Proton therapy out of reach? Think again!

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1 FINANCING STRATEGIES In-depth exploration Proton therapy out of reach? Think again! The role of the Financial Solutions team within IBA s Treasury and Financing group is twofold. The Financial Solutions team helps customers in the process of understanding the financial metrics of proton therapy, and it also helps with financial solutions. One of its main objectives is to challenge the mistaken belief that proton therapy is too expensive for all but the largest healthcare facilities.

2 2 IBA s help in every step of the way breaks down the complicated process of establishing a proton therapy center into a series of manageable steps. The Financial Solutions team not only contributes to sorting out the financial implications, but thinks along when it comes to financing solutions as well. THE BUSINESS PLAN, CUSTOMIZING REQUIRED Prospecting, initial discussions and negotiations are handled by IBA s Sales team, which is assisted by the Integrations and Sales Support department. But once the technical offer has been finalized, the Financial Solutions team comes into play. The team is managed by Bernard Dandoy, VP of IBA s Treasury and Financing group, and Export and Project Finance Manager Amaury Donckers. The moment the project becomes mature enough, the Financial Solutions team enters into planning discussions with the institution s representative. Knowledge, expertise and contacts The team contributes knowledge, expertise and contacts to help draft a highly-detailed business plan to submit for approval to the hospital board or other decision-making group. An internal IBA tool has been created to obtain a thorough idea of the different financial aspects that play a part in the construction and operation of a viable proton therapy center. Several financial indicators

3 are central to the typical business plan. INITIAL INVESTMENT Capital expenditure 1% First and foremost, the business plan summarizes all capital expenditures needed to acquire a proton therapy center. It starts with the purchase CAPEX of the main equipment, and then any auxiliary equipment, such as dosimetry or imaging modalities, is also taken into account. Then there Proton Therapy equipment OIS/TPS software Building is the investment needed to adapt or build the facility, along with the development costs, comprising any kind of consulting, legal guidance, tax advice and the like. Last but not SOFT COSTS Development Capitalized financial costs least are the financial expenses, which cover fees, interest and similar Pre-operation & start-up expenses banking costs involved in realizing the project, and the working capital 3 needed to cover initial operations until break-even is achieved. All these elements add up to a total amount of initial budget that s required, and will need to be approved by the hospital board. Depending on the size of the project, this figure will range from 4 YEARLY OPERATIONAL EXPENDITURES (OPEX) million euros ($45 million USD) for the single-treatment-room solution Proteus ONE, to more than 1 million euros ($112 million USD) for the most comprehensive four-room FIXED OPEX Proteus PLUS installation. Clinical staff Operating cost Training of staff Equipment operation & maintenance The business plan will also provide Building maintenance & cleaning an estimate of the operating expenses that accompany a proton therapy center. For the proton Property insurance General & administrative therapy equipment, an operation and maintenance contract is generally VARIABLE OPEX signed with IBA, with IBA committing to guarantee a maximum uptime (the availability of the equipment during Patients supplies Power - equipment % 1% %

4 4 TYPICAL MEDICAL STAFF 1 PHYSICIAN 1 DOSIMETRIST treatment time) required. The uptime is key for the hospital: 3% greater uptime equals an estimated surplus of ten patients treated or 3 fractions delivered on a yearly basis. Being able to count on a reliable system is of the utmost importance. Patient treatment also requires a skilled staff. Standard staffing for one shift should be calculated at approximately seven or eight fulltime equivalents: one physicist, one physician, three radiation therapists, one dosimetrist and a nurse. However, staffing needs might vary, as cancer centers or hospitals which already have an oncology department may look for in-house synergies with the available human resources. Based on the input of the healthcare facility itself, IBA offers an approximate indication of the human resources that will have to be hired or deployed at the center. The maintenance contract and staffing together will amount to about 8% of the operating costs. The remaining 2% is divided between several 1 PHYSICIST 2 RADIATION THERAPISTS ABOUT 8 FULL TIME EQUIVALENT PER ROOM PER 8-HOUR SHIFT 2 NURSES 1 RADIOGRAPHER areas, including sales, general and administrative costs, such as support services provided by accounting, IT, marketing, reception, etc. Another frequent question raised by centers interested in proton therapy is the energy consumption of the system. IBA is able to provide a very accurate estimation of the yearly energy consumption. It has also made significant efforts to decrease the energy consumption of the proton therapy equipment by 3%. In addition, there are expenses relating to building maintenance, property insurance and treatmentspecific patient supplies such as immobilization cushions or masks. Some of these costs are minimal, but need to be taken into account so that the business plan is as detailed and precise as possible. Revenue Generating revenue is the third aspect to be in integrated in the business plan. To assess the total amount of revenue, several elements are combined. The total treatment capacity of the installation is taken into account and combined with basic assumptions on the number of hours the system will be in use on a yearly basis. The type of treatment indications the hospital wants to focus on defines the time needed per treatment session and per patient, and is used to estimate an average treatment time, which is combined with the total treatment capacity to obtain the annual number of patients the hospital is likely to treat each year.

5 Reimbursement is the final aspect to be added to the business plan. This portion demands very complex ciphering work, as rules, regulations and reimbursement rates vary between public and private insurance companies, from country to country, between regions or different healthcare fund organizations, and can vary due to stipulations outlined in hospital contracts and agreements. TOTAL NUMBER OF PATIENTS TREATED PATIENTS TREATED* AT CAPACITY BETWEEN 75 AND 1 PER YEAR Finally, combining the number of patients per year with the average reimbursement rate per type of indication, for a specific institution, allows for the calculation of expected revenues on a yearly basis. Ramp up NUMBER OF FRACTIONS* DELIVERED BETWEEN 8 AND 12 PER DAY * This information is highly dependent on the patient mix and the schedule of operations. One final concern is the ramp up, as financial success largely depends on the probability the center will reach full capacity within a given timeframe, by means of patient recruitment. When it comes to profitability and medical welfare protection, margins may differ largely from location to location, and clinical indication rates are equally geographically dependent. Again, IBA not only assesses the customer s capabilities to assure occupancy of the proton therapy rooms, but also advises on suitable approaches to inform and recruit potential patients. THERAPY WITHIN REACH A common misunderstanding which IBA wants to correct is that only the biggest hospitals in the richest countries are able to raise money and afford the entry ticket for a proton therapy installation. The reality is that prices have not only dropped considerably, but the IBA Financial Solutions team can actively support customers in obtaining the required budget. 5 Combining all the elements above, IBA is able to produce a 2-year projection of the financial aspects involved in operating a proton therapy center. FINANCING SOLUTIONS, BRINGING PROTON Lower threshold The single-room Proteus ONE solution has lowered the threshold significantly: the price of the equipment itself has been reduced and its compactness also lowers the costs to build or adapt the premises. A patient number from 2 to 3 a

6 6 year can make this kind of installation viable for any healthcare facility with a good oncology department. The ever-increasing cancer rates worldwide, the increasing evidence of the benefits of proton radiation therapy and a broadening scope of indications that are eligible for proton therapy (brain, head & neck, lung, gastrointestinal, genitourinary and pediatric tumors, among others) make TYPICAL CANCER INDICATION MIX % PATIENTS BRAIN 1% HEAD & NECK 1% LUNG 15% GASTROINTESTINAL 2% GENITOURINARY/ PROSTATE 25% it worthwhile now, more than ever, to consider acquiring an in-house installation. Scouting the market When the hospital board approves a proton therapy project, the required financial means may already be available or accessible, but this is not always the case. That is why the Financial Solutions team is not automatically discharged once the preliminary work on the business plan has been done. In addition to assembling a case-by-case overview of the financial dimensions relating to a proton therapy project, the team lives up to its name by proactively looking for financing possibilities. Customers may ask the team to propose financing solutions and the array of options to do so is wider than is generally presumed. TYPICAL SCHEDULE OF OPERATIONS OTHERS 5% PEDIATRIC 15% Step by step, these efforts to facilitate the financing of the project help to expand access to proton therapy, offering cancer patients worldwide an extra weapon in their fight against this devastating disease. 25 DAYS per year 14 HOURS per day DAYS OF OPERATION HOURS OF OPERATION

7 STANDARD INSTALLATION PLANNING 1 2 BUILDING CONSTRUCTION APPROX MONTHS 3 EQUIPMENT INSTALLATION AND COMMISSIONING APPROX MONTHS TO 1ST TREATMENT ROOM ACCEPTANCE 4 7 APPROX. 3 MONTHS PER ADDITIONAL ROOM CLINICAL COMMISSIONING RECORD TIME OF 12 MONTHS TO FIRST PATIENT * * From building occupancy date at Seattle Cancer Care Alliance (SCCA) Proton Therapy Center, a ProCure Proton Therapy Center, Seattle, WA, USA

8 JOIN THE IBA FAMILY In proton therapy, the development of practical and patient-centered solutions is only possible through constant collaboration, open engagement and shared research objectives. With more than 25 years of experience designing and developing proton therapy systems across the globe, IBA has grown a strong and vital community of proton therapy professionals. Together, this unprecedented community of clinical leaders and distinguished technological experts is advancing proton beam technology and clinical innovations. By entering the IBA Proteus community: Your clinicians and researchers will leverage the latest outcome-driven practices being advanced by a clinical proton beam users using a common technological platform and the capacity of your team to be trained with the utmost care and the highest standards of quality. Your project management team will be able to collaborate with the world s most experienced team of proton therapy experts (6+), cutting-edge technology and robust processes in system installation and operation. Your executive team will leverage the know-how and clinical understanding built on 25+ projects and 25,+ patients treated to secure the institutions investment. Together with our people, by sharing our passion for innovation and patient care, you can take comfortably the highway to the future of cancer care. The IBA Proteus Community includes among others Massachusetts General Hospital Burr Proton Therapy Center, ProCure Proton Therapy Centers, University of Florida Proton Therapy Institute, University of Pennsylvania Health System Roberts Proton Therapy Center in North America; or Centre de Protonthérapie Orsay de I Institut Curie, Universitätsklinikum Carl Gustav Carus in Europe; and Korean National Cancer Center, Appolo Health Group in Asia. We are constantly looking for attractive research programs in the field of PT, and we also welcome talented people to contribute as IBA employees.