Fangzhou Yunkang Passes HKEX Listing Hearing, Signaling a New Shift in the Trillion-Yuan Chronic Disease Management Market
In recent years, internet healthcare has experienced explosive growth, with rapid increases in the scale of internet hospitals, the number of physicians and users, and service volumes. However, as the medical service system—particularly offline services—has fully resumed operations, internet healthcare has truly entered a phase of normalization. In this more sobering environment, the key challenge for practitioners lies in transforming their past highlights into sustained core competencies.
On June 10, Ark Cloud Health Holdings Limited (hereinafter referred to as “Ark Cloud Health”) passed the hearing by the Hong Kong Stock Exchange, with its initial public offering (IPO) imminent. According to data from Frost & Sullivan, Ark Cloud Health is China’s largest online chronic disease management platform based on average monthly active users in 2023. The upcoming listing of Ark Cloud Health is expected to boost industry confidence and serve as a benchmark for internet-based chronic disease management.
Since 2023, offline medical services have begun to recover and grow rapidly, while online medical services continue to expand. According to data from the China Internet Network Information Center (CNNIC), as of June 2023, the number of internet healthcare users in China increased to 364 million, a rise of 1.62 million from December 2022, accounting for 33.8% of the total internet population.
Focusing on the service supply side, leading hospitals and internet healthcare platforms capable of delivering high-quality services have also demonstrated significant growth.
West China Hospital of Sichuan University was among the first public hospitals to launch an internet hospital following the introduction of new policies on internet-based healthcare in 2018. Through continuous innovation in online services, the hospital’s internet hospital platform had more than 1,800 registered medical professionals and over 13 million registered users by 2023. In addition, leading hospitals such as the Internet Hospital of Tianjin Medical University General Hospital and Beijing Friendship Hospital, Capital Medical University, have also seen significant growth in their online service volumes.
Among leading internet healthcare platforms, Fangzhou Yunkang had 42.7 million registered users as of 2023, with monthly active users reaching 8.4 million in 2023. In addition to the growth in user base, the number of physicians registered on Fangzhou Yunkang’s H2H service platform exceeded 210,000. The physician retention rate increased from 85.1% in 2021 to 91.9% in 2022, and further reached 93.2% in 2023.
The current state of these hospitals and platforms is a microcosm of the sustained development of internet healthcare. Ultimately, whether for public hospitals or internet healthcare platforms, the key to standing out in the wave of internet healthcare lies in accurately identifying and understanding user needs.
For Fangzhou YunKang, which focuses on internet-based chronic disease management services, prioritizing the needs of patients with chronic conditions is the foundation of its business model.
So,What are the needs of patients with chronic diseases? Simply put, they are to improve treatment adherence and achieve better long-term outcomes, to access prescriptions and medications more conveniently and affordably, and to obtain highly relevant health and disease-related information.
Previously, improving drug accessibility served as a key entry point for numerous industry participants. By collaborating with pharmaceutical companies and building supply chains, these players facilitated the rapid delivery of medications to meet the basic medication needs of patients with chronic diseases.
However, this model has many limitations. First, the pure pharmaceutical e-commerce model often addresses only the downstream needs of patients’ medical services, while neglecting the long-term health management needs of chronic disease patients for their own conditions. When facing internet giants entering the market with stronger supply chains and resources, such a model is difficult to sustain. Second, some practitioners片面 emphasize GMV (Gross Merchandise Volume), but high GMV may hide problems such as over-diagnosis and over-medication. This not only affects patients but also further hinders the development of the entire industry.
Therefore,Merely meeting the medication accessibility needs of patients with chronic diseases is only the foundation; prioritizing their more advanced needs, such as providing proactive, continuous, comprehensive, and diverse health management services, is the key to the sustainable development of internet healthcare platforms.
In recent years, countless enterprises have entered the field of internet-based chronic disease management, employing diverse strategies. Internet healthcare companies are the primary drivers, entering this space by establishing stable doctor-patient relationship chains, creating matrices of medical science popularization content, or leveraging smart hardware. Pharmaceutical and medical device companies have also made significant inroads, such as by developing digital whole-course disease management models that span both in-hospital and out-of-hospital settings. Even brick-and-mortar hospitals are increasingly extending their service reach through internet hospitals, conducting post-consultation follow-ups, and providing chronic disease or whole-course disease management.
Amid such a bustling market, what online chronic disease management path did Fangzhou Yunkang choose to develop into China’s largest online chronic disease management platform?
VCBeat’s analysis of the prospectus reveals that Ark Cloud Health centers its business on chronic disease management service hubs, connecting patients, physicians, pharmaceuticals, and other internal and external medical resources to deliver refined chronic disease management services, thereby realizing three core value propositions for patients with chronic diseases.
First, establish a Chronic Disease Management Service Center to improve patient treatment adherence and achieve better long-term outcomes.
Many patients with chronic diseases exhibit low adherence to disease management due to factors such as lifestyle habits and the level of attention paid to their conditions. However, patient adherence directly impacts the effectiveness of chronic disease management. Therefore, external interventions are necessary to facilitate behavioral changes, making patient education and follow-up monitoring essential measures for improving adherence.
Fangzhou Yunkang provides comprehensive medical services based on its H2H platform and offline medical institutions. As a capability support for comprehensive medical services, Fangzhou Yunkang has also established a Chronic Disease Management Service Center to provide patients with services such as consultation follow-up, prescription consultation, and patient delivery.
The medical team at the Chronic Disease Management Service Center provides more targeted diagnosis, treatment, and management plans for patients with chronic diseases through a standardized management service system. This approach consolidates treatment outcomes, enhances patient adherence, and thereby reduces or delays the onset of complications.
To better serve patients, Fangzhou Yunkang has also invested significantly in retaining high-quality physicians. This includes providing a professional and reliable practice platform that ensures compliant service delivery and transparent income for doctors. By optimizing incentive mechanisms and offering superior physician tools, the company enhances patient management efficiency, thereby saving physicians’ time. Furthermore, Fangzhou Yunkang addresses physicians’ advanced professional needs by providing platforms for career development and academic exchange. Through its academic community services, it delivers educational content to help physicians stay abreast of cutting-edge knowledge and potential treatment options for chronic diseases.
It is precisely the empowerment of physicians that has further deepened medical services, and, in conjunction with the service model of chronic disease management centers, enabled patients to receive more refined chronic disease management services.
Next, establish a robust pharmaceutical supply chain to help patients access prescriptions and medications more conveniently and affordably.
Medications are also a critical component in ensuring the effectiveness of disease treatment and management. From the perspective of patients with chronic diseases, core needs include accessing medications, obtaining high-quality drugs, receiving delivered medications, and achieving continuous, regular guidance on medication adherence.
In the course of serving patients, Fangzhou Yunkang has accumulated a base of physicians and patients through its medical and pharmaceutical services. This accumulation of physician-patient resources has earned recognition for the Fangzhou Yunkang platform from pharmaceutical companies. Furthermore, the academic knowledge and patient education content generated through collaborations with pharmaceutical companies further attract physicians and patients, creating a virtuous cycle.
Fangzhou Yunkang has established a robust pharmaceutical supply chain and an efficient distribution system to meet patients’ basic medication needs. As of the end of 2023, Fangzhou Yunkang had partnered with more than 760 pharmaceutical companies, including multinational pharmaceutical corporations and major domestic manufacturers, procured from over 1,400 suppliers, and offered more than 210,000 drug SKUs for sale, 61.6% of which were prescription drugs.
Next, we will establish a medical science popularization matrix to provide patients with highly relevant health and disease-related content.
Medicine is a field characterized by high seriousness and strong academic rigor, which creates a certain sense of distance from the general public; yet, it remains an unavoidable topic for everyone. Therefore, as people increasingly prioritize their personal health and seek a clear understanding of their own health status, professional medical science popularization has become entirely necessary.
Fangzhou Cloud Health has established “Fangzhou MedChat,” an interactive, technology-driven platform for medical science popularization and education, connecting doctors and patients. By providing engaging, practical, and professional health education services, it serves as a bridge between healthcare providers and patients, empowering them to actively participate in managing their own health and facilitating a shift in medical practice from “treating existing diseases” to “preventing diseases before they occur.” From the perspective of Fangzhou Cloud Health’s overall strategic layout, “Fangzhou MedChat” also attracts more industry users, fostering a virtuous cycle of interaction between users and doctors.
For patients, the effectiveness of chronic disease management is of great significance. In the past, numerous internet healthcare platforms offered services with varying processes, content, and quality levels, leading to discrepancies in both patient-perceived outcomes and objectively measured effectiveness based on available data.
Fangzhou Yunkang leverages its high-quality physician resources, the chronic disease management service centers mentioned above, and a robust pharmaceutical supply chain to meet the needs of patients with chronic diseases. This enables them to access premium medical resources, convenient healthcare channels, and long-term health management services with minimal time and financial costs.
High user stickiness and high repurchase rates also indirectly attest to patients’ recognition of Fangzhou Yunkang’s business model. In 2021, 2022, and 2023, the conversion rate from active users to paying users on the H2H service platform was 32.6%, 42.9%, and 36.2%, respectively, while the conversion rate on the online retail pharmacy service platform increased from 14.7% to 14.8% and 17.7%, respectively.
The vast market potential of internet-based chronic disease management needs no further elaboration. VCBeat believes that, driven by China’s accelerating population aging and the rapid advancement of digital technologies such as AI and big data, the future development potential of internet-based chronic disease management remains enormous.
In the context of an aging population, age-friendly renovations can expand the user base.According to the 52nd Statistical Report on China’s Internet Development, as of June 2023, the proportion of internet users aged 50 and above increased from 26.3% in December 2021 to 29.9%. The number of elderly internet users aged 60 and above reached 140 million, and this proportion continues to expand with the ongoing popularization of the internet.
As a high-risk population for chronic diseases,Middle-aged and elderly users zThe market share of internet healthcare platforms will continue to rise, bringing a larger potential user base to the internet healthcare industry. Platform providers can enhance accessibility for elderly users through measures such as optimized page design and smart terminal configuration.
For chronic disease patients across all age groups, Fangzhou Yunkang leverages its H2H smart healthcare ecosystem to extend medical services, chronic disease management, patient-provider education, and pharmaceutical services from hospitals directly into patients’ homes. This enables at-home disease care, thereby improving patients’ healthcare experience, enhancing the timeliness of medical services, and increasing the accessibility of pharmaceutical services.
Technological Innovation and Application: Continuously Deepening Service Offerings.Artificial intelligence technology plays a crucial role in enhancing the operational efficiency of internet-based healthcare, further improving the proactivity and interactivity of patient services, as well as strengthening service continuity and treatment outcomes.
Fangzhou Yunkang has also extensively applied its scientific and technological research to frontline operations. Public information indicates that Fangzhou Yunkang has completed the development and application of intelligent visual robots, intelligent text-based robots, and intelligent auxiliary management systems across various business scenarios, thereby enhancing operational efficiency while delivering more professional and compassionate services.
Build a multi-channel payment system to achieve linkage between healthcare, pharmaceuticals, and insurance.In the management of chronic diseases, services provided by medical teams and diverse medication needs—particularly for innovative drugs—require support from more favorable payment channels. In addition to out-of-pocket payments and basic medical insurance, platforms must also leverage multi-dimensional healthcare data to drive innovation in commercial health insurance products, thereby achieving a closed-loop online healthcare ecosystem. In terms of innovative payment solutions, Fangzhou YunKang is also enhancing health coverage through integration with medical insurance systems.
Since 2014, the internet healthcare sector has flourished as innovative startups, pharmaceutical and medical device giants, and major technology companies have entered the market. However, constrained by factors such as patient adherence, management effectiveness, and payer dynamics, most participants have ultimately faced business contraction, distressed sales, or complete shutdown.
Fangzhou Yunkang has withstood market tests by identifying an online chronic disease management pathway better suited to its operations. According to the company’s prospectus, Fangzhou Yunkang generated revenues of RMB 1.759 billion, RMB 2.204 billion, and RMB 2.434 billion in 2021, 2022, and 2023, respectively. Its profitability has also improved steadily, with gross margin rising from 12.5% in 2021 to 20% in 2023. The loss ratio has narrowed year by year, declining from 17.3% in 2021 to 8.1% in 2023. Based on non-HKFRS adjusted profit, Fangzhou Yunkang achieved a net profit margin of 0.3% in 2023, reaching break-even.
In the past few years, the internet healthcare industry has undergone a significant shakeout. Looking ahead, the sector still faces numerous hurdles to overcome, requiring continuous exploration from all stakeholders. While Fangzhou Yunkang may be only 100 meters away from the milestone of an initial public offering (IPO), the long-distance race in internet healthcare is far from reaching its endgame.