introducing digital health€¦ · with this report, we are initiating a new series that. covers...

We are initiating a new series of reports that cover the convergence of Healthcare

and Technology, a topic we label Digital Health. To bring focus to this expansive topic,

these reports will aim to identify specific areas where the convergence is tangible,

significant, and actionable for investors. We start by exploring the future of robotic

surgery. Future reports will address topics that include genomics, wearables, and

digital therapeutics.

Introducing Digital Health

Introducing Digital Health. With this report, we are initiating a new series that covers the convergence of Healthcare and Technology – a topic we label Digital Health. The implications of this megatrend are vast as we estimate 26% of the

market cap in the S&P is somehow exposed. In addition, the landscape between incumbents and disruptors is rapidly evolving as 32% of VC dollars in Healthcare

was allocated to Digital Health companies in 2018 (vs 15% five years ago).

Why is this important to investors? Global demand for Healthcare continues to rise thanks to demographics, economic growth and innovation. At the same time, current Healthcare systems increasingly look inefficient and unsustainable. As these systems reach new tipping points, we think disruptive forces will be increasingly driven by technology-driven advances (i.e., compute power, storage, mobility) that have already swept across other major industries such as retail, transportation and manufacturing. We also see the potential for newer emerging technologies (blockchain, 3D printing and augmented reality) to play a disruptive role in Healthcare. Taken together, we think these secular forces and disruptive technologies will have a meaningful impact to existing profit pools and earnings growth for incumbents.

analysts with FINRA in the U.S.

Isaac Ro+1(212)902-6393 | [email protected] Sachs & Co. LLC

Veronika Dubajova, CFA+44(20)7774-1901 |[email protected] Sachs International

Akinori Ueda, Ph.D.+81(3)6437-9910 | [email protected] Sachs Japan Co., Ltd.

Ziyi Chen+852-2978-0526 | [email protected] Sachs (Asia) L.L.C.

Jack O’Connell+1(212)357-4810 | [email protected] Sachs & Co. LLC

Sara Silverman+1(212)357-3292 |[email protected] Sachs & Co. LLC

Frits Jonker+1(801)884-4709 | [email protected] Sachs & Co. LLC

Americas Healthcare: Medical Technology

Digital Health: Robotic Surgery and the OR of the Future

15 November 2018 | 4:59AM EST

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of thisreport. Investors should consider this report as only a single factor in making their investment decision. For Reg ACcertification and other important disclosures, see the Disclosure Appendix, or go towww.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research

The following is a redacted version of the original report. See inside for details.

https://research.gs.com/

Our goal with these reports. To bring focus to this expansive topic, this report series will aim to identify specific areas where the convergence is tangible, significant, and actionable for investors. These areas include genomics (diagnostic testing, gene therapy), wearables (patient monitoring), imaging (MRIs, pathology), and digital therapeutics (software-based treatment of disease).

Our approach. In this report series, we will evaluate disruptive technologies from both public and private companies, track regulatory catalysts, apply a global perspective when relevant, and be opportunistic in the topics we cover.

Deep dive on robotic surgery. In this report, we attempt to frame the outlook for the next decade in robotic surgery. We evaluate the competitive landscape, consider new therapeutic markets where robotic surgery is taking off, and discuss key trends with a handful of key opinion leaders (KOLs).

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Goldman Sachs Americas Healthcare: Medical Technology

Note: The following is a redacted version of “Digital Health: Robotic Surgery and the OR of the Future”

originally published Nov. 15, 2018 [30pgs]. All company references in this note are for illustrative purposes

only and should not be interpreted as investment recommendations.

Our Report in Pictures

Exhibit 1: Digital Health touches roughly 26% of the S&P % of S&P 500 Market Cap Impacted by Digital Health

Exhibit 2: VC funding for Digital Health is rapidly increasing $13bn+ in FY18, >30% of all Healthcare deals

Impacted by Digital Health,

26%

74%

11% 13% 15% 21% 20% 22% 21% 32%

43% 42% 42% 39% 46% 44%

47%

44%

35% 32% 29% 24%

19% 17%

18%

13%

11% 14% 14%

16% 15%

16%

14%

11%

$0bn

$5bn

$10bn

$15bn

$20bn

$25bn

$30bn

$35bn

$40bn

$45bn

$50bn

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E

Digital Health Pharma & Biotech HC Devices & Supplies HC Services & Systems

Impacted firms are defined as companies in the Healthcare sector and large cap Technology companies with substantial investments in Digital Health.

Source: Company data, Goldman Sachs Global Investment Research

Source: National Venture Capital Association, Rock Health, Goldman Sachs Global Investment Research

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Robotic Surgery Is a Global Theme

Europe

The developed markets are the areas at the forefront of focus for robotic surgery entrants. Though markets within the continent have idiosyncrasies, an obstacle we believe worth noting is the push by surgeon societies, and not manufacturers, to administer training. Conversely, any momentum towards outpatient care should be constructive for robotic surgery. Having said that, companies like CMR Surgical have noted they are intent on capitalizing on home field advantage and incremental improvements such as mobility to penetrate a virtually untapped market in Europe.

China

China, a less developed market, is seeing a spike in interest among patients in the field of robotic surgery. Based on our conversations with industry participants, there is a real market for affluent Chinese patients who wish to pay out-of-pocket for robotic procedures. Having said that, the market is less accessible than it otherwise could be due to political factors. In recent weeks, China’s National Health Commission announced a new quota allowing for the placement of an incremental 154 surgical robots at state hospitals through the end of CY20. The move comes several years after the previous quota was filled and expired in 2015, leading to several years of pent-up demand in the Chinese market.

We believe the current general trade environment to be disadvantageous to those seeking to grow the use of surgical robots in Chinese markets. Chinese surgeons often have cited cost as a major constraint, as reimbursement for robotics is not as established as it is in the United States. Surgeons therefore are more likely to perform a higher volume of surgeries and be part of system in which the large capital outlay of a robot could be justified by a steady flow of well-to-do patients.

Another dynamic to keep in view is the push within China to develop robotic surgery supply from the country as part of the “Made in China 2025” initiative announced in

Exhibit 3: China largely untapped, nearly as big as the US China Tier 3 hospitals vs US short-term acute care hospitals

0

500

1000

1500

2000

2500

3000

3500

US China

HospitalsInstalled base

Source: American Hospital Directory, National Health and Family Planning Commission, Company data, Goldman Sachs Global Investment Research

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https://research.gs.com/content/research/en/reports/2018/10/31/09472333-7c1e-4700-8e29-c5bd16bad33a.html

2015. As part of a broader push to modernize China’s manufacturing capabilities to allow for the production of higher value goods, the government plans to support research into medical robotics, both in design and manufacturing capabilities. A number of smaller players within the country are developing platforms to bring to market bolstered by this program, though few are close to commercialization.

Conversations with KOLs

General Surgery

In the past decade, robotics have begun to supplant open and some laparoscopic procedures. Robot assisted surgery has proven itself to be a challenger to both open and laparoscopic procedures, displacing open procedures in colectomy, cholcystectomy, and bariatric surgery; conversely, it has challenged laparoscopic methods for procedures like inguinal hernia repair and ventral hernia repair. Several general surgeries have seen considerable uptake in robotics in the past decade.

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Orthopaedics

In the realm of orthopaedics, robotic technology has gained traction in recent years, as surgeons are using robots in some of the most common surgeries among the U.S. patient population – knee and hip replacements. We have previously highlighted that we see a compelling value proposition for robotics in the hip and knee replacement markets: in a number of clinical studies, robotic orthopaedic procedures have been shown to allow for shorter postoperative stays and improved alignment vs. conventional approaches (see our deep-dive for more information). While this has not yet been demonstrated to deliver significant long-term functional improvements, we believe that there is sufficient evidence to suggest that robotic orthopaedic surgery will likely deliver reduced hospitalization costs and reduced post-surgery complications in the medium term.

We estimate that there are approximately 700-800 orthopaedic robotic systems globally. We believe that robotics account for c.20% of all partial knee replacement procedures in the US, up from c.16% in 2015; however, penetration in total knee and total hip replacements still remains low – likely in the low-single digits – though we expect it to

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http://research.gs.com/content/research/en/reports/2016/04/11/957f3eff-e52b-4a6f-9e6f-5c4a2a708949.pdf

increase over the next 5-7 years, in particular as more companies bring solutions to market, and as the industry expands the range of procedures available on the robot.

Exhibit 4: US and Global orthopedics markets are likely candidates for significant displacement by robotic surgery US and Global Orthopaedics Market Sizes (Billions)

Exhibit 5: Hip and knee replacements are poised to benefit from an aging US population % of US Procedures by Age Range

$3.1 $3.4 $5.5 $6.2

$4.5 $5.1

$7.3 $8.3

$-

$2

$4

$6

$8

$10

$12

$14

$16

2018 2024e 2018 2024e

Knee Replacement

Hip Replacement

Global US 0%

10%

20%

30%

40%

50%

60%

65-84 yrs old 45-64 yrs old >85 yrs old 18-44 yrs old 1-17 yrs old

Hip

Knee


Source: company data, Company data, Goldman Sachs Global Investment Research

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Spine

Current robotic surgery systems for spinal implants are very nascent with just a couple of entrants with first generation systems on the market that offer limited functionality. Key benefits currently include more accurate placement of pedicle screws, reduced pain for the patient, and real time verification of goals throughout the procedure. To date, the accuracy related benefits have been well documented but there is still insufficient clinical data that show the use of robotics in spinal surgery lead to improved outcomes. Future opportunities include “no-fly-zones” for surgeons, motion sensors, follower robots, and automation of simpler procedures.

Background

Background: Successful treatment was often dependent on selection of a “good surgeon” which is a highly qualitative and subjective process. With the advent of robotic surgery, surgical procedures have become more minimally invasive, more closely linked to technological advances in imaging/novel design of end effectors, and seen improved precision and patient outcomes. As a result, robotic surgery has begun to

democratize patient outcomes particularly in routine categories such as prostatectomy and hysterectomy. While the magnitude of patient benefit and

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cost-effectiveness remains a hotly debated topic, we think these technologies will only improve over time both in terms of performance and cost-effectiveness.

Equally important, robotic surgery has become a very effective marketing tool for

hospitals who adopt the technology. Many surgical procedures are important profit centers to a hospital which in turn created an incentive for early adopters to advertise these capabilities directly to patients in an attempt to portray the institution as a leading center of excellence for complex illnesses such as cancer.

We therefore believe the continued adoption of these technologies will have far-reaching implications for the business model around general surgery. For hospitals, general

surgery procedures are likely to remain key profit centers, making capital spending

for value-add technologies a continued priority. For physicians, the rise of robotics has significant implications for hospital recruitment of new physicians as training on these technologies now begins in medical school. For Med Tech companies, increased market adoption of robotics also puts pressure on legacy business models that are based on manual laparosopic devices and commodity implants (knees/spine). These products are high margin and historically not linked to capital equipment. Robotic surgery systems generally have “razor/razorblade” based business models that threaten to capture these annuity streams.

Where we are today:

Exhibit 6: Robotics have penetrated just 3% of procedures in the US

Exhibit 7: Opportunities for new US placements are still vast Roughly 10,000 US hospitals do not have a surgical robot

Robotic, 0.7mn, 3%

Laparoscopic, 10.8mn, 37%

Open, 17.3mn, 60%

US 2018e General Surgery

Procedures: 28.8mn

5,500

4,500

1,000

U.S. Ambulatory SurgeryCentersU.S. Hospitals

da Vinci placements

Source: US Census Bureau, Company data, Goldman Sachs Global Investment Research, National Center for Health Statistics

Source: Titan Medical, American Hospital Association, Advanced Surgical Care, Goldman Sachs Global Investment Research

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Appendix

Exhibit 8: Robotic Surgery Penetration in General Surgery

0.2% 0.2% 0.6% 0.4%

19.9%

1.8% 2.9% 5.4%

8.0%

29.4%

0%

5%

10%

15%

20%

25%

30%

35%

Cholecystectomy Ventral HerniaRepair

Bariatric Colectomy Inguinal HerniaRepair

2008

2015

Source: Company data, Goldman Sachs Global Investment Research, National Center for Biotechnology Information, University of Nebraska Medical Center

Exhibit 9: Many of the largest Tech companies have expressed or launched Digital Health initiatives Sample of high profile announcements from major Tech companies

Company Product/Service Launched? Description

AAPL Apple Watch Y Includes FDA-approved electrocardiogram apps that allow for irregular heart rhythms that may not show up in a traditional medical exam.

AMZN Genomics in the Cloud YAWS offers an ecosystem for genomic data that allows for storage, collaboration, and analytics.

INTC Echopixel YRenders anatomy of patients using virtual reality formatting for the goal of increased clinical knowledge and faster operations.

GOOGL Verily Life Science Algorithm N According to a study recently published in the Nature Biomedical Engineering Journal, a Google AI algorithm has predictive capability for cardiac events.

GOOGL Verb Surgical (JNJ Collaboration) N (Expected 2020)

A strategic partnership to advance surgical robotics to benefit patients,surgeons, and healthcare systems. JNJ has emphasized that this launch will be as much about "digital surgery" as robotics, distinguishing the terms as cognitive versus physical.

IBM IBM Watson Care Manager YDesigned to help healthcare teams parse patient data, regulatory requirements, and create individualized healthcare plans.

MSFT Airband Initiatve (Radwin Partnership) N (Expected 2019) Initiative designed to address the "broadband gap" in rural communities, largely motivated by the desire to administer healthcare using telemedicine.

ORCL Clear Trial Coud Service YSoftware that uses industry intelligence and clinical knowledge to optimize clinical study planning, sourcing, and deployment for R&D.


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Exhibit 10: VC deal size and frequency are increasing in Digital Health Roughly 600 deals, nearly $20mn on average

FY11 FY12 FY13

FY14

FY15 FY16 FY17

FY18E

100

200

300

400

500

600

700

$0mn $2mn $4mn $6mn $8mn $10mn $12mn $14mn $16mn $18mn $20mn

Num

ber o

f Dea

ls

Average Deal Size

Source: Rock Health

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Disclosure Appendix

Reg ACWe, Isaac Ro, Veronika Dubajova, CFA, Akinori Ueda, Ph.D., Ziyi Chen, Jack O’Connell, Sara Silverman and Frits Jonker, hereby certify that all of theviews expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certifythat no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.

GS Factor ProfileThe Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and itssector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, FinancialReturns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. Thenormalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric mayvary depending on the fiscal year, industry and region, but the standard approach is as follows:

Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with ahigher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financialstocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentileindicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returnspercentile and (100% - Multiple percentile).

Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputsfor the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).

For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.

M&A RankAcross our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may varyacross sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoringcompanies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standarddepartmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does notfactor into our price target, and may or may not be discussed in research.

QuantumQuantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used forin-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

GS SUSTAINGS SUSTAIN is a global investment strategy focused on the generation of long-term alpha through identifying high quality industry leaders. The GSSUSTAIN 50 list includes leaders we believe to be well positioned to deliver long-term outperformance through superior returns on capital, sustainablecompetitive advantage and effective management of ESG risks vs. global industry peers. Candidates are selected largely on a combination ofquantifiable analysis of these three aspects of corporate performance.

DisclosuresCoverage group(s) of stocks by primary analyst(s)Isaac Ro: America-Medical Technology. Veronika Dubajova, CFA: Europe-Medical Technology. Akinori Ueda, Ph.D.: Japan-Medical Equipment,Japan-Pharmaceuticals. Ziyi Chen: A-share Pharmaceuticals, China Healthcare.

A-share Pharmaceuticals: Betta Pharmaceuticals Co., Chengdu Kanghong Pharmaceutical, Huadong Medicine Co., Hualan Biological Engineering,Jiangsu Hengrui Medicine Co., Jiangsu Nhwa Pharmaceutical Co., Livzon Pharmaceutical Group (A), Shanghai Fosun Pharma (A), Sichuan KelunPharmaceutical Co., Tigermed, Tonghua Dongbao, Zhejiang Huahai Pharmaceutical.

America-Medical Technology: Abbott Laboratories, Abiomed Inc., Baxter International Inc., Becton Dickinson & Co., Boston Scientific Corp., DexcomInc., Edwards Lifesciences Corp., Hill-Rom Holdings, Hologic Inc., Inspire Medical Systems Inc., Intuitive Surgical Inc., Medtronic Plc, Nevro Corp.,NuVasive Inc., Penumbra Inc., Stericycle Inc., Steris Plc, Stryker Corp., Teleflex Inc., The Cooper Co., Varian Medical Systems Inc., Zimmer BiometHoldings.

China Healthcare: 3SBio Inc., AK Medical Holdings, Ascletis Pharma Inc., Baiyunshan (H), BeiGene Ltd., China Biologic Products Inc., China MedicalSystem Holdings, China Resources Pharmaceuticals, CSPC Pharmaceutical Group, Hua Medicine, Livzon Pharmaceutical Group (H), Luye PharmaGroup, Shandong Weigao Group, Shanghai Fosun Pharma (H), Shanghai Pharma (H), Sino Biopharmaceutical, Sinopharm Group, United LaboratoriesIntl.

Europe-Medical Technology: Amplifon, Coloplast, ConvaTec Plc, Elekta AB, EssilorLuxottica, Fresenius Medical Care, Fresenius SE, Gerresheimer AG,GN Store Nord, Grifols, Grifols, Philips, Siemens Healthineers AG, Smith & Nephew, Sonova Holdings, Straumann AG, William Demant Holding.

Japan-Medical Equipment: Olympus, Sysmex, Terumo.

Japan-Pharmaceuticals: Astellas Pharma, Chugai Pharmaceutical, Daiichi Sankyo, Eisai, Healios, Kyowa Hakko Kirin, Ono Pharmaceutical, OtsukaHoldings, PeptiDream Inc., ReproCELL Inc., Santen Pharmaceutical, Sawai Pharmaceutical, Shionogi & Co., Taisho Pharmaceutical Holdings, TakedaPharmaceutical.

Company-specific regulatory disclosuresThe following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies coveredby the Global Investment Research Division of Goldman Sachs and referred to in this research.

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Goldman Sachs has received compensation for investment banking services in the past 12 months: Intuitive Surgical Inc. ($513.64)

Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Intuitive Surgical Inc.($513.64)

Goldman Sachs had an investment banking services client relationship during the past 12 months with: Intuitive Surgical Inc. ($513.64)

Goldman Sachs had a non-securities services client relationship during the past 12 months with: Intuitive Surgical Inc. ($513.64)

Goldman Sachs makes a market in the securities or derivatives thereof: Intuitive Surgical Inc. ($513.64)

Goldman Sachs is a specialist in the relevant securities and will at any given time have an inventory position, “long” or “short,” and may be on theopposite side of orders executed on the relevant exchange: Intuitive Surgical Inc. ($513.64)

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Buy Hold Sell Buy Hold Sell

Global 35% 54% 11% 64% 57% 55%

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Total return potential represents the upside or downside differential between the current share price and the price target, including all paid oranticipated dividends, expected during the time horizon associated with the price target. Price targets are required for all covered stocks. The totalreturn potential, price target and associated time horizon are stated in each report adding or reiterating an Investment List membership.

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Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in anadvisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). GoldmanSachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis fordetermining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating andprice target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspendedcoverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The informationis not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.

Global product; distributing entitiesThe Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs on a global basis.Analysts based in Goldman Sachs offices around the world produce equity research on industries and companies, and research on macroeconomics,currencies, commodities and portfolio strategy. This research is disseminated in Australia by Goldman Sachs Australia Pty Ltd (ABN 21 006 797 897); inBrazil by Goldman Sachs do Brasil Corretora de Títulos e Valores Mobiliários S.A.; Ombudsman Goldman Sachs Brazil: 0800 727 5764 and / [email protected]. Available Weekdays (except holidays), from 9am to 6pm. Ouvidoria Goldman Sachs Brasil: 0800 727 5764 e/[email protected]. Horário de funcionamento: segunda-feira à sexta-feira (exceto feriados), das 9h às 18h; in Canada by either GoldmanSachs Canada Inc. or Goldman Sachs & Co. LLC; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities PrivateLtd.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by GoldmanSachs New Zealand Limited; in Russia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W);and in the United States of America by Goldman Sachs & Co. LLC. Goldman Sachs International has approved this research in connection with itsdistribution in the United Kingdom and European Union.

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European Union: Goldman Sachs International authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority andthe Prudential Regulation Authority, has approved this research in connection with its distribution in the European Union and United Kingdom; GoldmanSachs AG and Goldman Sachs International Zweigniederlassung Frankfurt, regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht, may alsodistribute research in Germany.

General disclosuresThis research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that weconsider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates andforecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research asappropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majorityof reports are published at irregular intervals as appropriate in the analyst’s judgment.

Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investmentbanking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research Division.Goldman Sachs & Co. LLC, the United States broker dealer, is a member of SIPC (http://www.sipc.org).

Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and principaltrading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, principal trading desks andinvesting businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.

The analysts named in this report may have from time to time discussed with our clients, including Goldman Sachs salespersons and traders, or maydiscuss in this report, trading strategies that reference catalysts or events that may have a near-term impact on the market price of the equity securitiesdiscussed in this report, which impact may be directionally counter to the analyst’s published price target expectations for such stocks. Any suchtrading strategies are distinct from and do not affect the analyst’s fundamental equity rating for such stocks, which rating reflects a stock’s returnpotential relative to its coverage group as described herein.

We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, actas principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

The views attributed to third party presenters at Goldman Sachs arranged conferences, including individuals from other parts of Goldman Sachs, do notnecessarily reflect those of Global Investment Research and are not an official view of Goldman Sachs.

Any third party referenced herein, including any salespeople, traders and other professionals or members of their household, may have positions in theproducts mentioned that are inconsistent with the views expressed by analysts named in this report.

This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would beillegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs ofindividual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, ifappropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from themmay fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.

Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors.Investors should review current options disclosure documents which are available from Goldman Sachs sales representatives or athttp://www.theocc.com/about/publications/character-risks.jsp. Transaction costs may be significant in option strategies calling for multiple purchase andsales of options such as spreads. Supporting documentation will be supplied upon request.

Differing Levels of Service provided by Global Investment Research:The level and types of services provided to you by the Global InvestmentResearch division of GS may vary as compared to that provided to internal and other external clients of GS, depending on various factors including yourindividual preferences as to the frequency and manner of receiving communication, your risk profile and investment focus and perspective (e.g.,marketwide, sector specific, long term, short term), the size and scope of your overall client relationship with GS, and legal and regulatory constraints.As an example, certain clients may request to receive notifications when research on specific securities is published, and certain clients may requestthat specific data underlying analysts’ fundamental analysis available on our internal client websites be delivered to them electronically through datafeeds or otherwise. No change to an analyst’s fundamental research views (e.g., ratings, price targets, or material changes to earnings estimates forequity securities), will be communicated to any client prior to inclusion of such information in a research report broadly disseminated through electronicpublication to our internal client websites or through other means, as necessary, to all clients who are entitled to receive such reports.

All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Not allresearch content is redistributed to our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution of ourresearch by third party aggregators. For research, models or other data related to one or more securities, markets or asset classes (including relatedservices) that may be available to you, please contact your GS representative or go to http://360.gs.com.

Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY10282.

© 2018 Goldman Sachs.

No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior writtenconsent of The Goldman Sachs Group, Inc.

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