur is in association with the Cure All Group, promoted by the Nangia Family. This would be a comprehensive oncology hospital offering radiation, medical and surgical oncology services. This project, with a budget of $ 4.5 million (Rs 30 crore) is slated to be commissioned in the month of August, says Dr Lloyd Nazareth, who was designated as group CEO for CTSI at the time of announcing the TPG investment. Now Joseph Nicholas and Andrew 3. Citizens Hospital has shown 50% growth in revenue over the last one year. 3 21

6 4. AOI recently started operations in Ludhiana. 4 Shogan have taken over as executive directors and continue to spearhead the expansion of the company, besides bridging and contributing to knowledge of oncology systems from the US. In the last few months, AOI has also been fortifying its presence pan Asia. AOI has signed an MoU with AFC Healthcare to start a 200-bed oncology hospital at Chittagong in Bangladesh. AFC Healthcare has also been instrumental in starting Bangladesh s leading cardiac centre, Fortis Escorts Heart Institute, at Khulna. The oncology hospital would be a Greenfield project built ground up. The total cost of the project, which is funded by AFC, exclusive of the land, is to the tune of $25 million (Rs 165 crore). AOI has also inked a deal with Asiri Hospitals, a TPG Growth portfolio company, to launch the country s first comprehensive cancer care centre in the private sector at the Asiri Surgical Hospital. The Asiri - AOI oncology hospital would have the country s first radiation therapy in the private sector, says Bali. AOI is also expected to start a Greenfield project in Myanmar with a group that is currently into multi specialty hospitals. But that project has been plagued by delay. The Myanmar government has fairly stringent rules on foreign investment. TPG has other investments in that country and we are hopeful of closing the deal in a few months, explains Bali. And in Nepal, AOI has tied up with a group to construct an oncology hospital with a local business family. Scouting for projects in UP, MP, Maharashtra, Punjab-Haryana and eastern India, AOI is inching towards closing around 12 to 13 more projects by the end of this year. We have planned to remain focused on having around 15 centres in India and south-east Asia by the next three years, shares Dr Lloyd. In India, the group has an opportunity to expand the network in Punjab in association with Dayanand Medical College & Hospital. They have expressed interest, but the talks with the trust are in a preliminary stage, says Dr Lloyd. Additionally, Maharashtra is another state that the group has zeroed in onwhether it is Mumbai, Navi Mumbai, Pune or Nashik. The group is likely to forge a few partnerships in Maharashtra within the next few months. Yes, we have a strategic interest in Maharashtra. First, there is an under-served market in oncology there and second, the clinical talent is looking for better infrastructure. Mumbai-Navi Mumbai has a population of 25 million people and the city has just a few quality cancer care centres, informs Dr Lloyd. Additionally, the group has lined up a standalone 100-bed oncology hospital in Bhubaneswar. Out of Rs 220 crore that TPG Growth was slated to invest in CTSI, a majority has already been pumped in. Investment in CTSI has all gone in as growth capital, says Bali, adding, We would continue to invest 22

7 5 in CTSI as and when it is required. And how does the group single out potential markets? We look at the quality of clinical talent available locally, how well developed is the state, the number of organised healthcare players and the addressable population, says Dr Lloyd. As of now, the spotlight of the group is on India and its tier I and tier II cities. Around 70% of our focus would always be on India, says Bali. The vehicle for growth for AOI is primarily the partnership model with existing healthcare players. According to Bali, the partnership model accelerates the scale for AOI. There are many multi specialty hospitals in the country which do not have oncology services. With AOI, they can establish a high quality internationally benchmarked oncology programme for their patients, says he. What AOI brings to a partnership is its international expertise of clinical protocols, the expertise in design, equipment and training, financial investment in technology and the operational expertise to run a high quality oncology centre. And how does AOI sieve out the partners? Our aim is to opt for long-term partnerships. We need to have shared vision with the partner with respect to following international protocols and quality of services in oncology. We also prefer tying with partners who have presence in healthcare and thus possess an understanding of how the industry functions, says Dr Lloyd. For instance, to provide high quality radiation services, AOI has benchmarked that a single Linac should not take on more than patients per day, while several centres in India go up to 100 patients. The centralised treatment planning service gives the group enhanced productivity. As the AOI network expands, we are pleased to see a number of institutions across the country which are proactively reaching out to us for forging partnerships, says Dr Lloyd. One of the core strategies of expansion is establishing oncology centres with focus on radiation therapy and medical oncology services. In centres where the partnership is with a multi speciality hospital, surgical oncology continues to be provided by them. The centres with medical and radiation oncology services are housed in buildings with an in-built are of 20,000 to 25,000 square feet. Its investment per centre can range from $ 2 million (Rs 13 crore) to $ 5 million (Rs 33 crore) based on the level of technology and infrastructure 5. The group's facility at NRI Medical College, Guntur. 23

8 6 6. The target for CTSI is to take the total revenue of the group from Rs 150 crore to Rs 240 crore in FY requirement. Every centre of AOI necessarily has radiation and PET scan services. The investment shoots up when surgical oncology services are provided as well. Usually, the unit should attain operational breakeven within two years, says Dr Lloyd. Ever since the TPG investment, the management team has also been augmented across operations and other key functions to shore up the geographical expansion and to ensure the deliverables at each centre. CTSI s second arm, the Hyderabad based Citizens Hospital, has also seen a major spurt in revenue after TPG s takeover. The revenue has swelled by 50% in the last one year, mainly due to strengthening of a few specialties besides surgical oncology like cardiology, gastroenterology, orthopaedics, neurosciences and emergency care. Post the investment, Citizens has become a dominant specialty hospital in the Hyderabad s competitive healthcare ecosystem. The hospital has attracted many senior and respected clinicians within the city across all specialities which demonstrates the clinical orientation of the group. What was an impediment in terms of its location has become an advantage with most of the new housing of Hyderabad coming up in that region of Hyderabad, says Dr Lloyd. And CTSI s pathology provider, AmPath, has also spread its wings in the last one year. It has started operations in Lucknow, Kolkata, Patna, Chennai and doubled its revenue over the last one year. Also, it has tied up with TPG s other invested company, Motherhood Hospitals, to start a lab in each of its centres. AmPath now intends to increase its B2B business, delve into B2C and start four more satellite labs in key geographies, says Dr Lloyd. How the well-crafted strategies are panning out? The brand is growing at a steady pace and the target for CTSI is to take the total revenue of the group from Rs 150 crore to Rs 240 crore in FY , says Dr Lloyd. But would CTSI able to sustain its growth, in the wake of stringent government regulations for private healthcare? The macro environment for healthcare services will change in India, given the government s push and regulatory policies. Regulation should support the industry to grow and has to be well planned and executed, so that the private sector continues to invest in infrastructure and introduces advanced medical technologies. I am optimistic that the government will play an enabling role, concludes Bali. 24