Obesity Epidemic in Emerging Markets Opens Investment Opportunity

Obesity in epidemic proportions in Emerging Markets (EM) , FDA’s openness to new medical technologies for obesity has translated in a investment frenzy amongst investors. Private investors are the most benefited by such investments. Investors are drooling over the potential for multiple returns in the obesity space.
It is unfortunate that emerging markets seem poised to inherit the unwanted side effects of economic progress. Yet if they follow the trends we've seen in the developed world, there will be far-reaching implications for economies and markets. As a result, we think investors should pay close attention to OBESITY as an important indicator of consumer and health-related trends in emerging-market countries. According to a physician entrepreneur “This is a tremendous investment opportunity for private and institutional investors”

 
Following the West Trend
The average calorie consumption in the US rose steadily from approximately 2,000 calories a day in the early 1960-1970s to 3,800 in 2006, according to UN statistics. About two-thirds of Americans are overweight today, based on the World Health Organization's definition.

China: From Lean to Fat
Today, China seems to be following American patterns. Rapid urbanization and modernization have prompted a sharp decline in physical activity. People are consuming more processed and packaged foods-and more calories.
It’s no surprise that obesity is on the rise. A study published in Obesity Reviews reported that 11.4% of Chinese men were obese in 2009, compared with 2.9% in 1993, and obesity is rapidly rising among women and children, too..

India: From Malnourished to Obese
India was malnourished a 2 decades ago. The obesity index in the urban population has grown over 300%. Patients who are obese are seeking immediate treatment and are ready to pay out of pocket. Patients are looking for the technologies that are made in the US ( it did not matter if the technology was approved or in clinical trial).
Despite strong weight loss data shown by Sleeve Gastrectomy and Gastric Bypass. The patients are looking for something else. They are demanding less invasive procedure and are more assertive in their request. If their request are not met, the patients are shopping for new doctor.  The demand for gastric banding is returning, particularly when US and international experience suggest that almost all Gastric bypass and Sleeve Gastrectomy  offer weight loss only until 5-7 yrs. "SO WHY CUT THE GUT?" .

GASTRIC PRESERVATION: The demand of medical device treatment that can offer a minimally invasive, reversible and offer decent weight loss is growing. According to a patient who was 150 Kg and BMI of 40 said " I was recommended Gastric Surgery, I dumped my doctor, I don't want my stomach to be cut and portions of my gut be removed, when I can get a good procedure and be able to upgrade it later if I need it" ," I am only 30 yrs old and don't want to worry about bone loss and other complications because of gastric bypass and Sleeve gastrectomy-go to youtube and see how many people have leaks, bleeds and problems! I don't want that to happen to me" . This individual shopped for a surgeon and got a gastric band like device at another weight loss clinic, lost 50 Kgs in the first year and has kept it off for 30 months.
Investors should take note. If the pattern follows that of developed countries, we would expect to see increasing demand for medical devices like the gastric bands in emerging markets from Johannesburg to Jakarta and  Brazil to China

Opportunity:  Medical  device and drug makers that offer solutions and treatments for obesity should grow rapidly, in our view. California has been a hub for medical technology innovation and had given strong return on investments. These could include companies that develop medical devices or laparoscopic treatments targeting bariatric surgeon users in the US, and devices targeting diabetes.
China & India is already home to the largest number of diabetics in the world-11.6% in China and 14% in India, versus 1% in 1980, according to the Journal of the American Medical Association . In the US, 10.9% of the population suffers from diabetes, reports the International Diabetes Federation ((IDF)).
Investors interested in obesity technologies,  should research carefully using key words “innovations” “obesity” “laparoscopic” “minimally invasive” “reversible” “diabetes”. Contact companies directly to explore investment opportunities..

Is Chinese investment in American medical device start-ups a recent phenomenon?

The value of the Chinese yuan was reduced against the US dollar three time last week—on three successive days—by China’s central bank, the People’s Bank of China. US stocks fell sharply when the first reduction was effected on August 11.

The primary reason for the fall was concern that the Chinese economy is slowing down more than expected even by Chinese authorities.

But, is America resuming its economic leadership of the world in the late days of the Obama presidency?
China appears to be in retreat for now — its currency, the yuan, is taking a tumble and in the process causing ructions across Asia. So, while US VCs and investors sit on the side lines, China investors are finding ways to get their investments into the US. The perception is that the US is poised to resume its economic leadership. The ultra rich in China are counting on US development and the appreciation for their investments in the US.

Recently, one of the medical device provider of advanced proton therapy systems, announced that it has entered into an investment agreement with a China firm where up to $200 million will be invested  to accelerate its development of its technology.  Chinese investors are finding ways to invest in technology companies in the US. They are betting on young medical technology companies working on chronic diseases like obesity, cardiovascular disease, diabetes, orthopedic sector.  $6 billion – that is the amount of money that Chinese companies have committed to investing in U.S. technology firms in the first quarter of this year, according to a report this month by the Asia Society and Rhodium Group. This was no small jump, given that the peak annual transaction value in this category in the past eight years was only $1.5 billion.

We know that Chinese investment in U.S. technology isn’t news, but is Chinese investment in American med device start-ups a recent phenomenon?It’s kind of step-by-step. the investor first tries to buy a house, as usual. Then he buys commercial real estate, strip mall, golf courses, shopping centers. Then he starts to think about start-up companies that he can partner with and improve his business in China, or just for financial return.

China's spending on healthcare has increased 40%, this means a sharp rise in use of medical devices made in the US. Medical products made in China or anywhere in Asia are less desirable, than the ones designed and made in the US. Thanks to the Apple product phenomenon. Chinese consumer believes in the quality of US made product, particularly when it comes to healthcare.

The aging Chinese population is concerned about obesity and aging related problems. They are open to get surgical treatments for obesity, plastic surgery, dentistry, women's health, weight loss treatments drugs or devices.

Chinese investors are now competing with the US- VCs and institutional investors. For them the next step is to go beyond biotech and pharma, they are eying on the med device boom on wall street in the form  of IPOs. They believe the life science sector is not done yet, the med device and diagnostic sector is very much untapped. Experts believe that the recent surge of med device IPOs is an indicator of more IPOs in 2016 -2017 leading to more M&A transactions, higher valuations and takeouts. U.S. life science start-ups have always been in the leading position in innovation, delivering the next generation of technology and business models, so it’s natural for Chinese investors and companies to look there.