Private healthcare provider EMC valued at $1.1 billion in IPO

The European Medical Center (EMC)  — the hospital of choice for many foreign visitors to Moscow — was valued at $1.1 billion Thursday in its initial public offering. One of Russia’s largest healthcare providers, EMC raised $500 million as investors were drawn to its three-decade transformation from a group of Soviet-era clinics into a premium hospital chain.

• Operated by United Medical Group, EMC is well-known among foreigners as medical insurance at most Western firms in the Russian capital will include treatment here. EMC was founded in 1989 when French firm Europ Assistance set up clinics to treat foreigners based out of the Intourist medical centers that cared for foreign visitors to the Soviet Union (and helped the KGB keep tabs on them). However, the company was unprofitable and was bought out by Andre Kobouloff, a French radiologist with Russian ancestry, who later appointed influential physician Leonid Pechatnikov as EMC’s chief doctor. The company hired European medical staff and pioneered a process whereby the patient was guided through a whole course of treatment, from diagnosis to recovery.
• Kobouloff sold EMC for about $20 million in 2006, and Pechatnikov moved on in 2010 when he accepted an invitation from Moscow Mayor Sergei Sobyanin to lead the city’s public health department. Companies linked with EMC soon started to win big state contracts, although Pechatnikov denied allegations of corruption. Be that as it may, from 2008 to 2020, EMC’s value increased 10-fold. Its ownership has changed repeatedly and its current shareholders include billionaire Roman Abramovich who has a 6.9 percent stake.
• But EMC’s shareholders won’t net stellar returns from the IPO as the placement was very much at the lower limit of the price range. The more modest than anticipated valuation is because EMC is a niche player in a premium segment, and investors likely doubt the scalability of its business model, according to Marat Ibragimov, a senior analyst at Gazprombank.
• Russia’s tradition of free, state healthcare provision means private medicine has developed very slowly since the collapse of the Soviet Union. In 2020, PwC valued Russia’s private healthcare market at just 811 billion rubles (about $10 billion), and estimated it would not reach 1 trillion rubles until at least 2025.

Why the world should care: Commercial healthcare in Russia is an untapped and potentially highly lucrative market. However, with the state investment in public healthcare and Russian salaries falling amid economic stagnation, this market looks set to grow at a snail’s pace.