Drived by policies, markets and epidemics, Internet medical care, which has always been regarded as a slow business, will suddenly enter the fast lane in 2020. Giant people accelerate layout in succession, high - quality head project becomes investment organization contend for object.

Recently, China Entrepreneur Magazine published an article on Internet medical care, interviewing representatives of venture capital institutions such as Pipes Capital Pte.Ltd.l, Dilac Garden, Rehabilitation Home Group and Weimai to conduct in-depth discussion on relevant issues. Pipes Capital Pte.Ltd. has long been focused on Internet healthcare and has rich experience in financing transactions in this area. In this interview, Xu Guangxun, chief investment officer of Pipes Capital Pte.Ltd., offered the following views:

The growth of Internet medical enterprises is not achieved overnight. It depends on the deep cultivation of the industry, the development of the whole market education, as well as the changes of policies and medical insurance. In the short term, enterprises should face the problem of understanding the medical industry and how to obtain stable profit growth to ensure the healthy development of enterprises.

The explosion of Internet health care has made more Internet giants see or re-examine the opportunities in this field. Of course, the upfront profits from the health business for the giant are negligible. For the giants, more important is the precipitation and application of data, as well as the pace of industry layout. This is very important to open up the whole process of online and offline medical services in the future.

From the point of view of the listed Internet medical enterprises, medical e-commerce is their main revenue. At the present stage, if there are flow and supply chain advantages, medical e-commerce will have higher profits, which will be an important breakthrough for Internet medical enterprises to realize profits quickly.

In the future, if enterprises can provide more valuable services in the early, middle and late stages of patient diagnosis and treatment, and do a good job of data precipitation, there will be more services in diagnosis and treatment, as well as the ability of physical medical institutions, even including the application of AI medical treatment, to break the simple profit model of medical e-commerce.

The following is reprinted from: China Entrepreneur Magazine

Reporter: Li Xiuzhi

Edit: Mina

Head figure source | panorama network

"It only took a few days." In the second half of 2020, Li Tian Tian quickly negotiated a round of $500 million financing for Lilac Garden, which was led by Zhi Xin and followed by Tencent and Hillhouse Venture Capital. This is the fifth round of financing in the 20 years since DXY was founded.

At the end of December 2020, the day of the announcement of the financing, founder Li Tian Tian told China Entrepreneur that this was the least "story" of the financing for Dilac Garden. "We don't need to talk about it for a long time, we are all old friends. They know our user operations and our revenue numbers."

Tencent and Zhi Xin Capital are old shareholders of DXY. In September 2014, DXY received a $70 million Series C strategic investment from Tencent. At the beginning of 2018, DXY won another round of D financing of $100 million led by Zhi Xin Capital and followed by Tencent. In the field of Internet healthcare, Tencent has previously invested in WeDoctor, Haodydoctor Online, YiLian, Penguin Almond, etc., while Zhi Xin Capital and Hillhouse Capital are also investors in Haodydoctor Online and JD Health respectively.

The Internet medical treatment, which has always been regarded as a slow business, suddenly entered the fast lane in 2020. The giants have accelerated the layout, and the high-quality head project has become the object of competition for investment institutions.

In addition to Dxingyuan, Internet medical companies such as Chunyu Doctor, Ali Health, Jingdong Health, WeMedical, WeMai, 1Pharmaceutical, Dingdang Kuaiyao, have all completed new financing in 2020. According to the rough statistics of China Entrepreneur, the total amount of capital raised by these enterprises in 2020 will exceed 40 billion yuan.

In particular, JD Health, after receiving about $914 million investment from Hillhouse Capital and other institutions in August 2020, was listed on the main board of the Hong Kong Stock Exchange in early December, with a market value of over HK $600 billion for a time, becoming the Internet medical company with the highest market value at present.

Alibaba Health and Wellness, also listed in Hong Kong, has also performed well in the stock market, with a market capitalization of more than HK $350 billion and HK $100 billion respectively.

Industry insiders say bluntly that under the catalysis of policy, market and epidemic situation, 2020 will be the first year of the real outbreak of Internet medical treatment. While the outbreak came at the same time, questions about the Internet medical track never stopped, and the industry still has a lot of difficult questions to solve.

Tabulation: Xiao Li, Wang Chao

Capital booms and bubbles emerge

Li everyday discovers beside produced quietly one big change.

As a medical graduate, Li Tiantian's college classmates were also doctors. It turns out that the group's two most active activities are seeking medical advice and voting for children. Many people think that doctors are knowledgeable about medical treatment, but they don't share much health knowledge in the group. After the outbreak of the New World in 2020, the group also began to share health knowledge.

Even Li Tiantian himself has had a new health experience. After successfully losing weight a few years ago, Li Tiantian had a hair transplant and a tooth set in 2020, according to a staff member close to him who told China EntrepreneUR.

"During the epidemic, people have experienced a profound health education: starting from personal care, actively use masks, hand sanitisers and other products; Concerns about healthy lifestyles remain high after the outbreak eases in China." Li Tiantian said.

This point, from the major electricity business platform disclosure of the data can also be seen. JD.com said that as of 6 am on Nov 11, 2020, its sales of imported health products had completed the full day's turnover in 2019. In its consumer medical categories, the transaction volume of vaccines and medical beauty in 11 days (November 1, 2020, BBB 0, 11) increased by more than 10 times compared with the same period last year. Tmall found that, compared with the same period in 2019, during the "Double 11" in 2020, the active users ofTmall1 Pharmaceutics born in 1995 increased by 102% year-on-year, and the average amount of health products purchased by the post-1995 generation increased by 18 yuan per person.

"Based on the user side, there have been profound changes in the Internet healthcare industry. And it's not going to go back to where it was as the epidemic recedes." Li Tiantian of this one judgment, also accelerated the financing process of clove garden to a certain extent.

He told "Chinese Entrepreneur" that the lilac garden is in a profitable state, and the revenue growth is relatively good, no financing on the business impact is not big. But the epidemic is rapidly improving the health awareness and health literacy of the Chinese people, and Dxie Garden must respond.

Li tiantian. Source: Respondent

Investors know this, too. Zhang Ying, the founding managing partner of Jingwei China, said that in the current entrepreneurial environment, the head effect is becoming more and more obvious. "Today, it is easier for a top company in a big industry to raise $1 billion than for an average company to raise Rmb100 million."

Li Tiantian, an Internet medical company that started out in a medical forum, said DXY is now the largest professional doctor community in China, covering more than 70 percent of the country's doctors. DXY Talent, which was launched in 2007, is the largest human resource service platform in the medical industry in China.

According to Frost Sullivan Report, JD Health has the largest online retail pharmacy in China by revenue in 2019, with a market share of 29.8 percent. Combined with advantages such as being "the first profitable online medical company to go public", JD Health took in more money.

JD Health was 31 times oversubscribed after its Hong Kong offering. Without exercising the overallotment, the global offering would have netted about 26.5 billion Hong Kong dollars ($3.5 billion). That means JD Health has become the biggest IPO in Asia's healthcare sector, beating the record $2.3bn raised by Otsuka Pharmaceuticals of Japan a decade ago.

Bubbles occur when capital is overindulging in head projects. At the 2020 annual meeting of Chinese corporate leaders, Han Yusheng, founder and CEO of Burning Stone Medical, said blunly that there must be a certain bubble in the capital market when the global currency is overissued. In the secondary market, for example, there are many companies with no fundamental change, but their PE (price/earnings ratio) has increased by two, three times or more.

In the primary market, some good projects have even been "endorsed". Citing the views of investors, the website revealed that unlike the market value of the project in the secondary market, which automatically adjusts according to the market, the price of the project in the primary market only rises. And a lot of enterprises in the process of financing, the valuation of the high point into the institutions will be signed with anti-dilution provisions.

"Once the business declines, the performance can not support the high valuation of the rise, and can not reduce their value, they will be caught in an embarrassing dilemma. In particular, if the enterprise is in a hot track with high demand for cash burning volume, the interruption of blood transfusion will make it break the capital chain in a very short time and go bankrupt." The investors said.

The "Industry Perception Tax"

The explosion of Internet health care has also made more Internet giants see or re-examine the opportunities in this field.

In November 2020, Beijing Sanfast Technology Co., Ltd., an affiliated company of Meituan, submitted an application for the trademark ofMeituanBB1 Professional Pharmacy ". In the same month, Meituan released the results report for the third quarter of 2020, showing that the single quarter drug orders increased by more than two times compared with last year, and the number of pharmacies registered MeituanBB1 drug buying platform was nearly 100,000 by the end of the third quarter of 2020.

Wang Xing, the founder of Meituan, has also spent the past few years learning from professionals in the medical community. At the end of 2019, Wang Xing had in-depth communication with Bai Yu, an investor in the health industry and chairman of Rehabilitation Home Group. Bai Yu told "Chinese Entrepreneur", "Wang Xing's learning ability is super strong, the industry research is more in-depth, is a deep thinking before the layout of people. At present, the business form of Meituan in the Internet medical field is mainly door-to-door drug delivery. On this chain, it should get stuck.

Bytedance is even more aggressive in the healthcare industry. Since 2020, Bytedance has made a number of major moves in the field of health care, including the wholly-owned acquisition of Baike Medical at a consideration of hundreds of millions of yuan, the launch of an independent health care brand "Xiao He Medical", the creation of "Yao 024" Internet hospital and offline diagnosis and treatment institution brand "Pine Concord Clinic", etc. From the online health science content to the Internet for medical consultation, and then to the offline diagnosis and treatment institutions, Bytedance's ambition for the medical and health industry can be seen.

Baidu will also start to regain its momentum in healthcare in 2020. In March 2020, Baidu upgraded the original Baidu Search Health business to Baidu Health, a new brand. At present, Baidu Health has joined more than 1,000 public hospitals and 250,000 doctors (as of August 2020), forming a content ecology with Baidu Health Medical Book as the core and a service ecology with Baidu Health Doctor as the core.

How big a splash can these giants make in Internet health care?

"The biggest difference between the Internet healthcare industry and other Internet industries is that it has a higher cognitive barrier. I don't think any of these giants are going to get off the ground today. We all have to pay the industry cognition tax, who also can not run ", Bai Yu bluntly.

Bai Yu believes that the core of the Internet medical industry cognitive tax, is to find the top talent. "JD runs fast because their waist talent (director level) is very strong, and I have a lot of medical industry acquaintances who have gone to JD. In the past four or five years, Alibaba has also recruited a large number of middle-level and grass-roots professionals in the pharmaceutical industry. But whether it's Bytedance or Baidu, I haven't seen them find a lot of top talent in this space."

It is interesting that both the MAO 24 Internet Hospital and the Pine Cone Clinic, through equity penetration, are pointing to the former Baidu executive Wu Haifeng. Wu has worked at Baidu for 17 years as a technical backbone in NLP (natural language processing) research, and once served as the head of Baidu's medical and health industry-related business. In 2019, Wu Haifeng's directors, including Sun Wenyu, Wu Xiaohui, Wang Xi, Li Meng, Tan Yu, and Liu Hailang, as well as senior technical and product personnel, joined Bytedance after leaving Baidu.

When JD Health went public, China Entrepreneur noted that 22 executives above the general manager level, including Xin Lijun, had made public appearances.

Talent means the ability to organize. Li Tiantian also said that even though it has been working in the Internet medical industry for 20 years, DXY still often faces the problem of "facing new market changes, the organizational ability can not keep up with, and the product is not good enough".

In addition, when the giants enter the Internet medical service, the policy is another major cognitive tax they need to pay. The medical industry is subject to strong policy regulation, especially the Internet medical industry.

Take online prescription drugs as an example. In November 2020, the State Food and Drug Administration solicited public opinions on the Measures for the Supervision and Administration of Online Drug Sales (Draft for Comments), and planned to allow conditional liberalisation of online prescription drugs sales. This is undoubtedly a great boon for JD Health, Ali Health and other Internet medical enterprises whose main revenue is medical e-commerce.

But in recent years, the online prescription drug policy has been loosened and tightened several times, and has even been dubbed "flipping pancakes" by the industry. In 2018, the Opinions on Promoting the Development of "Internet + Health Care" issued by the General Office of the State Council explicitly stated that a qualified third-party agency can be entrusted to deliver online prescriptions after being reviewed by a pharmacist. In 2019, a draft amendment to the Drug Administration Law shows a completely different attitude, banning the direct sale of prescription drugs through third-party platforms for online drug sales.

"Internet medical enterprise's growth is not achieved overnight, itself relies on the subsoil of the industry, the market education development, and the policy and the change of the health care", chase capital investment director Wang Shi can "China entrepreneur" interview that incoming Internet medical enterprises, face the problem in a short time first the understanding of the health care industry, as well as the stable profit growth, to ensure the healthy development of enterprises in a benign way.

"Of course, the upfront profits from the health business for the giant are negligible. For the giants, more important is the precipitation and application of data, as well as the pace of industry layout. This is important for the future to connect the whole process of online and offline medical services." "Said the dog.

You can't just make money by selling drugs.

From the point of view of the listed Internet medical enterprises, medical e-commerce is their main revenue.

According to China Entrepreneur, sales revenue from medicine and health products accounted for more than 87 percent of JD Health's total revenue from 2017 to 2019. During the same period, the proportion of Ping An Good Doctor's health mall business in the total revenue increased from 47.9% to 57.2% year by year. In the fiscal year 2018~2020, medical e-commerce has contributed more than 96% to the total revenue of Ali Health.

XinLiJun. Photography is by Shi Xiaobing

How can a company that sells drugs be worth $300, 400, 500, 600 billion? Xin Lijun, CEO of JD.com Health, has faced such skepticism many times. He admitted in an interview with the media that "we never shy away from people saying that we make money by selling drugs".

In Xin Lijun's view, Jingdong Health's revenue structure is similar to that of offline medical institutions. "The current revenue structure of hospitals is that 1/3 is medicine, 1/3 is consumables and medical devices, and 1/3 is medical services. That is to say, hospitals account for two-thirds, or 66%, of the income made up of physical goods. The 87% ratio of JD Health is also normal."

Xin LiJun also believes that the companies that do Internet health care in China, those that do not sell goods are losing money. The reason is that the price of medical services in the national expenditure, has not reached the reasonable level. For example, "Health care services should account for 20 percent of total health care spending, but now they only account for 5 percent. You can make money at 20% and you can't make money at 5%."

That may not be the case.

"When it comes to health care, many people's first reaction is to copy the model of the [hospital]. You can see the doctor in the hospital, you can see the doctor online. Drugs can be bought in the hospital and sold online. This position is correct. However, as people in the industry, there is an increasingly obvious upstream and downstream relationship in health care. Downstream is the patient. Upstream is the health sensitive population, including potential patients." Li Tiantian said.

Li Tiantian's observation is that the people, goods and field of the medical and health track have changed. People are no longer just patients. Young mothers, for example, need the expertise of a doctor for two to three years or longer. The goods have changed. The original goods are medicine, now also include online knowledge economy, remote services these virtual products. The field also changed, extending from the inside of the hospital to the outside. In addition, the consumption scene outside the hospital is more frequent, less risky and less regulated than inside the hospital.

After noticing these changes, DXY began to use DXY Doctor as the underlying platform to build vertical products, such as DXY Mama, which is targeted at young mothers. Li Tiantian hopes to build a business model that "combines physical products with virtual products, online services with offline services, and finally provides users with a solution. He can pick whatever he needs, knowledge payment, prescription, e-commerce, offline."

Li Tiantian told "Chinese Entrepreneur", medicine e-commerce market competition has been very sufficient, Dxilingyuan will not touch. At present, the prescriptions of Dxuiyuan's online diagnosis and treatment are handed over to third-party companies such as Sinopharm.

There are also Internet medical companies that do not sell drugs for a living. Medical services company, its main innovation, in the city, and the depth of the public hospital cooperation, to provide local users online the whole process of medical service, the combination of Internet medical service, health management and family doctor service, health care, door-to-door service, and the whole cycle surrounding segment diseases closed-loop management innovation services and so on.

Take obstetrics as an example. Qiu Jialin, the founder of WeMai, gave an example of users' pain points in this respect to "Chinese Entrepreneur" : In the past, pregnant women managed their own registration, payment, doctor visits, antenatal examinations, and other results, but there was no special person to answer their questions and doubts out of the hospital.

QiuJiaLin. Source: Respondent

The solution offered by WeMai is to assign pregnant women a team of family doctors. They are composed of obstetricians, nurses, doctors in medical technical departments such as ultrasound/laboratory doctors, and VMX pregnancy stewards, who provide online health guidance, report interpretation and in-hospital health management services for pregnant women. The package also includes online classes and health insurance.

The business model is a bit like the US model of Kaiser Healthcare (hospital, doctor and insurance), which many Internet healthcare companies are adopting. However, Qiu prefers to call it "H+D2C" (Hospital+ Doctor to Consumer), which is based on the Internet, AI, big data and other new technologies. It connects with the Hospital's information system and provides users with management services for the whole course of disease through the Hospital's medical staff.

Currently, more than 80 percent of WeMai's revenue comes from medical services, Qiu told China Entrepreneur. Moreover, WeMai has been profitable in the cities where it has been in operation for more than two years.

"WeMai's business model has been proven and is being replicated in different cities," said Wang Yu, executive director of Baidu Capital.

"At this stage, if there is flow and supply chain advantages, medical e-commerce has higher profits, will be an important breakthrough for Internet medical enterprises to quickly achieve profitability." "Wang Shineng said.

Wang Shineng believes that in the future, if enterprises can provide more valuable services in the early, middle and late stages of patient diagnosis and treatment, and do a good job of data precipitation, there will be more services in diagnosis and treatment, as well as the ability of physical medical institutions, even including the application of AI medical treatment, to break the simple profit model of medical e-commerce.