The Global Private Capital Association (GPCA) has just published its report entitled "Healthcare in Asia: The Growing Opportunity for Private Capital." 

Changing demographics and rising incomes are driving growth in the healthcare industry across Asia, a new report by the Global Private Capital Association (GPCA) says.

Despite growing demand, significant gaps in key segments of the healthcare landscape remain, fuelling a long-term opportunity for private capital investors, the firm says.

The report analyses healthcare investment trends across China, India and Southeast Asia. It also looks at how private capital players are helping to address local market needs, improve the quality and availability of care and drive innovation in the region.

Although digitalisation and the Covid-19 lockdowns fuelled rapid growth in Asia’s healthtech sector, investment activity has slowed down since 2021. Despite this cooling, investors remain optimistic about digital health’s lasting potential to aid strained healthcare systems and improve access to medical services. Rising incomes and policy support are creating a multi-decade opportunity for private capital investors to back the buildout of healthcare products and services across the region, even amidst an uncertain global dealmaking environment, the report states.

It reveals that healthcare expenditures in Asia have grown more than five times since 2000, outpacing GDP growth – a trend fund managers active in the region expect to continue over the next decade. Nevertheless, healthcare delivery remains fragmented and underdeveloped in key markets across Southeast Asia, with traditional providers attracting the bulk of commitments from private capital funds eyeing expansion opportunities.

“Improving health insurance coverage and a rising middle class are driving demand for medical services in Southeast Asia. However, the region faces a scarcity of doctors and a shortage of public sector spending. This has created an opportunity for investors to scale local private hospitals,” Nick Bloy, co-managing partner at Navis Capital Partners, said.

Private capital investors are also increasingly eyeing specialist care providers across India and Southeast Asia, which are underpenetrated. Already a leading supplier of generic medicines, India is transitioning up the pharma value chain with recent early-stage investments in biologics and genomics, the report says.

“India benefits from a deep pool of specialist doctors, which is why you’ve seen large specialty care hospital networks scale across the country – whereas in Southeast Asia, you’ve yet to see similar models emerge at similar scale – we will get there, but the region needs to invest resources in growing its specialist talent pool,” Ewan Davis, partner at Quadria Capital, said.

Moreover, strong public markets and trade sale interest have driven a wave of healthcare exits in India. After a boom in investment in digital healthcare platforms during the early days of the pandemic, healthtech startups are navigating a new environment of scarcer funding and pressure to reach profitability.

Strong support from the government has also fuelled unprecedented growth in biotech investment across China, a sector largely unaffected by recent Chinese government tech crackdowns and US investment restrictions, the report continues. A growing share of capital has poured into China’s medical device sector pointing towards a trend of localisation.

“We believe that robot-assisted surgery is still relatively underdeveloped. The penetration rate is low, even with the presence of multi-national players. We think robot-assisted surgery will be able to grow rapidly in the next decade or two with support from the Chinese government,” Maomeng Tong, principal at INCE, said.

At the same time, heightened geopolitical tensions between China and the West are creating investment opportunities in India and Southeast Asia as global medtech companies seek to de-risk their supply chains.

“India took a long time to wake [up], but we’re starting to see real shifts in market policies and technology related to local medtech manufacturing. There’s a lot of work happening now in a sector that was once subscale with little innovation and we’re already seeing some market leaders emerge,” Arjun Oberoi, managing director at Everstone Group, concluded. With populations ageing, healthcare has also been singled out by other investors as an area to invest in. See more here.