Gas companies plug into market for healthcare
by Tara Patel
2016-05-12 05:00:00.0
IN A cluttered suburban apartment east of Paris, health technician Vincent Mallet adjusts a plastic tube delivering oxygen to an elderly man’s diseased lungs. Sitting at the dining room table, Mallet tests the equipment, while the patient and his wife recount the daily struggles of living with chronic illness.
In the past, the couple would have made frequent visits to a nearby hospital. With Mallet now spending about an hour a week calibrating a bedside machine and writing a report for the man’s doctor as part of his rounds in the town of Fontenay-sous-Bois, those visits have become rare.
Mallet is not a nurse or physician. He is an employee of Air Liquide, a French company better known for supplying gases to industrial sites, such as refineries. The visit to the patient, paid for by France’s state-funded medical system, is part of Air Liquide’s expanding health-care operations.
As factory demand softens and an oil slump hurts new industrial projects, big gas suppliers, such as Air Liquide, Linde, and Praxair, have discovered they can profit from ageing populations and an increase in chronic illness, such as asthma and diabetes. Linde serves 1.7-million home patients and says the global market for the kinds of health-care services it offers is on track to double in the 10 years to 2020, to €17bn.
"The potential for healthcare is huge, both in Europe and in emerging markets,’’ says Benoit Potier, CEO at Air Liquide, which serves 1.3-million patients. "Governments around the world are discovering that healthcare in the home can be cheaper and more effective than hospital stays."
The gas companies were started more than a century ago by scientists who figured out how to liquefy and separate gases for industrial uses. Business boomed on demand for oxygen from steel makers and nitrogen for chemical factories.
As early as the 1930s, the companies began supplying hospitals with oxygen and nitrous oxide used as anaesthesia. Since the 1980s, that has expanded to include home-health services.
Healthcare could eventually overtake some of these companies’ industrial divisions, says Baader Bank analyst Markus Mayer.
Air Liquide’s health-care sales have climbed at an average of 8% annually since 2011, and last year, expanded at double the pace of its industrial operations.
At Munich-based Linde, health-care services account for about a quarter of the gas division’s revenue, and jumped 7% last year, versus 0.5% growth for its industrial gas units.
"We will continue to reinforce our position as world leader" in home healthcare, Linde CEO Wolfgang Büchele says.
The US has become a major market for Linde, which agreed last December to buy American HomePatient for €174m. That followed the 2012 purchase of US health-services provider Lincare Holdings for $3.8bn. Air Liquide has focused on Europe, spending more than $1bn on a string of acquisitions in the past five years. Last year, the company booked €2.8bn in revenue from healthcare, and the business now makes up a third of overall sales in Europe, and 17% worldwide.
In the 1990s, Air Liquide began moving beyond gas deliveries, starting with intravenous treatments for AIDS patients, and chemotherapy for people with cancer. It later added services such as insulin machines and pain management. In recent years, it has started selling equipment that concentrates oxygen from ambient air, bypassing the need for deliveries of cylinders. Its technicians have even been known to pick up a baguette or two for patients they visit.
"We’re on the front lines, sometimes the only human contact a patient has on a given day," Olivier Lebouche, Air Liquide’s vice-president of home healthcare in Europe, said at a ceremony marking the launch of a new clinic in Paris that teaches people how to use equipment to treat sleep apnea, diabetes and other diseases.
Air Liquide is making a push into the US, with a $10bn takeover of US gas distributor Airgas, its biggest deal yet. Although both companies deliver gases to US hospitals and clinics, neither goes into US homes, and the company says it is not planning to enter the business there.
Praxair says healthcare can offer more stable expansion than more cyclical industrial businesses.
Since January, the company has acquired medical-gas distributors in Italy and Britain as part of a global push in that market. Healthcare made up 8% of revenue last year, and the company sees growing opportunities for home services in Europe, South America, Mexico, and Canada, says chief technology officer Todd Skare.
Bloomberg
Gas suppliers, such as Air Liquide, Linde, and Praxair, are profiting from ageing populations, and an increase in chronic illness, such as asthma and diabetes, often in homecare situations. Picture: REUTERS
IN A cluttered suburban apartment east of Paris, health technician Vincent Mallet adjusts a plastic tube delivering oxygen to an elderly man’s diseased lungs. Sitting at the dining room table, Mallet tests the equipment, while the patient and his wife recount the daily struggles of living with chronic illness.
In the past, the couple would have made frequent visits to a nearby hospital. With Mallet now spending about an hour a week calibrating a bedside machine and writing a report for the man’s doctor as part of his rounds in the town of Fontenay-sous-Bois, those visits have become rare.
Mallet is not a nurse or physician. He is an employee of Air Liquide, a French company better known for supplying gases to industrial sites, such as refineries. The visit to the patient, paid for by France’s state-funded medical system, is part of Air Liquide’s expanding health-care operations.
As factory demand softens and an oil slump hurts new industrial projects, big gas suppliers, such as Air Liquide, Linde, and Praxair, have discovered they can profit from ageing populations and an increase in chronic illness, such as asthma and diabetes. Linde serves 1.7-million home patients and says the global market for the kinds of health-care services it offers is on track to double in the 10 years to 2020, to €17bn.
"The potential for healthcare is huge, both in Europe and in emerging markets,’’ says Benoit Potier, CEO at Air Liquide, which serves 1.3-million patients. "Governments around the world are discovering that healthcare in the home can be cheaper and more effective than hospital stays."
The gas companies were started more than a century ago by scientists who figured out how to liquefy and separate gases for industrial uses. Business boomed on demand for oxygen from steel makers and nitrogen for chemical factories.
As early as the 1930s, the companies began supplying hospitals with oxygen and nitrous oxide used as anaesthesia. Since the 1980s, that has expanded to include home-health services.
Healthcare could eventually overtake some of these companies’ industrial divisions, says Baader Bank analyst Markus Mayer.
Air Liquide’s health-care sales have climbed at an average of 8% annually since 2011, and last year, expanded at double the pace of its industrial operations.
At Munich-based Linde, health-care services account for about a quarter of the gas division’s revenue, and jumped 7% last year, versus 0.5% growth for its industrial gas units.
"We will continue to reinforce our position as world leader" in home healthcare, Linde CEO Wolfgang Büchele says.
The US has become a major market for Linde, which agreed last December to buy American HomePatient for €174m. That followed the 2012 purchase of US health-services provider Lincare Holdings for $3.8bn. Air Liquide has focused on Europe, spending more than $1bn on a string of acquisitions in the past five years. Last year, the company booked €2.8bn in revenue from healthcare, and the business now makes up a third of overall sales in Europe, and 17% worldwide.
In the 1990s, Air Liquide began moving beyond gas deliveries, starting with intravenous treatments for AIDS patients, and chemotherapy for people with cancer. It later added services such as insulin machines and pain management. In recent years, it has started selling equipment that concentrates oxygen from ambient air, bypassing the need for deliveries of cylinders. Its technicians have even been known to pick up a baguette or two for patients they visit.
"We’re on the front lines, sometimes the only human contact a patient has on a given day," Olivier Lebouche, Air Liquide’s vice-president of home healthcare in Europe, said at a ceremony marking the launch of a new clinic in Paris that teaches people how to use equipment to treat sleep apnea, diabetes and other diseases.
Air Liquide is making a push into the US, with a $10bn takeover of US gas distributor Airgas, its biggest deal yet. Although both companies deliver gases to US hospitals and clinics, neither goes into US homes, and the company says it is not planning to enter the business there.
Praxair says healthcare can offer more stable expansion than more cyclical industrial businesses.
Since January, the company has acquired medical-gas distributors in Italy and Britain as part of a global push in that market. Healthcare made up 8% of revenue last year, and the company sees growing opportunities for home services in Europe, South America, Mexico, and Canada, says chief technology officer Todd Skare.
Bloomberg
