On April 1, 2021, WeDoctor officially submitted a prospectus to the Hong Kong Stock Exchange. As of the end of 2020, WeDoctor has connected more than 7,800 hospitals (covering more than 95% of China’s top three hospitals), more than 270,000 registered doctors, and operating the Internet 27 hospitals(17 of them can directly settle their expenses through medical insurance); among the 222 million registered users, the average monthly paying users(MPU) reached 25.4 million.
according to Frost & Sullivan (hereinafter referred to as “Sullivan”) data, based on the number of Internet hospitals and the number of digital medical consultations, WeDoctor has become the largest digital medical service platform in China.
WeDoctor’s revenue in 2020 is 1.83 billion, while JD Health’s revenue is 19.4 billion in the same period, and Ali Health’s fiscal year 2020(As of March 31, 2020) revenue of 9.6 billion.
The revenue of “China’s largest digital medical service platform” is an order of magnitude worse than that of JD Health and Ali Health, because WeDoctorI chose a different track, more precisely the “hardest one”.
Three tracks
The advancement of digital technologies such as big data, cloud storage and artificial intelligence will inevitably fundamentally change the health industry. Relevant policies and regulations have gradually opened up the license for the Internet to enter the health industry.
In March 2017, the first batch of Internet hospital licenses were approved, and “Internet medical” players never had to “consult” Upgrade to provide “diagnosis and treatment” services.
In April 2018, the State Council’s “Opinions on the Development of Internet + Medical Care” clarified the positioning of Internet medical services. In September of the same year, three management measures (“Internet Hospital Management Measures”, “Internet Diagnosis and Treatment Management Measures”, “Telemedicine Service Management Measures” were promulgated), Internet hospitals obtain the right to “electronic prescriptions”.
Patients and medical institutions are increasingly accepting digital medical services. In 2015, WeDoctor created China’s first Internet hospital, reaching 119 at the end of 2018, and more than 1,100 at the end of March 2021. Since the outbreak of the new crown, online diagnosis and treatment The business volume has increased by about 20 times.
In the eyes of outsiders, Alibaba Health, Ping An Good Doctor, JD Health, New Oxygen and The WeDoctors who have just submitted the prospectus are all on the same track. In fact, the “Digital Health” arena is divided into three tracks: the non-prescription drug e-commerce market and the health consumer goods e-commerce market(mainly including health care product sales and O2O platforms such as medical beauty and oral cavity), digital medical service market.
The first two tracks are relatively “crowded”. Major players such as AliHealth, JD Health, and New Oxygen have been listed. Their common feature is the layout around “sales”. “There are three factors for success: an online trading platform with abundant traffic, relevant licenses for operating prescription drugs/non-prescription drugs/medical devices/nutritional health products; an “online consultation” platform for compliance and diversion.”
Digital medical care uses digital means to empower traditional medical services, break through time and space constraints, and improve the efficiency of medical resource allocation .
In the long run, digital medical services are bound to become the main track of “digital health”. According to “Sullivan” data, from 2019 to 2030, the average annual compound growth rate of the digital medical service market will be 37%, and the market size will reach 739 billion in 2030. By then, the market sizes of health consumer e-commerce and over-the-counter e-commerce will be respectively It is 630 billion and 237 billion.
Compared with e-commerce for the purpose of “sales”, success in the digital medical service market must be There are four preparation elements: Internet hospitals, comprehensive and comprehensive online + offline service closed-loop capabilities, integration with medical insurance, and commercial health insurance product cooperation and innovation capabilities. This blocked many players directly out of the door.
WeDoctor is not an e-commerce company wearing a “white coat”
The Hong Kong Stock Exchange has three “digital health” companies: Ali Health(00241.HK), JD Health(06618.HK), Ping An Good Doctor(01833.HK), NASDAQ listed company New Oxygen(NASDAQ:SY) It belongs to medical beauty.
Alibaba Health and JD Health both have a market value of over HK$300 billion. Ali Health’s fiscal year 2020 (as of March 31, 2020) total transaction volume of 88.5 billion, revenue 9.6 billion; in 2020, JD Health Revenue is close to 19.4 billion.
The two main pharmaceutical retail businesses are a subset of Tmall and JD.com. Ali Health has self-operated and platform businesses, and JD Health is all self-operated. Self-employment earns the difference between purchase and sales, and platform business earns broad-based commissions.
More than half of Ping An Good Doctor’s income comes from the sales of products in the “Health Mall”, and a large part of the income relies on Ping An Group’s insurance business sales members 制产品。 System products.
The three “digital health rich second generations” are closely related to the parent company from genes to business. The parent company is likened to a flower pot, while the “rich second generations” are “bonsai”. Because the “flower pot” is too big, the “bonsai” is really “towering”.
1) Ali Health
Alibaba Health refers to online pharmaceutical retail as “cloud pharmacy business”, including “Tmall Pharmaceutical Platform” and self-operated Three parts of business and new retail. As of the end of September 2021, the Tmall pharmaceutical platform has more than 250 million annual active users, more than 18,000 sellers, undertaking management or opening more than 100 brand flagship stores; annual active users of online self-operated stores have exceeded 65 million.
The chronic disease welfare program, physician/pharmacist consulting services, and the “China Family Safe Medication Program” are all developed around the cloud pharmacy business. The purpose is to “provide consumers with comprehensive online health management service solutions”, and the effect is to “shopping guide” and ensure “sell drug compliance”. As of the end of September 2020, more than 39,000 doctors have signed up.
For example, the “Chunlei Project” creates six nourishing core categories: “Lycium berry, Ginseng, Panax Notoginseng, Ejiao, Bird’s Nest, and Honey” . Another example is the “‘1+N” brand linkage mechanism,” which has established “Top Ten Disease Centers” such as heart disease, diabetes, and liver disease, integrating user traffic, medical content, doctors, and after-sales medication reminder services.
In 2016, Ali Health acquired Guangzhou Five Thousand Pharmaceutical Chain Company and changed its name to Ali Health Pharmacy; in the same year, it became the main body of Tmall Enter into an agreement to provide outsourcing and value-added services such as investment promotion, merchant customer service, technical support, etc. The consideration is 21.5% of Tmall’s related revenue.
Alibaba Health relies on the traffic of the Tmall platform and the strong capabilities that Alibaba Group has accumulated over the years in warehousing, logistics, customer service, and quality control. Services such as “30 minutes delivery”, “7*24 hours delivery of medicines”, “one hour delivery of medicines urgently” and other services have been expanded to more and more cities.
In addition to selling medicines, Alibaba Health launched the health service app “Yilu”, which gathers medical content search, consultation and registration , Medical examination appointments and other services.
In short, the core of Alibaba Health is self-operated medicine/platform e-commerce, and the B2C, B2B, and O2O models are all-encompassing. FY2020(As of March 31, 2020), FY2021 H1(As of September 30, 2020)GMV is 83.5 billion and 55.4 billion respectively.
In fiscal year 2020, Alibaba Healthcare’s self-operated business revenue will be 8.134 billion yuan, and e-commerce platform business revenue will be 1.17 billion yuan. 9.3 billion yuan, accounting for 97% of fiscal year revenue; in fiscal year 2021, H1, self-operated business and platform business revenues were 6.04 billion yuan and 925 million yuan, totaling 6.96 billion yuan, accounting for 97.2% of total revenue.
In fiscal year 2020, revenue was 8.13 billion, a year-on-year increase of 92.4%.
2) Jingdong Health
JD Health’s self-operated brand-“Jingdong Pharmacy” is a “subset” of JD.com. More than 9,000 third-party drug sellers on JD.com have also been “loaded” into JD Health. In addition, there are 11 drug warehouses and 230 other warehouses. From 2017 to 2020, nearly 90% of JD Health’s revenue came from the sales of pharmaceuticals and health products. As of the end of 2020, retail pharmacies have more than 2,000 SKUs.
JD Health also relies on the group’s strong logistics capabilities to develop an “omni-channel layout.” This is a location-based service that provides the same day to users of partners (offline third-party drug, health care products, medical device retailers) Delivery services such as arrival, next day delivery, and 7*24 express delivery.
JD Health provides online medical services through Internet hospitals-consultation, chronic disease management, family doctors. Users can also make appointments for offline medical and health services, Such as physical examination, medical aesthetics, oral cavity, vaccine, genetic test, etc.
JD Health also uses technological infrastructure and capabilities to help hospitals build Internet hospitals and internal digital solutions.
In 2020, the sales revenue of JD Health Medicine and health products will reach 16.77 billion yuan, accounting for 86.5% of revenue; market and advertising And other services of 2.61 billion yuan, Jizhong advertising and “omni-channel layout” rely on the flow of JD e-commerce and the distribution capacity of JD Logistics, respectively.
3) WeDoctor is not an e-commerce company wearing a “white coat”
Ali Health and JD Health are “medicine/health products e-commerce businesses” separated from their respective “parents”. As long as the capital market is willing to pay for related concepts, it is completely possible to separate listed companies with various names such as “Ali Clothing”, “Ali Department Store”, “JD 3C”, “JD Books, Audiovisual, etc.”.
Relying on the revenue, users and traffic of the existing e-commerce business, we are striving to expand “online consultation” and other businesses such as Alibaba Health, JD Health An inevitable choice.But 90% of revenue comes from “pharmaceutical e-commerce”, and future performance depends entirely on “selling medicines and health products”. The resources of the entire company naturally lean towards the track of “selling things”. strong>
According to relevant laws and regulations, drug buyers must go through online consultation and get a prescription. Online pharmacies are online medical diversion. If online consultation becomes a climate, users can be directed to the retail of medicines and health products.
Alibaba Health and JD Health have seized the opportunity of opening up online pharmaceutical retail and adopted a monetization model that investors love to see. There are two core business logics: one is that the user knows what medicine to buy and is required to receive a remote consultation when placing an order on the e-commerce platform; the other is that the user does not know what medicine to buy and actively accepts the remote consultation and gets the prescription. Then go to the mall to place an order.
Healthy outcome-oriented medical services are more complex and professional The e-commerce of “medical” is much higher. Because of this, we have chosen WeDoctors on different tracks, and the current revenue scale is an order of magnitude worse than that of Alibaba Health and JD Health.
Micro-medicine mode
In 2011, WeDoctor launched an online appointment platform——Guanhao.com(renamed “Wei Doctor” in 2015); In 2015, it was approved to establish China’s first Internet hospital; in 2018, it launched a “mobile hospital” empowered by Internet hospitals. Improve users’ availability of medical resources by continuously expanding service scenarios.
China has 300 million patients with chronic diseases, and the treatment and management of chronic diseases cost nearly 70% of China’s medical insurance funds. Improving the effectiveness and economics of treatment through digital means will produce typical benefits for chronic disease groups. Taking diabetes as an example, the UKPDS(UK Diabetes Prospective Study) research results show that the incidence of any major diabetic lesions is The elevation of glycosylated preglobin increases.
The management of core indicators can bring huge clinical benefits. For every 1% reduction of glycosylated hemoglobin, the occurrence of microvascular endpoint events The risk is reduced by 37%, and the risk of cataracts is reduced by 19%.
WeDoctor adopts continuous and long-term services that combine online and offline to reduce the risk of severe illness, relieve pain for patients, and contribute to the country” save money”.
1) Revenue and gross profit
WeDoctor provides a full set of medical and health maintenance services through the digital medical service platform. Revenue is divided into two parts accordingly: medical services and health maintenance.
Medical services include online appointments, offline first visits, medical record acquisition, online follow-up visits, electronic prescriptions, and medical billing And dispensing services. Among them, offline first diagnosis, examination, and treatment services can also be provided by the offline service center of the Internet hospital operated by WeDoctor.
Health maintenance services are mainly for patients with chronic diseases, including comprehensive management and mobile medical services. Specifically, it is a digital management service empowered by Internet hospitals and directly settled by social insurance. Based on the digital health portrait of each member, we provide personalized treatment and rehabilitation plans, follow-up visits, prescriptions, and drug dispensing to monitoring of important indicators, and customized guidance on diet and exercise. Taking the “Diabetes Management Project” launched in May 2019 as an example, the patient’s condition control rate has significantly increased from 49.4% to 64.1%.
20In 20 years, micro-medicine revenue was 1.83 billion, a year-on-year increase of 262%; of which, medical service revenue was 707 million, accounting for 38.6%; health maintenance service revenue was 1.125 billion, accounting for 61.4%.
In 2020, the health maintenance profit will be 280 million and the gross profit margin will be 24.7%. Perhaps thanks to the economies of scale, the medical services that suffered a slight loss in the previous two years will become positive in 2020, achieving a gross profit of 220 million yuan and a gross profit margin of 31.1%.
The main costs of WeDoctor include commodity costs, expert fees, and employee salaries. In 2020, the cost of goods is 907 million, accounting for 49.5% of revenue; expert fees are 167 million, accounting for 9.1% of revenue; employee compensation is 146 million, accounting for 8% of revenue.
2) The loss rate is narrowed
Use a blue polyline to represent gross profit (rate) , the colored stacked column represents the cost (rate), only when the blue “overwhelms” the color, there will be operating profit.
In 2020, gross profit of 498 million yuan, gross profit margin 27%(increased by 4 percentage points from 2019); market expenses are 487 million, and the expense ratio is 27%, which is 35 percentage points lower than in 2019! Both the administrative expense ratio and the R&D expense ratio decreased by tens of percentage points from 2019.
Deduct extraordinary gains and losses (Gross profit minus three items Expenses), WeDoctor’s operating loss in 2020 is 1.24 billion, with a loss rate of 67.6%(2019 loss rate of 195.6%). If this trend continues, WeDoctor’s losses will quickly narrowAnd it will be profitable within two to three years.
In 2020 marketing expenses, promotion and sales commissions will be 146 million, a net increase of 79.74 million compared to 2019, and revenue An increase of 1.33 billion. In other words, spending 1 yuan more on promotion can increase revenue by 16.6 yuan, and the marginal benefit of micro-medicine marketing is very high; of the 905 million administrative expenses, 370 million is the cost of equity incentives. It is expected that Datong will fall to “normal” in 2021. .
WeDoctor does not rely on a powerful e-commerce platform or giant insurance, and has invested in medical digital infrastructure and research and development for a long time. It is an important cause of accumulated losses.
“serious” micro doctor
The purpose of medical treatment is to treat diseases and save people. It needs to strictly abide by scientific laws, so it is naturally serious. The so-called “serious medical treatment” aims at the lowest cost and the least pain Cure the disease.
“Consumer Medical” is different. The driving force is not illness but the pursuit of a better life. The act of discovering and arousing related needs is the so-called “grass planting”.
The degree of harm to life/health of the disease and the patient’s own demands determine which medical treatment is more suitable. If you have a toothache, you should receive “serious medical” services. If you think your teeth are not long enough for whitening, “consumer medical treatment” is more appropriate.
Different from “e-commerce in a white coat”, WeDoctor focuses on the digitalization of serious medical services. According to the view of WeDoctor’s founder and CEO Liao Jieyuan, WeDoctor’s development direction is to implement a “digital responsibility medical system led by a platform-based Internet hospital.”
The “Public Medical Insurance Fund” managed by the National Medical Insurance Bureau is the largest single payer in China’s medical and health market. Expenditures in 2019 amounted to 2.1 trillion yuan, with a share of more than 31%.
Medical insurance only pays for serious medical care, and WeDoctor focuses on serious medical care. As early as 2015, WeDoctor established China’s first Internet hospital in Wuzhen. During the 2020 epidemic, WeDoctor took the lead in opening up online medical insurance payments nationwide. At present, 17 of its 27 Internet hospitals have opened medical insurance payment. Specifically, WeDoctor provides one-stop standardized services such as offline and offline follow-up visits, electronic prescriptions, online medical insurance settlement, drug delivery, and full-process management of chronic diseases for patients with chronic diseases in cooperation areas.
In 2018, targeting at the weakest link in my country’s medical service system-rural primary care, micro-medicine and county-level health care The health department cooperated to launch a “mobile hospital”-a modified medical examination vehicle containing biochemical analysis, B-ultrasound, electrocardiogram and other equipment, which can perform inspections on 53 items in 7 categories.
Of course, the remote diagnosis/consultation function is also necessary. At present, WeDoctor has covered 28 million residents in the three-level medical security service of “county-township-village” nationwide. The grassroots people in remote areas such as Tibet, Qinghai, and Gansu received modern medical services at their doorsteps for the first time.
2019,All 16 second-level and above hospitals in Tai’an, Shandong are connected to the management of chronic diseases by micro-medicine. The average patient visit time has changed from “half a day” offline to “half an hour online follow-up”. The amount of a single prescription decreased by 12.7% compared with 2019. At the same time, It also reduced the local medical insurance fund expenditures for chronic diseases. At present, WeDoctor is rapidly copying the “Taian Model” to 16 cities in Shandong Province.
In 2020, WeDoctor will cooperate with all 267 primary-level medical and health institutions in Tianjin to form a “grass-level digital health community”. Digital empowerment methods such as cloud management, cloud pharmacy, and cloud inspection have greatly improved the ability of primary medical institutions to act as “family health gatekeepers”. At the same time, open up information sharing with medical institutions and medical insurance at all levels to promote vertical integration.
During the “closing of the city” in Wuhan, WeDoctor undertook 97% of follow-up visits and purchases for 408,000 severely ill patients in the city Medicine and medicine delivery work to ensure that patients return to the clinic and take medicine on time.
The epidemic has made the public and regulatory authorities truly see the value of digital healthcare. Liao Jieyuan stated that “in the 60 days of the most stressful fight against the epidemic, the breakthroughs and innovations in industry policies are equivalent to the past six years.”
Some people think that paying for medical insurance will not make a high gross profit. Medical insurance is basically the main channel for the government to provide public products such as “health insurance” to the society. Only by deep and tacit cooperation between Internet companies and medical insurance can they go far and steadily in the field of general health.
For WeDoctors, cooperation with medical insurance is a low-cost means of acquiring customers. The high user stickiness and high trust in the platform obtained through medical insurance, and the purchase of value-added services (such as commercial health insurance) will generate considerable user lifetime value< span class="text-remarks" label="Remarks">(LTV). WeDoctor and commercial insurance companies such as AIA, PICC, and China Life have jointly developed innovative health insurance products as a supplement to medical insurance. And this kind of strategic cooperation has just begun.
Opportunities for Internet companies
If a certain field can be profoundly changed by the Internet, but it hasn’t been changed for one reason or another, then this The field is where the opportunities for Internet companies lie, such as medical and health.
In 2019, China’s medical and health expenditure exceeded 6.5 trillion yuan, ranking second in the world. It is estimated that it will exceed 10 trillion yuan in 2024 and reach 17.6 trillion yuan in 2030. From 2019 to 2030, the average annual compound growth rate is 9.5%.
There are two biggest “pain points” in China’s medical and health field:
First, the distribution of medical resources is unbalanced, and patients are too concentrated in large medical institutions. In 2019, among the 34,000 hospitals across the country, 8% of the “tertiary hospitals” accounted for 2.06 billion outpatient visits, with a share of 53.5%; the second-tier hospitals, accounting for 28%, provided 1.34 billion visits. The share is 35.9%; there are more than 10,000 tertiary and secondary hospitals in total, and 36% of the hospitals account for 89.4% of the outpatient volume. How can it not be difficult and not expensive?
Source: National Health Commission, Frost & Sullivan analysis
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Second, there is a lack of active and effective management of patients with chronic diseases, medical resources are inefficiently occupied, and patients are healthy But it is not fully protected. In 2019, 300 million patients with chronic diseases consumed 69.6% of medical expenditures, or 4.5 trillion yuan. According to the current trend, with the accumulation of chronic disease patients, the management cost of chronic disease treatment will account for 84.4%, or 14.9 trillion yuan, by 2030. This does not include the patient’s time cost and travel expenses. Although it occupies 70% to 80% of the medical expenditure of the whole society, the health services provided to hundreds of millions of patients with chronic diseases are not satisfactory.
Divert the patient to an appropriate medical institution, and conduct scientific management of the chronicity(including but not limited to remote follow-up visits), Internet companies have a lot to do in these two aspects. Relatively speaking, pharmaceutical retail has been quite market-oriented. Even if the “Ali Pharmacy” and “Jingdong Pharmacy” are not separated and listed separately, it will not affect the “selling of medicines.”
Entering 2020, WeDoctor’s revenue has increased by nearly 300% and losses have rapidly narrowed. It shows that WeDoctor’s business model can be closed loop. On the one hand, WeDoctor’s digital medical services improve the availability of medical resources and ease the conflict between resource distribution and user needs. On the other hand, it improves the effectiveness of chronic disease management and reduces the burden on medical insurance and patients in both directions.
Although Alibaba Health and JD Health are leading in terms of revenue and market value, they are addressing the two major issues in China’s medical and health fields. The pain points are far behind.