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Briefing Sep 18, 2020 12:24 pm EqualOcean

JD Health’s New Move on Hong Kong IPO

Analysis EO
Analysis · 2
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Analysis EO
Nov 2, 2020 10:33 am ·

Ding Dang Kuai Yao: A Chinese E-Commercial Way to Run a Pharmacy

► Ding Dang Kuai Yao can deliver drugs on-door within 28 minutes, solving users' pain of 'last mile' and urgent demand. ►It has built an Internet-based business ecology, with an anchor on the back-end logistics M2F platform. With insights and experience of the distribution area in China' drug market, it grabbed the gist by prioritizing tier-one or -two capital cities in China. The Chinese O2O pharmacy delivery platform, Ding Dang Kuai Yao, recently announced the close of a Series B+ at an amount of CNY 1 billion. The bankroll is destined to boost a civic roll-out project called ‘thousands of cities, tens of thousands of shops.’ The company expects its service radiation to cover tier-1 to -3 target cities throughout the country by the end of 2020.  So here come the questions: What is it about? How will it win the favor of millions of users? And how can it withstand the market predations of Internet-backed giants?  Ding Dang Kuai Yao is not a new name in the Chinese Internet healthcare industry. It was established as early as in September 2014 and has raised a fund every year since then. The startup received CNY 5 million from Renhe Yaoye (000650:SZ) in an Angel round in 2014, followed by a pre-Series A of several tens of million from Chun Feng VC (Chun Yu Doctor’s Corporate VC) in 2015. As the online-to-offline (O2O) concept heated up in 2016, more cornerstone investors stepped in to join the investment, big names such as SoftBank China and CICC. What is the business logic? Ding Dang Kuai Yao is an O2O platform delivering medicines or other daily medical supplies for online users. The way it works is quite simple. Whenever users want to buy medicines but don’t want to go out, they can just order on the Ding Dang Kuai Yao platform in the form of the WeChat Mini Program or the App. Then they can wait for the products to be delivered to the door. The traditional O2O concept is that businesses use online tools to aggregate target users. As it developed further, more consumer-centered O2O variants emerged, providing on-door services, including food delivery and online-ordering car. Ding Dang’s medicine delivery is one type of these upgraded O2O models, solving the pain of the ‘last mile’ issue. That Ding Dang Kuai Yao started this business has something to do with its background. Its founder and the CEO, Mr. Yang Wenlong, is also the CEO of Renhe Yaoye (000650:SZ) – a pharmaceutical developer, manufacturer and retailer. Renhe Yaoye focuses on the manufactory and distribution of medicines and medical supplies, especially some days counter (OTC) products. In those days, these OTC products are only available at pharmacies and usually sold out, which is a hassle for customers with urgent needs.  For consumer-faced medicine, fast delivery regardless of time, dedicated private service, regular on-door care for chronic-disease patients and etc. are critical core demands. The CEO, Mr.Yang, noticed the unmet niche market and founded Ding Dang Kuai Yao – a product that offers a ‘fast speed’ delivery – ‘Kuai’ in Chinese indicates ‘fast.’ Ding Dang Kaui Yao promises to have healthcare goods delivered within 28 minutes, way faster than the one-hour delivery guaranteed by other players, Yao Gei Li (‘药给力’) and Kuai Fang (‘快方’). Although Internet-based O2O is not a new operation model, the success factor to excel in the speedy drug delivery lies in computing power and the delivery capability. In the beginning, Ding Dang sought an extensive fast roll-out by concentrating on the establishment of its platform, connecting online users and offline pharmacies. The computing power and initial user consumption pattern accumulated at this stage. Later, Ding Dang built its own offline supply pharmacy and delivery team because it realized the bottleneck of the role of an online platform – it being hard to push third-party pharmacies and control the delivery. Up to here, we see that Ding Dang stands out from a mature healthcare retail business because it grabs delivery based on the deep understanding of user pains and consumption behaviors. How profitable is this business? Ding Dang Kuai Yao heavily relies on an App-based operation model – when it extends to self-run offline pharmacies, the OMO (Online Merge Offline) gives a profitability formula beyond the pure Internet platform. Its revenue comes from an online order, so the per-user deal amount and user number are the two main growth drivers. The per-user deal value is around CNY 20 – 30 for a new user and usually increases to CNY 70 – 80 later, with a repurchase rate at 52% as of May 2019. In terms of the user number, it depends on the radiation range of a single shop. The community Ding Dang store can cover a 500-meter radius area and the offline pharmacy can cover a five-kilometer radius. Compared to increasing offline stores, it is easier to increase the deal value amount per user by providing more discounts and diverse product portfolios.  From the perspective of cost, Ding Dang has different functions to reduce each type of these costs. For the medicine cost, it has access to the wholesale or the ex-factory price by its flexible supply chain (FSC), in cooperation with many drug makers, and self-manufacturing. Moreover, its offline stores are mostly located in cheap-priced areas instead of popular street corners, which can save 75% of lease expenditures per year. The variable cost primarily pays for the delivery fees, which can be reduced by optimizing the back-end matching system.  After years’ accumulation, Ding Dang Kuai Yao has established a stable triangle pillaring the online e-shop, offline smart pharmacy and full-time delivery. Based on this ecology, it can ideally deliver medical goods from its own shops using its own delivery man – the seamless cooperation efficiently reduces the waiting time and fulfills the ‘fast delivery’ promise. In 2019 October, Ding Dang Kuai Yao almost covered the whole Beijing market with its only 100 offline pharmacy shops. Starting from the capital city, it then conquered Shanghai and other tier-one capital cities characterized by dense population, fast-paced lifestyle and young people. As of the end of 2019, the online drug delivery platform had served over 100 million users, a 73% up from the year before, and increased 52% service intensity (calculated by user number divided by service coverage). Marketing roll-out strategy The popular user growth model is commonly known for ‘AARRR,’ short for ‘acquisition,’ ‘activation,’ ‘retention,’ ‘revenue’ and ‘referral.’ However, Ding Dang Kuai Yao adopts a user growth strategy somehow different from this typical model by prioritizing ‘retention’ at the first stage. It first satisfies a small number of users, leveling up the retention rate to a new high, and then acquire new users. This strategy works effectively in China because users never have too many medicine delivery platforms – what they lack is high-quality user-centered service when they need some supplies immediately. From Ding Dang’s data, users with three receipt addresses increased 103%, those with four addresses up 94% and five addresses up 88%. It indicates that the mainstream of the current users has the potential to advance to core users with more potential consumption situations. And the drive behind this user growth comes from the ‘RAARR’ logic based on the business logic prioritizing ‘fast delivery’ service quality. In terms of the waiting time, Ding Dang’s users averagely need 24.85 minutes before the on-door knock while other users on other platforms need at least 50 minutes. The large gap makes a significant difference.  Following the anchor step of retention, Ding Dang Kuai Yao has started to cultivate its online content community, like all other healthcare e-commerce. It is building an omnichannel network, showing up in phone users’ break time via all types of media: news channels, social platforms, short-video platforms and self-owned publishing sites. As of July 2019, it had accumulated a total of over 150 million views, including 23% of users’ sharing. DingDang Institute of Health Research’s data shows that users tend to focus more on daily topics such as healthy life tips (29%) and supplementary medications (17.6%). Competition benchmark Ding Dang Kuai Yao is primarily faced with two types of competitors: traditional franchise pharmacies and tier-one Internet companies, such as Meituan, Ele.me, JD Health and Ali Health, etc. For the traditional franchise pharmacy brand, it will be harder for them to merge online compared to Internet-based online healthcare platforms. These offline stores not only need to cater to Chinese consumers’ online shopping behavior but also digitalize their physical street stores. The consumer-oriented online sales is an unstoppable trend, indicated by the increase from 1.6% in 2014 to 5.1% in 2018.  In terms of user acquisition, Internet companies have natural advantages in the dynamic online community. O2O platforms such as Meituan and Ele.me, together with online healthcare e-commerce brands like JD Health and Ali Health. However, Ding Dang Kuai Yao is not in a pure competition relationship with these Internet players but in a ‘coopetition’ business relation. Besides launching its own App and mini program on WeChat, Ding Dang Kuai Yao also settled on the O2O life service platform (Meituan and Ele.me), online healthcare (Ping An Good Doctor) and some top e-commerce (Tmall, Taobao and JD.com). Among this cooperation, Ding Dang works with O2O platforms the best – one reason is that they both can satisfy users in a timely manner. Thus, Ding Dang Kuai Yao is fighting against other platforms for online traffic while concurrently work with them as an online vendor. Now we have a new outlook of Ding Dang Kuai Yao’s business strategy. After it cultivated the reputation of ‘fast delivery,’ what it has been doing is to extend the arm along the professional medical service chain.  Based on the ‘fast’ business logic, it has started to deliver prescription drugs, together with online consulting, and on-door medical services by sending nurses and physicians. Different from other ‘all-in-one’ healthcare platforms, speed and professionalism are two features Ding Dang has been trying to the extreme. The core competition faced by Ding Dang lies in the integration capabilities of the online and offline parts.

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Briefing
Sep 4, 2020 12:07 pm · VCbeat

JD Health Helps Pandemic-Center Hubei with Medical Care

Analysis EO
Analysis · 2
report
Analysis EO
Aug 27, 2020 01:02 pm ·

What’s Next for Ping An Good Doctor?

► Ping An Good Doctor faces challenges from every segment of the business and gradually gets stuck as it comes close to the ceiling of traffic conversion from Ping An Group. ► The market overvalues Ping An Good Doctor, giving high expectations of WeDoctor and other to-be-public Internet healthcares. Ping An Good Doctor (01833:HK), the online healthcare service provider backed up by the most prominent Chinese insurance group, has released its 2020 semi-annual financials: a revenue of CNY 2,747 million at 20.9% up and a net loss of CNY 214 million at 22.1% down. Besides, the online healthcare – the business segment pivoting Ping An Family Doctor – brought more revenue by 10.5% to 25.3% during the first half-year. All these numbers seem reasonable to the majority. The new chief board has done a responsible job amid the pandemic crisis by catching the current of online healthcare and the company is also seeking global expansion. However, the company's performance is only seemingly good. The revenue structure that indicates the market's recognition of the business model also conveys a worrying fact that Ping An Good Doctor has not built a well-established moat. Competition everywhere The majority of Ping An Good Doctor's revenue comes from health malls (or online pharmacies); they accounted for 56% and 57% in 2018 and 2019. This is a much-contested arena where two e-commerce giant-backed players have joined in the fight: Ali Health and JD Health. Users on Taobao/Tmall and JD.com, the two leading e-commerce platforms, can access online pharmacies. Even though Ping An Good Doctor can leverage traffic from the insurance platform, the amount is still way less than that on an e-commerce platform. It may be argued that there can hardly be enough online pharmacies to satisfy China's consumer market. Indeed, only a small share of the Chinese consumer market can bring over half the revenue of Ping An Good Doctor. However, it also indicates a lower threshold, especially for e-commerce. It is not unlikely that Pinduoduo, the third largest e-commerce in China, will enter this area and take the market away. The consumer healthcare is practically an online-to-offline (O2O) model. The craze of the O2O business rose in 2014 as the Internet spread across all kinds of industries. Since the O2O business model walked into adversity, the Chinese medical cosmetology industry has brought the O2O model to a new era, with representative companies such as SoYoung Technology and Gengmei. To catch up on the wind, Ping An Good Doctor and other online healthcare platforms also include this service as their consumer healthcare, connecting online users and offline store services. Online healthcare under Ping An Good Doctor includes online consultation platform service and the family doctor service – the pillar business in the company's differentiation strategy. However, JD Health also launched a similar function,  JD Family Doctor, which provides a doctor-team service, including doctors specializing in different areas. From the business competition above, Ping An Good Doctor is faced with fierce competition in each segment but still owns the advantage – being backed by the most prominent insurance group. It is not easy to provide a comprehensive insurance-based payment solution, especially in the setting of China's complicated insurance system. It is still a question mark that this is an exclusive resource owned by Ping An Good Doctor. Why overvaluation? Many market watchers, regardless of being inbound or outbound, give an 'overvaluation' credit to Ping An Good Doctor. We value the company by dissecting the business portfolio and comparing each business against the most relevant competitor based on the P/S ratio. From the relative valuation above, Ping An Good Doctor's online healthcare segment is valued at a multiple of 34.51x, the average of itself and Ali Health’s. Ping An Good Doctor's online healthcare covers online consultations, online registration and family doctor, while Ali Health doesn't provide family doctor. The two companies do not perfectly fit but still are very comparable to some degree. Even though JD Health or WeDoctor can be one of the most comparable candidates for Ping An Good Doctor, the first one is listed on National Equities Exchange and Quotations (NEEQ) and the second one has not gone to public yet. There could be several rationales behind the gray area or the market premium shown above. First, the market highly appreciates the boom in the traffic (monthly active users, newly registered users, etc.) and the increasing conversion rate during the last few years (from 2.7% in 2017 to 4.0% in 2019). Plus, even though the company has not profited yet, the healthy cash flow from the investing activities conveys a positive signal. Last but not least, Ping An Group (02318:HK) will always be the most reliable back-bone for the young healthcare platform, providing business traffic and technology & financial support. There could be synergies among the four segments, and there could be that the health mall is under-valued. However, considering JD Family Doctor, Ping An Good Doctor's different business cores, the family doctor business may not be that unique as before. Moreover, JD can still play the healthcare business around with JD Finance, JD Logistics and JD Digital while Ping An can only go with the insurance. Future path To conclude, Ping An Good Doctor will not become the top player only because Ping An Group is backing it up. Undoubtedly, the company needs to work harder on a deeper  business moat. Not pivoting on logistics delivery, online malls or family doctors, it can get more ambitious by providing full access to the public health payment system. So far, PAGD has been doing this in some tier-three and pilot cities. As the only Internet healthcare company with an insurance background, it has a first-mover advantage allowing it to do more profound work on the healthcare payment solution service. Specifically, the platform can first penetrate below-tier-three cities where most patients rely heavily on public insurance. They are continually struggling with insufficient medical resources and the complicated Chinese insurance system. The whole business chain between Internet healthcare and insurance service is also part of the potential market investors buy. The timing issue is another key to opening the vast market other Internet giants have aimed for. Tencent-backed Water Drop, Alibaba-backed Ant Finance and JD.com-backed JD Finance – these three are seemingly very fierce rivals. It is always easier to take on a blank insurance market than to ask users to replace another insurance company.

Briefing
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Analysis EO
Analysis · 2
report
Analysis EO
Jun 15, 2020 11:46 pm ·

JD Health: A Low-profile Unicorn Challenging BAT’s Healthcare Arms

► Cooperation between JD Health and hospitals has allowed both parties to divert users to profitable businesses. ► Although Ali Health’s losses have been gradually decreasing, JD Health’s profits are not negligible. ► Both policies and the Internet are empowering the healthcare industry. Following the launch of JD Digits and JD Logistics, JD Health came into the public’s perspective in 2019, arriving with more than USD 1 billion in Series A financing. Different from Ali Health, which received Alibaba’s strategic investment, the unicorn got the favor of external institutions, including the CPE China Fund and CICC Capital. Although JD Health declared its independence in 2019, tracing its history, JD.com started to lay out strategies for the medical field as early as 2013. Considering the massive market for healthcare, JD Health was not satisfied with the small pharmaceutical retail area. It gradually expanded its focus coverage across four major businesses, including pharmaceutical retail, health services, Internet medical treatment and smart solutions. Regarding the retail pharmaceutical business, JD Health has officially announced that it boasts a 15% market share, being the most significant pharmaceutical retail channel. With JD.com’s robust self-operated logistics system, this business already generates the highest revenue for the company. As mentioned above, JD.com’s ambitions are much more than that. The ultimate goal of this company is to complete the closed-loop of ‘medical + medicine + medical insurance’ products. With the strong competitor Ali Health on the same track, this path is destined to be full of thorns. Who is better at the closed business circuit? Ali Health vs JD Health Affected by the epidemic, the hospital has undoubtedly become a nightmare for many individuals. The high demand for online medical treatment and drug distribution makes Internet medical treatments attractive. However, two giants have different business models in the field of Internet hospitals. JD Health chooses to cooperate with hospitals and pharmacies to gain an advantage in the professionalism of doctors in public hospitals. In January 2019, the JD Suqian Internet Hospital went online, and residents can revisit and purchase medicines. After users use medical insurance to pay, drugs can be delivered directly through JD Logistics to achieve a medical closed loop. Unlike JD Health, Ali Health chose to invest in medical examination institutions to obtain offline traffic. After completing the privatization of iKang (爱康国宾) and buying nearly 11% of the shares of Meinian Onehealth (002044:SZ), Ali Health can effectively obtain data such as patient health records through the two major medical examination giants. The large traffic gateway of Alipay, backed by Ant Financial, drives users directly to medical insurance providers, who they can pay through this third-party platform. In contrast, JD Health’s users need to bind medical insurance cards to their apps to pay, which is inferior to Alipay, an integrated local life services platform. However, having strong self-operated JD logistics makes JD Health stand out, with low costs and more effective management. Ali Health, backed by Alibaba, has always been committed to investing in express companies and is a bit behind. In the long run, one advantage of JD Health is that it can divert patients to cooperative hospitals for profit. Moreover, many patients’ needs still need to be met at local hospitals, and it is hard for an online diagnosis to address symptoms directly. At present, this business is experiencing a loss, as JD Health has to discount services to push Internet hospitals to the public. After the user’s stickiness increases, its drainage effect will be amplified, or even show new barriers. A quiet – but not negligible – telehealthcare rival  Among the three giants, which are often compared, JD Health is the only one that is experiencing profit. In the past three years, both Ali Health (00241:HKEX) and Ping An Good Doctor (01833:HKEX) haven’t turned losses into profits. However, what JD Health needs to pay attention to is that the losses of the other two giants are decreasing year by year, especially Ali Health, which is likely to be profitable this year. Similarly, in terms of profit margin, only JD Health presents a downward trend, indicating the gap in profitability is gradually narrowing. In reality, JD Health’s to B business is its unique advantage, distinguishing it from other Internet medical platforms. However, the gross profit margin of this business is relatively low, as the current approach is to increase sales through promotion, which seems like inadequate long-term planning. Regarding net profits, although Ali Health and Ping An Good Doctor are catching up closely, JD’s third unicorn, with rapid development, is formidable. What is the value created by policy and the Internet? According to the statistics of the National Health Commission, as of October 2019, 269 Internet hospitals had been built nationwide. In April last year, the General Office of the State Council issued ‘Opinions on Promoting the Development of Internet + Medical Health’ – since then the number of hospitals has increased by 173. After the outbreak of COVID-19, eight new Internet medical policies drove the development of the industry. Amid the pandemic, the number of consultations with third-party Internet service platforms increased by more than 20 times over the same period, and the number of prescriptions increased by nearly ten times. During the two sessions, Yang Yuanqing, deputy to the National People’s Congress and chairman of the Lenovo Group, proposed accelerating the construction of a new generation of ‘Internet + medical and health’ platforms. “The biggest value of the Internet in the field of medical and healthcare is that it can be decentralized, activate various medical resources, and match the appropriate medical resources to the right patients.” The Medical Internet 3.0, as defined by Xin Lijun, the CEO of JD Health, rests on a new plan crafted by the group for this ‘new theme.’ The head-on confrontation between JD.com and the three Internet giants, or BATs (Baidu, Alibaba and Tencent), looks inevitable as they are all powerfully engaged in Internet healthcare. With the rapid incursion of JD Health, accompanied by unprecedented profitability, JD.com’s ambition to make BAT to BATJ looks more and more realistic.

News EO
News · 2
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News EO
Jun 15, 2020 09:02 pm ·

Miaoshou Doctor Announces CNY 600 Million Funding in Series D1 Led by Sequoia

Beijing Yuanxin Technology, whose brands include Miaoshou Doctor, has announced that it has closed a Series D1 funding round at a CNY 600 million amount. This funding was co-invested by Sequoia China, Qingming Ventures, INCE Capital, CITIC Securities and Index VC. Miaoshou Doctor plans to utilize this bankroll to push a collaborative construction, pivoting to medical consultation, medicines and insurance, connecting Internet hospitals, medical technologies, description distribution and healthcare insurance. Founded in 2015, this startup has built three primary platforms pivoting medicine trade, consultation trade and insurance technology, tightly interlinking patients, doctors,  hospitals, drug distribution and insurers. Apart from Miaoshou Doctor, this Beijing-based company has four other product brands: Yuanxin Medical, Yuanxin Pharmacy, Yuanyin Insurance and WuJie Medical (literally ‘Infinite Improvement’ for doctors). Now the 'healthcare platform' is a buzzword in China. It benefits the new generation of 'consumer-users;' on the other side, it transforms the tremendous C-end traffic into revenue boosts in online consultation, offline clinic services, medicine sales and insurance products. Several telehealth platforms backed up by these giants demonstrate different characteristics. Ali Health, the oldest entrant, is still playing an e-commerce game but in the arena of medicine and offline services. WeDoctor connects with doctors by building an online network and providing online registration services. Ping An Good Doctor makes a closed-circuit business model with a strong anchor in insurance products offered by its parent company, Ping An Insurance – the largest insurance group in China by far. Another big name is JD Health, a new rising star in this arena. JDH is sticking to its supply chain-specific logic – landing on the ground in those hospitals to facilitate workflow and digitize their internal operations. More or less, all these players are trying to take up some market space and cultivate a unique ecology. Yuanxin Tech seems to have one step ahead. This AI-driven medical tech company has come to the stage of creating synergies out of these differentiated portfolios based on five particular brands. “As a dedicated investor from the seed phase to Series D1, we witnessed the fast growth during the last five years,” says Mr. Zhou Kui, the partner of Sequoia China. “Yuanxin Tech has always been exploring an ‘Internet+’ and big-data solution to facilitate medical services, lower healthcare costs and drug prices,” says Mr. Hu Xubo, the managing partner of Qingming Ventures. Many industries have the potential to be digitized and revitalized by adding Internet power. In China, there seems to be more possibilities.

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Nov 11, 2020 10:42 am · 36Kr

Drug Innovator Asieris Nabs CNY 700 Million Series D

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Nov 3, 2020 12:06 pm · VCbeat

HaoYuan Chemexpress Files for IPO on the Star Market

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Oct 19, 2020 10:03 am · CEC Capital

3D Medicines Diagnosis Raises CNY 1.5 Bn after Being Spun-off

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Sep 29, 2020 06:21 pm · Lieyunwang.com

GeneMind Biotech Closes Series B of CNY 140 Mn

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