On June 22, a piece of news that "the state plans to prohibit third-party platforms from directly participating in the online sales of drugs" caused the two leading Internet medical stocks JD Health and Alibaba Health to plummet in intraday trading, but they recorded a sharp decline in the next two days. After two consecutive gains, it regained most of its losses.
This kind of roller coaster market shows the ambivalent attitude of the market and investors towards JD Health and Alibaba Health: The outside world has been worried about the revenue models of JD Health and Alibaba Health for a long time, and a slight change in regulatory policies is enough to amplify their panic. .
Although the revenue and gross profit performance of JD Health and Alibaba Health in the past year were not inferior, their reliance on self-operated drug sales business is still high, with revenue accounting for more than 85%. What’s even more embarrassing is that for a long time in the past, JD Health and Alibaba Health have focused their expansion on self-operated business, which has led to the continuous strengthening of their “drug-selling” attributes.
Faced with the increasingly severe regulatory environment, transformation is imminent.
The stock price rebounded after a flash crash. An old news broke the defense of two major Internet medical giants?
In the past two trading days, the trend of Hong Kong stocks Internet medical sector can be described as ups and downs, ups and downs.
html On June 22, the two leading stocks of Ali Health and JD Health collapsed during the session. The former closed down more than 13%, and the latter fell as much as 14.83%. However, in the following two trading days, both stock prices rebounded, and Ali Health closed up 3.97% and 4.62% respectively. JD Health's closing gains on these two trading days reached 5.81% and 5.4% respectively. They have now recovered most of the losses on the 22nd.
There is no doubt that what caused the stock prices of these two giants to ride a roller coaster was a report that became a hot search topic on June 22: The country plans to ban third-party platforms from directly participating in the online sales of drugs.
It should be noted that this is strictly speaking "old news". As early as May this year, the State Food and Drug Administration released a draft for soliciting opinions on the official website. One of the rules clearly stated that "third-party platform providers shall not directly participate in online drug sales activities." The deadline for soliciting feedback is It's June 9th.
Looking at historical data, we can find that the stock prices of JD Health and Alibaba Health also experienced a deep correction in early May. The former recorded three consecutive declines from May 4 to 6, and its stock price once fell to a new low since March this year. .
But in the subsequent period, these two leading stocks have returned to the growth curve. At key points such as the deadline for soliciting opinions on June 9 and the Food and Drug Administration’s announcement on June 17 to convene a symposium on the revision of the “Regulations on the Implementation of the Drug Administration Law”, its stock price did not fluctuate significantly.
In view of this, the sudden collapse of the stock prices of JD Health and Alibaba Health on June 22 surprised many investors and analysts.
A piece of regulatory news that has appeared for more than a month, why did it suddenly become so powerful?
In this regard, some investors have targeted the media for fueling the flames. html On June 22, the first thing that attracted the attention of the outside world was an analysis report by 1 Century Economic Report . The related terms were ranked second in the most popular searches.
In this report that caused an uproar, quoting the analysis of a large number of industry insiders, it was stated that strengthening the supervision of third-party platforms has become a future trend, and relevant departments aim to clarify the boundaries between self-operated and third-party business of pharmaceutical e-commerce platforms. Wait for a series of conclusions.
If these analyzes become true, it will undoubtedly have a huge impact on JD Health and Alibaba Health, which are highly dependent on the drug sales business. The power of policies and the uncertainty of the future instantly broke down the psychological defenses of investors, ultimately leading to this round of plummeting tragedy.
However, in the view of the Value Research Institute, investor sentiment may have been too weak in this turmoil, and the fluctuating stock prices may have concealed some deep-seated problems.
In fact, the policy boots have not yet been implemented, and the market panic may have come a little early. At present, the State Food and Drug Administration’s revision of the implementation regulations for drug management has not yet been completed, and more time is needed to refine various regulatory details and the division of powers and responsibilities.
In addition, major international banks including Credit Suisse also pointed out in the latest research reports that the final version of the regulations for the online drug sales business of third-party platforms is expected to be relatively mild. In general, the regulatory authorities will focus on the division of self-operated and third-party businesses by platforms such as JD Health and Alibaba Health. The purpose is to ensure the legitimate rights and interests of online pharmacies stationed on these platforms, not to suppress the platforms.
The rebound in stock prices on June 23 and 24 shows that investors have passed the initial panic stage and have begun to view the evolution of regulatory rules more rationally and wait and see.
Of course, from this round of plummeting, we can also see another fact: The outside world has been worried about the revenue models of JD Health and Alibaba Health for a long time, and a slight change in regulatory policies is enough to amplify their panic.
In other words, whether there is supervision of this " black swan " or not, JD Health and Alibaba Health should take a good look at their own problems.
Internet medical giants who have gathered together to sell drugs have already laid the foundation for their own trouble.
If you look at the financial reports of JD Health and Alibaba Health, you will find that selling drugs has always been their most important source of business and profit. The relatively single revenue results and over-reliance on the drug sales business have already caused a lot of controversy in the industry.
Objectively speaking, from the perspective of revenue data, the performance of JD Health and Alibaba Health in the past year was not bad.
The 2021 fiscal year annual report shows that JD Health achieved revenue of 30.682 billion for the whole year, a year-on-year increase of 58.3%; a total loss of 1.1 billion for the year was mainly due to changes in the fair value of convertible preferred shares , and the loss was higher than that of the 2020 fiscal year. 17.2 billion has been significantly improved; in addition, the full-year gross profit and Non-IFRS net profit were recorded at 7.197 billion yuan and 1.4 billion yuan respectively, a year-on-year increase of 46.4% and 91.5% respectively, which is a significant improvement.
(Picture from JD Health Financial Report)
Ali Health also announced last month its financial report for the 2022 fiscal year ending March 31 this year. Revenue and gross profit also recorded overall growth. Among them, the total revenue for this fiscal year was 20.58 billion yuan, a year-on-year increase of 32.6%; the gross profit was 4.11 billion yuan, a year-on-year increase of 13.6%.
But as mentioned above, the focus of the problem is that both Alibaba Health and JD Health rely too much on their own pharmaceutical business, and selling drugs has become their most important revenue pillar.
On the Ali Health side, according to financial report data, the revenue from self-operated pharmaceutical business in the last fiscal year was 17.91 billion, accounting for 87%, of which 64% came from self-operated pharmacy drugs operated under the Ali Health brand. Sale.
JD Health’s situation is very similar. Data shows that in fiscal year 2021, Jingdong Pharmacy’s self-operated business revenue was 26.2 billion yuan, a year-on-year increase of 56.1%, and its revenue accounted for 85.3%. In contrast, the revenue from online platforms, digital marketing and other services, which once had high hopes, was only 4.5 billion yuan, accounting for less than 15% of total revenue, and it is still difficult to achieve success.
(Picture from Alibaba Health Financial Report)
After reading these data, I believe it is not difficult for everyone to understand why "prohibiting third-party platforms from directly participating in online drug sales" will cause major shocks to the stock prices of JD Health and Alibaba Health. Since both companies' self-operated business revenue accounts for more than 80%, once this business is stopped, it will inevitably have a fundamental impact on their revenue and profits.
In contrast, Meituan , which is also involved in the drug sales industry, has much lower risks in buying drugs.
Meituan is also engaged in self-operated drug sales business, but Meituan Pharmacy has only really entered the strong market in the past six months, and the proportion of Meituan’s self-operated business is not high, and it is more of a third party like takeout. Service business. Data shows that Meituan Medicine has access to more than 100,000 third-party pharmacies, which is similar to and Ele.me .In recent years, Meituan has focused on increasing the scale of merchants and improving the efficiency of delivery services.
The difference from Meituan is that for a long time in the past, JD Health and Alibaba Health have focused their expansion on self-operated business, which has led to the continuous strengthening of their "drug selling" attributes.
JD Health follows the pace of JD and has focused on building its own smart warehousing and terminal logistics system in the past year. Data shows that by the end of last year, JD Health had established 19 drug warehouses and more than 400 non-drug warehouses across the country, promising that 80% of self-operated drug orders can be delivered on the same day/next day.
In order to build this open logistics system, JD Group has provided a large amount of financial and technical assistance to JD Health. According to public data, JD Health’s logistics and warehousing service expenses in fiscal year 2021 were 1.804 billion yuan, and technology and traffic support service expenses also reached 1.271 billion yuan, a year-on-year increase of 44.09% and 39.98% respectively, and both of these services are mainly provided by Provided by JD.com.
Alibaba Health focuses on the expansion of SKUs. Data shows that as of the end of the last fiscal year, the number of SKUs on the Tmall pharmaceutical platform, the main carrier of Alibaba Health's self-operated business, exceeded 44 million, a surge of more than 4 million in the past six months.
It should be noted that, driven by the two leading companies, JD Health and Alibaba Health, the entire Internet medical track has a tendency to tilt towards the "drug selling" route.
Zhiyun Health, a star unicorn that just passed the listing hearing on the Hong Kong Stock Exchange not long ago, its main revenue sources include SaaS services for the B-side (pharmacies and hospitals) and chronic disease solution business for C-side consumers. They account for a higher proportion of revenue, especially prescriptions and long-term health membership services, which are essentially still inseparable from the attribute of selling medicines.
Prospectus data shows that Zhiyun Health’s medical supplies sales revenue accounted for 65.7% in 2021, and it is making great strides towards the path opened by Ali Health and JD Health.
However, the experiences of Ali Health and JD Health in the past two days also tell us that it is not safe to rely too much on self-operated drug sales business. If you want to avoid regulatory risks to the greatest extent, transformation to diversification is an inevitable choice.
Transforming towards diversification, is the integration of "medicine + medicine" the way out?
The good news for the Internet medical industry is that consumer demand has always existed and will even continue to grow, which lays the foundation for the long-term development of the industry.
According to statistics from 36Kr Research Institute, my country’s Internet medical market has entered a period of rapid growth after 2017. The average annual compound growth rate is expected to reach 33.6% during 2017-2026, and the overall market size will reach 198 billion yuan by the end of 2026. . Among them, in addition to the drug sales business, there is great room for growth in medical insurance, health management, medical services and digital services.
Taking the medical service track that started early as an example, leading players such as Penguin Almond focusing on online consultation services, Zhuojian Technology providing telemedicine services, and WeDoctor building an Internet hospital have emerged. Of course, the shortcomings of these businesses are also obvious: large initial investment, long return cycle, and low overall gross profit margin. For companies with huge revenue pressure, it may not be a good business in the short term.
However, taking into account regulatory pressure and long-term development needs, Alibaba Health and JD Health cannot ignore the transformation hopes brought by these businesses - After all, the financial resources and market shares of these two giants have already surpassed the rest. If other competitors If they can run through these businesses, they don’t need to be afraid.
In fact, drug sales, diagnosis and treatment, health management and other businesses are highly related, and it is fully possible to connect with each other and build a complete medical service system. Ping An Good Doctor, a common rival of Alibaba Health and JD Health, has taken the lead in diversifying reforms along this route.
In the last fiscal year, Ping An Good Doctor followed the HMO model of Kaiser Permanente in the United States, leveraging the resources of Ping An Group to build a closed loop of insurance + medical care, and vigorously promoted employee health management services for the B-side and paid membership services for the C-side.
Take the paid business as an example. Data show that as of the end of the last fiscal year, Ping An Good Doctor had 420 million registered users, and the number of paid users accumulated throughout the year increased by more than 38 million. The paid user conversion rate was 24.8% - in the first half of the year, this figure was only 5.4%.
Compared with Ping An Good Doctor, the disadvantage of Alibaba Health and JD Health is that they do not have experience in providing insurance and diagnosis and treatment services. After all, the former has China Ping An as the leader. However, Alibaba Health and JD Health have another important basis for developing payment business and diagnosis and treatment services: a huge user base.
On JD Health’s side, the current number of annual active users has reached 123 million, a year-on-year increase of 33.56 million. As for Alibaba Health, let’s not forget that there is also the traffic entrance of Alipay behind it. Data shows that as of the end of the last fiscal year, the number of annual active users of Alipay's medical and health channel was 690 million, a year-on-year increase of 170 million. The number of contracted licensed physicians, licensed pharmacists and nutritionists providing online health consultation services totaled 160,000.
According to the Value Research Institute, the diagnosis, treatment and health consulting services of Alibaba Health and JD Health have been difficult to make breakthroughs in the past few years. In addition to the platform strategy and resources tilted towards self-operated business, various businesses lacked linkage and structure. A unified service system is also an important factor.
In fact, JD Health has begun to realize the importance of integrating medicine and medicine. The strategic service product JD Family Medicine has shouldered the responsibility of integrating platform medical service resources and supply chain. Currently, JD Health is providing services such as nutritional supplements, telephone consultations, vaccines and physical examination appointments through this new section.
Faced with the increasingly severe regulatory environment, transformation is imminent. But on this difficult road to transformation, I believe that the experience and resources accumulated in the past can provide some help to these two giants.
is written at the end
On December 8, 2020, when JD Health was listed on the Hong Kong Stock Exchange, Liu Qiangdong once made a bold statement:
"If the health business is done well, it is equivalent to rebuilding a JD.com."
was listed for the first time The stock price rose sharply, and the market value exceeded HK$340 billion. JD Health responded to Liu Qiangdong’s ardent hopes with actual performance. But the plot that follows is still full of tragedy at the peak of debut.
According to an announcement from the Hong Kong Stock Exchange, Liu Qiangdong reduced his stake in JD Health twice from April to May this year, and his current shareholding ratio has dropped to 68.88%. Although Liu Qiangdong announced last year that he would step down and hand over the position of CEO of JD.com to Xu Lei, he has been committed to offloading his burden and weakening his influence on JD.com and related companies. However, in this unfavorable environment The company has reduced its holdings of JD Health shares several times, which still leaves more room for interpretation by the outside world.
There is no doubt that so far, JD Health’s performance has not been as good as expected, let alone the realization of Liu Qiangdong’s vision of “rebuilding a JD.com”. And with the tightening of regulatory policies, the road ahead will only become increasingly difficult.
Fortunately, as mentioned above, the scale of the Internet medical market is expanding and user needs are growing. JD Health and Alibaba Health still have time to plan their own transformations.
only hopes that this time, they can learn from the previous lessons.
