The Stable and Unstable Investments in China's Healthcare Industry
COVID-19 and China
A person works in a laboratory. Photo credit to DarkoStojanovic on Pixabay

Healthcare is the hottest topic cared by the mass but also the most complicated for them to understand. Healthcare’s development relies heavily on science and engineering’s breakthroughs. However, its nature determines the strictness in regulations, approval and review process.

The development of healthcare can be dissected into two major categories Service and Tech. Each can be divided into different sectors as followings. We chose several representatives in these sectors to shed some light on China’s healthcare development status.

Most healthcare companies in EO500 portfolio reside at the service side. Under the concept and rapid evolution of artificial intelligence (AI), healthcare has been reshaped ranging from the service side to the technological (including R&D) side. The service side attracts more attention from investors since these businesses are comparatively predictable and understandable than medical science, which contains more volatility in outcomes. Either side has hot cash flowing in, but the service side has more opportunities and imagination space leveraged by AI and other technologies.

In service sector, online clinics, AI healthcare, and healthcare digitalization are the three closely related to data science and information digitalization. Online clinics, also referred to as Internet hospitals, are the product of the Internet time, especially when smartphones become widely accessible.

The online clinics play a virtual role of general clinics and provide consultation services. The form of online clinics fills the time blank and enables people to access healthcare consultation without geographical constraints. At some degree, online clinics help to release the tense caused by healthcare resource scarcity. General clinics open on workdays and are classified into different ranks depending on its scale and service level; siting is a point that these clinics need consider carefully. On the contrary, online clinics open 24*7 and can be accessed anywhere that is covered by signals.

From the historical investment data in online clinics sector, the vertex was reached in 2015, and then both the investment amount and frequency dropped from then. The cumulative investment amount in this sector is USD 6.3 billion (CNY 42.7 billion) from 477 investments. The financing amount jump in 2018 can be deducted to Ping An Good Doctor’s (平安好医生) Series F round of financing and its initial public offering (IPO). Online clinics can offer some convenience, but patients prefer a physical clinic and real doctor which can bring more comfort to the nervous group.

For all online clinics, when the “clinic” function is no longer real as the name suggested, what is the destination for them to stay in the market? Weimai (微脉), another online clinic in China, just closed a new round of financing and its development might shed some lights and inspire some thoughts to its struggling peers.

Weimai provides information and consultation services to patients and those who are looking for healthcare solutions, as all typical online clinics do. Online clinic is a medical version of Quora, Wikipedia, and yellow page. Other than these functions, Weimai also has to-hospital services such as hospital data management and process digitalization.

The combination of information services and data management service forms a circle. From appointment online reservation to service delivery, platform can provide portals for patients to consult and find the best match of healthcare service; they can make appointments online and the physical clinics will arrange accordingly; the healthcare data management can be integrated in the same platform and save doctors’ time from switching platforms.

From the above observation, a possible outlet for online clinics can be the ERM-alike (Environmental Resources Management) solution for healthcare involvers. ERM is for business users only and is not a to C product. For online clinics, to C lies in its advantage – its linkage to both to B and to C sides.

There are more than 380 Chinese companies in online clinic sector. Top online clinic players in the industry are as below: (ordered by total financing amount)

Ping An Good Doctor

Ping An Good Doctor is controlled by Ping An Group, which is the Chinese largest non-state-owned financial group with a business range from insurance, banking, and other financial services. Ping An Good Doctor’s business coverage includes toC information services, individual healthcare management, and Ping An Good Doctor is the only online clinic listed in Hong Kong Exchanges (HKEX) that aroused people’s attention in 2018. It is the first healthcare company listed in HKEX that had never profited from its founding in 2014 to 2018. According to its latest annual report, the composition of its income varied drastically.


Weimai just completed its USD 100 million in Series C financing round led by IDG Capital. Weimai, as introduced earlier, is transforming into a platform that can integrate healthcare data for hospitals while providing information and consultation services for the mass.

Haodaifu (好大夫在线)

Haodaifu (means Good Doctor in Chinese text) provides consultation services. It allows users to find a physician they want through filters such as specific diseases, locations, different departments, etc. Haodaifu has not been into sights since its last financing round closed in 2017.

Miaoshouyisheng (妙手医生)

Miaoshouyisheng (means Healing Hands Doctors in Chinese text). With the general online clinic functions, Miaoshouyisheng is transforming into an online pharmacy role. It allows doctors to upload their prescriptions and patients can order their medicines online, even the non-OTC (over the counter) ones. This function makes the treatment process easier for both doctors and patients since it breaks the geological limitation.

AI healthcare attracts the most attention from whether the AI field or the healthcare field. Healthcare is an industry with a myriad of data, which is an ideal playground for AI technologies. With decades of years of data accumulation, AI companies can enjoy the data dividend from healthcare legacy. AI healthcare can be split into several verticals: AI medical image reading, AI pharma R&D, AI healthcare robotics, AI medical text mining, and AI health management.

We have previously covered AI medical image reading companies. AI medical image reading technologies can offer assistive diagnosis service for radiologists. CT, MRI and DR pictures are the data sources for these AI companies. Depending on current data accumulations, pulmonary and hepatic diseases have the best AI medical image reading progress. Respiratory and pulmonary diseases are the top killer in China, and hence the urgency for related diagnosis and treatment methods ranks top.

One restraint for these companies’ development at the current stage is that their products are far from forming an ecosystem that can integrate multiple sources into a onestop. For radiologists, using the AI healthcare medical assistive diagnosis means adding another set of software to their workstations, which complicates the workflow and fails to simplify the working process for already saturated daily work. Based on this finding, some AI medical imaging companies have started to develop onestop solutions such as healthcare cloud and inclusive product with different functions.

Since AI technology itself has no boundary in landing scenarios, part of AI medical image reading startups or unicorns are inclusive AI solution providers not only for healthcare but also for security, smart city, fintech, and so on. Hence, the analysis of the related investment is included in AI healthcare category. This sector displays an upward trend in both the volume and frequency and shows the capital market’s confidence in the industry’s future.

Other than the AI development in healthcare industry, the biopharmaceutical-development is a forever focus in the industry. The breakthroughs in precision treatment and targeted therapy in solid tumors are eye-catching for both patients and investment institutes. Yet, biopharmaceutical R&D is a long-term investment and with high risks, which is as the same as all other scientific R&D projects – there is no guarantee for the outcome. Though with uncertainty, the first-in-class medicines and innovative therapies are ongoing with supports from both the government side and the capital side.

The targeted therapy is claimed to the be the least harmful treatment comparing to chemo, surgeries and so on. However, the cost of the first-in-class drug is huge to bear for most entities and investors that have a fixed length requirement for their investment.

From laboratory to market, the process of a new drug might take up to 10-15 years, and hence there is no sudden rush in biopharmaceutical-related investments. Investors in this field are patient and have large risk appetite.

With these features, investment in biopharmaceutical is stable. But recent breakthroughs in targeted therapies and precision treatments did bring a sudden capital heat into the market.

There are 1029 biopharmaceutical companies. The area received over USD 55.3 billion (CNY 376.2 billion) from over 1230 investment activities. Comparing the biopharmaceutical sector, targeted therapy’s company numbers are 90% less – only 41 companies with a total investment amount of USD 5.4 billion (CNY 37.0 billion) from 105 investment events.

In biopharmaceutical and targeted therapy, all these investments share a common point – high investment amount, at an average of around USD 200 million per investment. Correspondently, the investment institutes behind are the big names: Qiming Ventures, Sequoia China, Matrix Partners China, Shenzhen Capital Group, Legend Capital, Lily Asia Ventures, SoftBank China VC, IDG Capital, Arch Ventures, etc.

Even with hot money rushing in, the industry will maintain stability as always. The first-in-class and best-in-class drugs need not only time but also some luck. China’s policymakers are well-aware the high costs in the healthcare industry and thus have been trying to improve the environment for healthcare companies, especially biopharmaceutical companies. For instance, China Health 2030 and the new listing rules of HKEX give more incentive for investors and shareholders.

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