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Life Healthcare to tap into $6.6bn Alzheimer’s diagnostics market

Life Healthcare to tap into $6.6bn Alzheimer’s diagnostics market
A Life Healthcare hospital. (Photo: Supplied)

Group chief executive Peter Wharton-Hood says the healthcare company has allocated a capex spend of R1.6bn towards international maintenance and growth projects.

Hospital group Life Healthcare is set to tap into the $6.6-billion Alzheimer’s diagnostics and therapeutics market, with its Life Molecular Imaging (LMI) business.

Group chief executive Peter Wharton-Hood says the healthcare company has allocated a capex spend of R1.6-billion towards international maintenance and growth projects including the expansion of the LMI business.

“The development and approval of disease modification drugs to treat Alzheimer’s disease is good news for Alzheimer’s patients, and augurs well for our Life Molecular Imaging business,” he says. 

According to Future Market Insights, there are several drugs in the pipeline for the treatment of Alzheimer’s disease. Biogen’s aducanumab received FDA approval in 2021, making it the first new drug for Alzheimer’s disease in almost 20 years. 

Neuraceq, manufactured by LMI, is an FDA-approved radioisotope injectable that is used in PET-CT scans to detect beta-amyloid deposits in the brain — which is required for a clinical diagnosis of Alzheimer’s. There are only two other radioisotopes in the market — Lilly’s Amyvid and GE Healthcare’s Vizamyl. While blood tests and spinal fluid tests can also be used to detect the presence of beta-amyloid deposits, PET-CT scans are the most reliable tests.

The group remains in a strong financial position, with net debt to Ebitda (earnings before interest, tax, depreciation and amortisation)  at 2.17x, compared with 2.03x a year ago. Group revenue climbed by 12.9% to R15.3-billion for the six months to 31 March 2023, while operating profit moved up by 13.5% to R2.7-billion on the back of excellent operational performance in both acute and non-acute businesses.

Network deals and expansion in southern Africa

The southern African business grew revenue by 11.6% and increased normalised earnings before Ebitda by 13.5% year-on-year.  In line with the group’s strategy to improve underlying occupancies, it concluded network deals as a designated service provider with the Government Employees Medical Scheme (Gems) and Medscheme last year.

The group’s Southern Africa chief executive officer, Adam Pyle, says there was a good increase in underlying activities, while improved occupancies resulted in good revenue growth and improved margins. 

“Increased activity came off the back of normalising operations after Covid-19 and the successful completion of our network deals. We launched our value-based, integrated care product for renal dialysis in January 2023, to provide more consistent, holistic and cost-effective care for patients, and negotiated our first renal value-based contract with one of South Africa’s leading medical schemes,” he says. 

Pyle says the group is poised to take over 51 Fresenius Medical Care renal dialysis clinics in South Africa, Namibia and Eswatini. 

“We are finalising our applications for deal approval from the competition authorities of South Africa, as well as Namibia and Eswatini,” he says. 

Life Healthcare has also acquired the non-clinical assets of TheraMed Nuclear, a Gauteng-based nuclear-imaging business, adding PET-CT and SPECT-CT capabilities to its SA imaging business. 

Load shedding here to stay

Management is rather bullish on the second six months of 2023 despite taking a R40-million load shedding hit on additional diesel costs for the six months to end-March. Unlike its competitor Netcare, Life Healthcare did not exclude these diesel costs from “normalised earnings.

“We see that [diesel costs] as a continuing figure. We have not normalised for that because we don’t see it going away. We think load shedding will be with us for some time to come,” Wharton-Hood says. The total diesel costs for the six-month period were R48-million and management expects this to increase as winter settles in.

Looking abroad

The international business also delivered strong results, with growth in most regions. Revenue grew by 15.5% year-on-year (in rands), and normalised Ebitda was up by 10.8%. Management expects to see revenue growth of 10% to 12% and scan volume growth of between 6% and 8% in the UK and European diagnostic imaging market. While inflation remains elevated in much of Europe, energy costs have started to decline, and rising interest rates are likely to see inflation moderating.

International chief executive officer Mark Chapman says, “The business has delivered solid growth across all the main markets within which we operate.”

Revenue in the UK grew by 13.2% year-on-year, driven by continued demand for PET-CT scanning and also boosted by the opening of two community diagnostic centres (CDCs).

“We have continued expanding our footprint of CDCs and now have seven CDCs in operation, working in partnership with the NHS and a healthy pipeline of CDCs in the advanced negotiation phase. In Italy, revenue grew 9.5% year-on-year, and in Ireland, revenue was up 33.7%.” DM

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