DIAGNOSTICA MEDICAL CORPORATION
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Technology-Based Healthcare Development Model for the Region Modern equipment and tele-medicine allow medical diagnostic systems to be shared globally. As a potential hub for this East-West transfer of medical technology, Armenia boasts of Diagnostica. Upgrading its dated equipment not only implies better diagnostic care delivery but also enables world-class services to be provided and modeled in the region from Yerevan. To western suppliers of medical technology Diagnostica offers an attractive location for equipment testing, training, remanufacturing, sales and technical support for the FSU region. The small investment sought is $3.1 million. Company: Diagnostica Medical Corporation (Diagnostica) Amount: $ 3,100,000 Tenor/Terms: Equity participation preferable; equipment lease and other financing arrangements welcome. Documentation: Corporate Charter; Annual Audited Financial statements and project cost details Use of Funds: Equipment & Technologies $2,700,000 Rehabilitation and Construction Activities $ 324,700 Training $ 35,000 Marketing $ 40,000 Total $ 3,100,000 Equipment and technologies -- Approximately $1 million for Open MRI/Permanent magnet and Spiral CT Scanner and remainder for computerized EEG, Holter monitoring system, 2 Digital ultrasound systems, Video endoscopy Cabinet, PCR laboratory, Cath/Angio Lab/digital, Digital radiography system, R/F room, Mammography machine, Bone densitometer, Lithotripter/ w CArm, Miscellaneous laser and filming equipment and imagers, Endo- surgery cabinet, Operating room with table and light, 4 bed ICU including 4 lung ventilators, patient monitors, defibrillators each and Oxygen concentrator/bed side and General equipment for a 16 bed inpatient section. In addition other basic lab and telemedicine related equipment, personal computers, training equipment and other peripherals are needed. Other details will be made available in one-on-one meetings. Legal Status: Corporation (31% employee-owned; 38% privately held and 31% government-owned) — chartered as an Open Joint Stock Company Strategic Partners: Professional / academic collaborations with University of Maryland s East West Space Science Center; US Medical Informatics and Technology Applications Consortium (partnership with NASA); Washington Hospital Center, Radiology Outreach Foundation; Applied Communication Concepts; Armenian International Radiology Society (USA); Center for Reproductive Medicine (France); National Cancer Center (Italy); McGill University (Canada). Recent International Awards include NASA Certificate of Recognition in International Tele-medicine; European Market Research Center Award nomination and cited as a success story in USAID/PricewaterhouseCoopers publications. Current Operations: Diagnostica is a leading medical institution in the region, specializing in providing multi-profile medical diagnostics and high technology based services. Strongly positioned with years of business experience and privately run, its professionals are Western style marketing and management oriented and operated it profitably for nine years establishing a track record of international cooperation. Founded in 1984 and headquartered in Yerevan it piloted the multi-specialty diagnostic center in the former Soviet Union — a model still being emulated in the region. Many of its 330 employees, nearly 100 trained physicians, possess key medical qualifications that offer high-level contemporary technology backgrounds, some with prior training in the USA and Europe. It delivers outpatient and limited in-patient diagnostic services relying on modern diagnostic technologies equipped by leading manufacturers like GE, Siemens, Picker, Olympus, Aloka, HP and Phillips. The equipment includes, among others, CT Scanner, MRI, Ultrasound, X-ray, Mammography, Endoscopy, ECG, Echocardiography, Stress-tests, Myography, Vascular Doppler, Electroencephalography, Diagnostic Spirography, Urodynamics and various laboratory analyses equipment for clinical chemistry, immunology, microbiology, pathology, etc. It participates in web-based international collaborative networks, focusing on diagnostic telemedicine, distance learning, and operates other international and domestic links. As country s leading graduate training and research facility in medical diagnostics and telemedicine, Diagnostica serves as the major academic affiliate to the National Institute of Health and the National Academy of Sciences of Armenia. Sales and Marketing Plan: Diagnostica currently largely services the domestic market but aims to provide world-class services to regional health care systems given its direct contacts with institutions in the Former Soviet Union. Currently about 98% of the services are provided to the local market and 2% for neighboring countries. Future projections are to increase the share of medical diagnostic services, both outpatient and inpatient, provided to the clients from abroad up to 15%. It will require strong marketing efforts, primarily (but not exclusively) focused on regional markets of Georgia and Southern Russia and others. The enhanced international telemedicine service will play an additional and instrumental role for this market enlargement. Diagnostica also expects a significant increase in foreign exchange earnings through international training opportunities for medical doctors and engineers, both in-house and via distance learning. Finally, projections are made to increase the income via exporting the model of technology-based, market-driven healthcare industry development. Business Plan: Diagnostica has maintained an average gross operating margin of 15% on its annual revenues of $500-600,000 during the last six years and re-invested most of its internally generated funds to invest in fixed assets to keep abreast with rapidly advancing health care technologies. This reduced its net income and dividends have fallen. As the marketing plan indicates, it aims to raise financing to upgrade its equipment ($2.7 m) and building facilities ($0.4 m) to attract a growing number of regional (hard currency) clients providing cost-effective services to compete with European and Russian diagnostic service providers. Based on the above plans — of equipping better to provide modern diagnostic services regionally — Diagnostica expects to gradually increase revenues to twice its current levels. It is proposed to provide internationally acceptable standards of medical diagnostic services to overseas clients so that the share of externally generated earnings grows to 15%. This requires strong marketing efforts focusing on Georgia, Turkey, Russia, Gulf States. With a low cost/quality ratio, comparable to that of Jordan in the Middle East, and giving due consideration to commercially exploiting the existing professional reputation of Diagnostica, enhanced tele-medicine connectivity is expected to play a key role in enlarging this market. In addition, Diagnostica will embark on imparting world-class training medical doctors and engineers, both in-house and via distance learning. For this it will itself, invest in technology development programs of its staff aimed at developing a sustained demand for its widened range of contemporary medical diagnostic services. In summary, the range of market enlargement interventions include: (1) upgrading and improving existing outpatient diagnostic services; (2) increasing inpatient diagnostic service for specific diagnostic cases; (3) implementing specific treatment procedures, highly connected with modern diagnostic technologies and thus underused in the country/region; (4) expanding and commercializing international telemedicine service to attract patients in the country/region who cannot afford costly travels to the Western clinics; (5) creating highly attractive regional graduate training facility for medical doctors and technicians; (6) creating regional service/training center with major medical technology manufacturers; (7) creating a HMO-oriented network surrounding Diagnostica; (8) exporting the model of modern technology-based, market-driven healthcare industry development in the still predominantly state-owned and/or traditional healthcare environment of FSU (nearly 40 diagnostic centers created in FSU based-on Diagnostica s pilot experience may become efficient hubs for such expansion). Investment, Capital Cost and Financing Structure Proposed: As a corporation chartered to sell shares, the preferred option for raising capital would be through equity. However, since the majority of the investment is directed towards equipment purchase, Diagnostica would consider equipment based financing that includes technical assistance and training contracts. It invites equity participation with major equipment manufacturers and suppliers, health care service providers and international managers of quality health care services to take up active participation — in management, marketing or advancing technology-based health care enterprises in the FSU and regional markets. The indicative business plan projects the following: Five-Year Financial Projections (Post-Investment) (US$, 000) Year 1 Year 2 Year 3 Year 4 Year 5 Net Income 550 650 800 1000 1200 Net Profit 80 115 160 200 240 Net Profit Margin 15% 18% 20% 20% 20% Point of Contact: Mr. Saro Tsaturyan General Director Diagnostica Medical Corporation 6/1 Markaryan Street 375078 Yerevan, Armenia Tel: 374-1-34 32 47 374-1-35 11 01 Fax: 374-1-39 35 79 E-mail: stsatur@dmc.am |