PingAn and CICC see the value in segmented healthcare

Healthcare remains an attractive sector for investors. Chronic disease management platform 91health has just raised $100 million from a number of blue-chip names.

Chronic disease management platform 91health, also named Cloud of Wisdom, has raised $100 million from multiple investors proving the continuing allure of China's healthcare industry.

The state-backed investment fund of China Electric Data Services participated in the funraising, together with CICC, PingAn Ventures, IDG Capital, LeBox Capital, and Shenzhen-listed Meinian Onehealth Healthcare. Pharmaceutical company Tasly Group and Samsung Venture also joined the round. Healthcare-focused Probe Venture Capital acted as financial consultant to the deal

The company has already begun its follow-on Series C fundraising and is hoping to complete the construction of its business-to-business platform with the money, according to a source familiar with the matter.

91health had annual sales of Rmb400 million ($58 million) last year, and investors hope that the additional funds will allow it to gain market share, the source said.

The company was founded in 2015 as an app for diabetic patients to record and track their blood glucose levels. It then linked with hospitals so that doctors could check a patient's record and provide diabetic patients with online consulting. The company also sells diabetes detection devices to retail consumers.

91health already partners with 1,000 hospitals and has 10 million registered users. Chief executive Kuang Ming said that the company is already profitable and now plans to develop artificial intelligence for its services, and expand in more hospitals.

China's national health service remains under pressure. It is suffering from the double whammy of insufficient money and not enough doctors, and Beijing has made it a national strategy to separate diagnosis, treatment and drug selling to ease the pressure on public hospitals. No surprise then that Chinese investors have poured money into the segmented healthcare industry. 

91health is targeting an underserved part of the market. Hu Yubing, founding partner of Probe Venture Capital, told FinanceAsia in a telephone interview (in Chinese), that chronic disease management is a Rmb300 billion industry, and may hit Rmb500 billion by 2020. The most common chronic diseases are diabetes and high blood pressure, and patients used to monopolize resources in public hospitals when their illnesses could be managed by consultations and prescription drugs. 91health makes it easier for diabetic patients too. It provides medical management, further diagnoses, and prescriptions now that it has an online hospital license.

Hu said that Chinese healthcare startups began with a simple doctor-patient consulting platform. The problem is that it is hard to generate revenue with this business model. They have now evolved further to offer integrated healthcare services including consulting, further diagnoses, health management and the sale of drugs and medical devices. All of this is meant to provide a personalized medical service for users.

Hu expects more investment over the next two to three years for online prescription drug sales. “Even if only a third of prescription drugs are sold outside public hospitals this could be a Rmb200 billion market,” he added. “It is a sector for investors to keep an eye on as the government may loosen regulations covering the online sale of prescription drugs.”

For the companies themselves, data is crucial. It provides detailed information and feedback regarding drugs and treatment. This can be used for auxiliary diagnoses, drug development, and insurance policies. Hu said that data, rather than money, will be how internet healthcare companies gain market share. 

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