According to the analysis of industry insiders, when the price of medical services has not reached the reasonable level it should have, Internet medical services can only rely on "selling drugs" to make profits. For companies that do not have a supply chain foundation, it is more important to find a prescription drug sales scenario.
In April and May last year, the domestic epidemic in China stabilized. It is also from that time that the founder of Good Doctor Online, Wang Hang, who has been established for 15 years, has received calls or visits from the capital market almost every week: some investors come to negotiate a new round of investment, and there are brokers to help. A good doctor is listed online. "Almost all well-known brokerage firms have come to say hello. At first, foreign-funded securities firms were the main ones, and later domestic-funded securities firms gradually increased."
After the new crown epidemic, the demand for online medical services has soared, and "Internet medical" has become a hot concept in the hot secondary market that has lasted for more than a year.
At the end of 2020, JD Health, which is valued at US$30 billion, was listed on the Hong Kong stock market. Starting from the end of March 2021, domestic Internet medical companies Yimaitong and WeDoctor have successively submitted listing applications to the main board of the Hong Kong Stock Exchange. According to industry sources, Yuanxin Technology and Dingxiangyuan both have plans to go public on the Hong Kong stock market at the end of this year or early next year.
"JD Health raised the IPO valuation, and everyone followed suit." An investor described the fact that Internet companies get listed together and are related to the "JD effect". Another foreign investment banker who participated in the IPO projects of many Internet medical companies described the hot market background, "Last year and this year were the periods with the largest number of IPO projects in history."
Unlike JD Health and Alibaba Health, which have found clear profit models such as "selling drugs", most of the Internet medical companies listed this year have not yet found a profit model with a clear path. These companies with a turnover of more than one billion yuan, "just Bring all parties together and save a round'", it is not clear who will pay the bill. "An investor involved in related projects said frankly.
But the booming secondary market is a once-in-a-lifetime opportunity for these Internet medical companies that have partially cut into the traditional medical service scene. The latest IPO value of WeDoctor is US$15 billion, which is three times its valuation data last year.
The Internet medical market accelerated by the new crown epidemic
On the evening of April 1, 2021, WeDoctor, which has been established for more than ten years, officially submitted a listing application to the Hong Kong Stock Exchange.
This is not the first time it is preparing to go public. WeDoctor officially disclosed that the listing plan was in 2018 for the first time, but there was no substantial progress in the following two years. In May 2018, when WeDoctor completed the US$500 million Pre-IPO financings, it officially announced plans to list its three HMO-related businesses, namely, Micromedicine, Micromedicine, and Wemedical Insurance as a whole. "Business spin-off and independent listing on A-shares.
In March 2020, the news that WeDoctor will go to Hong Kong for IPO came out again, but the result was not successful. There are divergent opinions on the reasons. According to relevant sources, on the one hand, due to the financial fraud incident of Ruixing in April last year, Credit Suisse, one of the co-lead underwriters of Ruixing's listing, ceased to act as the co-sponsor for the Hong Kong stock listing of WeDoctor; on the other hand, it joined in February last year. Cai Qiang, the CFO who promoted the listing of WeDoctor, resigned in a low-key manner six months later, which further delayed the IPO process.
Industry insiders also told Badian Jianwen that the pre-IPO valuation of WeDoctor was only US$5 billion, which did not meet the founder's psychological expectations and proactively delayed the listing plan.
Only a few months later, the situation changed abruptly.
The new crown epidemic has greatly stimulated the demand for online medical treatment. According to Bain Consulting data, in January 2020, the number of new users of Ping An Good Doctor and the number of new user consultations increased by 900% and 800% respectively, and the number of online consultations and the number of active users of Dingxiangyuan increased by 135 respectively. % And 215%. At the beginning of the epidemic in March 2020, Internet diagnosis and treatment in hospitals under the management of the National Health Commission increased 17 times compared with the same period last year; the number of diagnosis and treatment consultations on some third-party Internet service platforms increased more than 20 times compared with the same period last year, and the number of prescriptions increased nearly 10 times.
The research report of Essence Securities has even increased the significance of the increase in the number of Internet hospitals: As a result of the acceleration of the epidemic, the in-depth development of "Internet + medical health" has advanced 3-5 years.
A few years ago, Internet medical care has always been a "looks beautiful" market, but entrants are struggling in it. In the consumer sector, the Internet will face great profit prospects as long as it scales up, reduces costs, and improves efficiency. However, the characteristic of the medical market is that “there are so many doctors. After the Internet brings a large number of patients, doctors can also have up to 100 accounts a day.” An investor explained that it is difficult for Internet medical treatment to rely on traffic and scale to bring immediate results.
Internet medical care had short-term prosperity based on entrepreneurs and investors’ “prosperity imagination” of the Internet and national policies “giving birth” to the Internet. However, after experiencing the initial contending of a hundred schools of thought and the melee of the industry, in 2016 and 2017, as the policy turned colder, From prosperity to decline, falling into the freezing point.
After 2018, due to the important turning document "Opinions on Promoting the Development of "Internet + Medical Health" issued by the State Council, the spring breeze blew again. The concept of big health has become popular. Internet medical services once ushered in the dual benefits of the capital market and policies, and the industry has gradually recovered. During this period, Internet medical and health companies ushered in a wave of listings. Smart wearable device Huami Technology went public, Ping An Good Doctor went public, and the parent company of Yiyao.com 111 Group went public. The heavy vertical platform Baby Tree and New Oxygen Technology have also been successfully launched.
However, after 2018, the popularity of Internet medical treatment is far less than that after the new crown epidemic. The isolation caused by the epidemic has made the necessity and urgency of “Internet medical treatment” a reality that people and policy-makers can see.
"Internet + medical" policies and detailed rules have been issued continuously. Throughout last year, a total of 14 documents including the "Notice on Doing a Good Job in Internet Diagnosis and Treatment Consulting Services in the Prevention and Control of the Epidemic" and the "Notice on Promoting the Development and Standardized Management of Internet Medical Services" have promoted the development of Internet medical services and Internet hospitals. , The policy of online sales of prescription drugs and access to medical insurance and medical insurance payment has also been liberalized and accelerated.
Under the dual blessing of demand release and favorable policies, the corporate valuation of the Internet medical concept has been rising all the way. In August 2020, JD Health received a Series B investment of more than US$830 million from Hillhouse Capital, with a post-investment valuation of US$30 billion, a four-fold increase from a year ago. JD Health went public in Hong Kong after the split from JD Group, and its market value has soared to 600 billion Hong Kong dollars.
Investee promotes listing
The crazy secondary market makes many investors unable to sit still. After all, the early investments of the year were started in 2014 and 2015 when the Internet healthcare was just starting, and the cycle of holding funds by PE/VC institutions was mostly 6-8. year. The listing of invested companies is the most ideal exit channel for capital. It coincides with the high point of Internet medical valuation after the epidemic, and this year is an excellent exit window.
"Listen as soon as possible while the valuation is high." This is the thinking of many investors and entrepreneurs.
In 2020, in the field of Internet medical care, the primary market will raise 16 cases (calculated based on the platform of self-built Internet hospitals), with a total financing amount of 16.8 billion yuan, of which 5 cases raised more than 1 billion yuan. In December, JD Health went public. If calculated at the public sale price of HK$70.58, the net proceeds from the global offering would be approximately HK$26.457 billion (approximately RMB 22 billion). According to statistics, the industry will raise a total of 38.7 billion yuan in 2020.
Immediately afterward, Internet medical companies are gearing up to take advantage of this to increase the company's valuation and complete the listing in one fell swoop. "Some Internet medical companies laid off their employees some time ago, just to get listed for performance." An investor admitted frankly.
An Internet medical entrepreneur admitted that the current wave of Internet medical listings is partly driven by investors-medical investment is a long-term track, and its development is too slow compared to other Internet industries. "Investors hope to be able to exit in such a short-term best window after the epidemic and get a better return on investment." He expressed his understanding of investors' eagerness.
Internet medical treatment can only rely on selling drugs?
Judging from the latest data of the three listed Internet medical companies, 87% of JD Health’s revenue comes from retail revenue (including pharmaceuticals and non-pharmaceuticals), and Ali Health’s revenue from self-operated pharmaceutical business and pharmaceutical e-commerce platform business accounts for up to 96.5%, Ping An Good Doctor’s health mall business revenue accounted for nearly 60% of its total revenue.
Good Doctor Online has never considered "selling drugs" and "why not selling drugs?" has been a question repeatedly asked by investors by Wang Hang. "We focus on the field of medical services, and this is what the people need most," said Wang Hang. Behind this problem is precisely the most realistic situation faced by Internet medical care-selling drugs has almost become the only way to realize the realization of enterprises from drugs to the Internet.
JD Health’s first financial report after its listing was extremely eye-catching, with profits increasing 3 times year-on-year to 19.38 billion yuan. In an interview with Jianwen at 8 o’clock, CEO Xin Lijun said frankly, “I’ve never shied away from saying that we make money by selling drugs. Companies that do Internet medical services in China lose money. Those who don’t sell goods lose money. There is no Internet medical company. Relying on services to make money, not realizing in kind.” (For details, see 8:00 Jianwen’s previous report "Why is a company that sells drugs worth hundreds of billions? After JD Health went public, we chatted with CEO Xin Lijun")
According to Xin Lijun's analysis, the reason behind the status quo of this industry is that the price of medical services has not reached its reasonable level. "For example, the proportion of medical service fees should reach 20% of the total medical expenditure, but now it has only reached 5%. When it reaches 20%, it can be profitable, but when it is only 5%, it is difficult to make a profit."
In this regard, an investor has the same observation, "Medical services are still not profitable in China, and patients have not yet had the habit of paying for medical services." For these Internet companies that want to charge for services, there is still much to do in the future. There is a long way to go. Since the new crown epidemic in 2020, low-cost customer acquisition and large-scale market education have just begun.
She joked that Internet medical companies that are now profitable and profitable have either already begun selling drugs or are looking for a scenario where they will soon be able to "sell drugs."
The fact is that if you pay attention to this round of startups that are about to go public, all those with a revenue of more than 1 billion yuan will get involved in the drug sales business. For example, Medical Federation, WeDoctor, Palm Sugar Doctor, Yuanxin, and JD Health, and Ali Health sell over-the-counter drugs in that the business they are trying to set foot in is the field of prescription drugs.
Another investor believes that the 1.0-stage Internet medical entrepreneurship such as JD Health takes a certain position in the supply chain as a victory. It used to be unable to sell medicines, but now it can sell medicines; but if there is no previous supply chain foundation, it is also There is no way to sell medicine.
For those companies that do not have a supply chain foundation, it is even more important to find a prescription drug sales scenario.
An investor said frankly, "Whether the prescription drug transaction is successful is the only imaginable space for several Internet medical companies to realize." He is optimistic about WeDoctor and Yuanxin Technology, which have tested the water for online medical insurance payment in some areas. In his view, access to medical insurance is an extremely important closed loop of "prescription drug transactions."
Although the total revenue disclosed in the prospectus of WeDoctor is increasing year by year, it still has a loss of 869 million in 2020. Its business model is compared with Alibaba Health, JD Health, which is a medical e-commerce model, and Ping An, which focuses on online medical services and insurance businesses. Good doctors still face profit doubts. However, in the eyes of many investors, WeDoctor has been connected to medical insurance payments in Shandong and other places. Although there is no definite "payer" for the time being, it has at least saved doctors, patients, and medical insurance in one bureau. "For the capital market that the company will develop in the next 3-5 years, this is a "justified story."
What do companies that do not choose to go public at this time think?
Faced with the flood of olive branches, Wang Hang replied to the other party every time, "Let's not consider it, for the time being, let's keep in touch." "This industry has just begun, and the time to go public has not yet arrived. We have not considered going public a few years ago, and neither will this year nor the short-term future."
An investor believes that as long as investors do not put pressure on him (Wang Hang), Wang Hang will not choose to go public in the next five years. And this kind of "Buddhism" is rare in the industry. Not making medical advertisements, not touching offline hospitals, and not making money from drug sales are the three main principles that Good Doctor Online has always adhered to.
The unclear profit model of most Internet medical companies is the concern of investors and entrepreneurs who do not advocate listing at this time.
After the epidemic, with the boom in Internet healthcare, related companies that have been listed are mainly focused on the two hotspots of pharmaceutical e-commerce and information software development, and the business models in these two fields have also been relatively mature.
But beyond that, other business models may not be mature. "To go public is to accept the supervision of the entire society and to take responsibility for investors and stockholders in the open market. The company must operate in a relatively stable mode." said an entrepreneur in the medical field.
To meet the conditions for listing, Wang Hang believes that it needs to meet the standards in three areas. The first is that the business model is clear and it can be seen that it has entered a virtuous circle; the second is that the business has achieved a considerable scale. "At present, the good doctor has been operating online for 15 years and has served more than 70 million patients in depth. From the perspective of China's total population of 1.4 billion, it covers The rate is only 5%, the scale is still relatively small, the scale has not yet been achieved, and there is still a lot of room for improvement." Third, the company can have a mature and reliable team, which is far It is not an easy task. "People who understand medical care don't understand IT, the Internet, and those who understand the Internet don't understand medical care." Even after 15 years of intensive cultivation, Wang Hang believes that talents are still a big problem and need to be continuously cultivated.
In his description, the development of Internet medical treatment is a long process, and there is no shortcut.
It's not that Haodafu Online has experienced financing difficulties. In 2015, the good doctor spent a whole year consolidating and optimizing the doctor's backstage, but when he was about to raise funds, he found that the capital winter was approaching, and he felt the difficulty of financing. Even so, I was asked, "Will it lose the once-in-a-lifetime valuation peak opportunity if it does not go public this time?" Wang Hang believes that there will always be a time window. "The most important thing for us now is to spend more time on business and improve service quality as soon as possible after the epidemic, when people's concept of Internet medical treatment improves."
If you don’t sell medicines, all you can do is medical services.
Wang Hang believes that "there are too many areas for improvement in medical services, and there are still many breakpoints." For example, where patients are dissatisfied with online medical services, they have long focused on doctors who respond too slowly online and the online responses are not detailed enough. "But patients must always find doctors who are clinically busy online. , They won’t find doctors who are not busy."
These problems seem simple on the surface, but it is quite difficult to solve them. "It is necessary to dig deep into the logic behind it and start with the most basic things, such as what kind of doctor to choose, how to better adapt to their clinical work, and how to use their time more efficiently?"
But when medical services are completed, whether patients will take it for granted, is the next question for Internet companies and investors.
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