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BEIJING – The coronavirus pandemic is proving to be the accelerator China's health technology startups need.
In a country of 1.4 billion people, many people who used to travel and waited hours for doctors are turning to more online products, according to the company. The government is introducing the necessary political support for internet-based healthcare. And investors invest money.
Prior to the coronavirus outbreak, much of China's health technology investment was focused on scientific research for medical treatments, said Kitty Lee, partner in Singapore and head of the Asia Pacific health and life sciences practice at Oliver Wyman.
For the future, she assumes that the share of investments in health care and consumer infrastructure will grow faster than in biotechnology.
In the second quarter, global health finance for private companies hit a quarterly record of $ 18.1 billion, according to CB Insights. Healthcare funding in Asia nearly doubled from the previous quarter to $ 5 billion, and business with China-based startups has recovered to pre-coronavirus levels, according to analysis.
"The entire Chinese health care industry only began to cultivate after the (coronavirus) epidemic ended," said Xin Lijun, CEO of JD Health, in an interview last week, according to a CNBC translation of his Mandarin-language statements.
The company is a subsidiary of Chinese e-commerce giant JD.com and will receive an investment of more than $ 830 million from Hillhouse Capital this quarter.
During the worst outbreak in China, JD Health offered free online consultations that were attended by at least 150,000 patients a day who then realized they didn't necessarily need to go to a physical hospital, Xin said. He now claims that his health technology company has the highest income among its peers in China in less than three years.
Covid-19 first appeared in the Chinese city of Wuhan late last year. The disease began to spread across the country in January and February before it hit the rest of the world in a global pandemic that infected more than 27.6 million people and killed more than 900,000 people. To contain the outbreak, authorities have restricted social gatherings and forced people to turn to more online platforms.
In the first six months of the year, visits to health facilities in China fell 21.6% year over year, according to the National Health Commission on August 21. Visits still fell 9.7% year over year to 630 million in June, the Commission said.
On the flip side, Tencent's WeDoctor said that during the coronavirus outbreak, customer orders for online consultations increased 3.6 times year over year. According to WeDoctor, more than 50,000 doctors have joined the platform for a total of around 250,000 doctors.
More high-level support
The Chinese government has also stepped up efforts to support the development of the health technology industry. In July in particular, 13 major national departments and ministries jointly announced support for the development of online medical services as part of a broader plan to stimulate consumption and employment. On Wednesday, a meeting of the country's top executive body, the State Council, reiterated the need to expand internet-based health clinics.
"Really after the severe phase of the pandemic … the central and local governments have put in place many different policies to help internet hospitals," said Tang Bochen, vice president at Qi & # 39; e XingRen, aka Tencent Trusted Doctor, said in a telephone interview on Sunday. "What I've seen has been almost every city. Their public hospitals are now building an internet hospital system to help their patients go from offline to online."
The company operates an online advice platform and offline clinics. Tang said around 450,000 doctors with 20 million patients are already part of the XingRen network, and more than 30 of the 135 clinics have already been licensed to work with the state social security program. He said the company intends to increase user traffic through general patient care and rely more on specialist clinics like dental and eye care for profit.
Large companies are also pushing into emerging industries.
Ping An Good Doctor, a Hong Kong-listed subsidiary of insurance giant Ping An, saw average daily online consultations grow 26.7% year over year to 831,000 in the first half, with online medical services revenue doubling to 694 , 9 million yuan ($ 101.56 million). Registered users grew by more than 56 million to 346.2 million in 12 months.
Alibaba Health is listed in Hong Kong and has more than 15,000 contracted medical facilities through the Alipay app, including nearly 400 Class III hospitals in 17 provinces that provide health insurance payment services. The company announced in the first quarter that the total net active users of the Alipay health channel exceeded 390 million.
"Telemedicine or Internet hospital or whatever you want to call it in China, it's here to stay," said He Wang, senior health care analyst at CB Insights. He assumes that at least around a quarter of spending on health services can be digitized.
"A key indicator of the dynamism of telehealth in China is its integration into the basic medical insurance program," said Wang. "You see insurance companies, hospitals and governments building telemedicine platforms themselves. I think it's increasingly a crowded space. The platform players like JD Health, Ping An and WeDoctor will likely keep playing."
Whether or not JDs Xin or other industry players interviewed CNBC for this article, they generally agreed that online health in China is still in the very early stages of development.
"I think this health care market is very big. It's far from dividing the cake. (Right now) it's about making the cake bigger," said New York-listed 111 co-founder and executive chairman Gang Yu , according to a CNBC translation of his Mandarin remarks.
The company works with local pharmacies to sell drugs and also has an online counseling program. Since the coronavirus outbreak, the proportion of users aged 40 and over has increased to more than half, according to the company. In August, the company announced it had received a capital injection of 419.82 million yuan ($ 61.36 million) prior to further listing on the Chinese Star Board. Net sales increased 93.5% year over year to 1.62 billion yuan ($ 236.77 million) for the second quarter, and net losses decreased.
"Long-term profitability is still a long-term issue for each and every one of these telehealth companies," said Wang of CB. "How to convert government support into cash flow is still on the table. It has not yet been resolved internationally."
It also remains to be seen to what extent health technology can transform such a traditional industry. While online consultations can provide doctors with a flexible source of income, they cannot replace a physical exam.
"The medical industry is still relatively closed as resource allocation is very uneven and virus-induced internet-based transformation cannot happen overnight," said Yipin Ng, founding partner of Yunqi Partners in Shanghai and a former partner of GGV Capital, in a Chinese-language statement, according to a CNBC -Translation. "Islands of data and the short-term lack of quality medical resources remain a long-term problem for China's medical industry and will continue to provide entrepreneurial opportunities for certain subsectors and improve efficiency."
The roughly six-year-old company has invested in Intco Medical Technology, whose shares have increased by 650% so far this year. Recent investments from Yunqi include V Daifu, which develops software for medical clinics, and Doctopia, which focuses on health technology for mothers with young children.
– CNBC's Iris Wang contributed to this report.