Zhiyun Health Releases 2023 Annual Financial Results: Sustained Revenue Growth, Significant Loss Narrowing, and Q4 Profitability Achieved

On March 21, Zhiyun Health (09955.HK) officially released its 2023 annual financial report. The report showed that Zhiyun Health maintained robust revenue growth in 2023, with total revenue reaching RMB 3.69 billion, a year-on-year increase of 23.5%. The adjusted net loss under Non-International Financial Reporting Standards (Non-IFRS) narrowed to RMB 75.1 million, representing a 77.4% reduction compared to the previous year. The fourth quarter marked the company’s first profitable quarter, achieving a turnaround from loss to profit on a quarterly basis. As of the end of 2023, the company’s combined cash and financial products totaled approximately RMB 620 million, remaining largely stable compared to the interim period, indicating ample cash reserves.

According to the financial report, Zhiyun Health operates three major business segments: in-hospital solutions, pharmacy solutions, and personal chronic disease management solutions. Among these, revenue from in-hospital solutions reached RMB 2.87 billion, accounting for over 70% of total revenue and representing the largest source of income, with a year-on-year increase of 31.5%. Revenue from pharmacy solutions amounted to RMB 660 million, reflecting a year-on-year growth of 6.9%. Revenue from personal chronic disease management solutions and other sources totaled RMB 160 million.

Specifically, in the hospital-based market, Zhiyun Health primarily expands its business through the “Access, Install, Monetize” model (also known as the AIM model). This model encapsulates the company’s business development approach, which focuses on engaging with hospitals to establish business relationships, deploying hospital SaaS products to enhance stickiness, and pursuing commercialization opportunities via in-hospital solutions.

As of December 31, 2023, the number of hospitals using Yihui SaaS reached 2,719, an increase of 152 from the previous year, representing a growth rate of 5.9%. This figure includes 815 public tertiary hospitals and 1,134 public secondary hospitals. Among the 815 public tertiary hospitals, 40 are ranked among China’s Top 100 hospitals.

Meanwhile, the in-hospital solutions have enabled the company to establish deep connections with hospitals and pharmaceutical companies, laying a solid foundation for expanding its business into out-of-hospital settings. As of December 31, 2023, Zhiyun Health had signed contracts with 39 pharmaceutical companies, with the total number of collaborative SKUs reaching 59, representing a year-on-year increase of 73.5%. By reaching more hospital departments and increasing the SKU count of medical supplies, the company can help hospitals meet patients’ chronic disease management needs more efficiently and precisely, further highlighting the scalability and sustainability of its commercial model.

Zhiyun Health’s integrated pharmacy solution, through its pharmacy SaaS consultation system and medical supply chain services, meets the needs of chronic disease patients for out-of-hospital consultations and prescription issuance. It plays a pivotal role in out-of-hospital medical care, enabling pharmacies to provide real-time in-store consultations and prescription services to walk-in customers. As of December 31, 2023, over 219,000 pharmacies had installed the Zhiyun Consultation SaaS system, covering approximately 35% of pharmacies across China.

Leveraging data insights derived from the pharmacy SaaS prescription services, the Company effectively connects pharmaceutical companies with pharmacies for pharmacy supply procurement. As of December 31, 2023, the number of transactional customers for pharmacy supplies reached 1,232, representing an increase of 257 customers, or 26.4%, compared to the year ended December 31, 2022. The Pharmacy Subscription Solutions and Value-Added Solutions segment maintained a stable growth momentum, with its commercial monetization capability continuing to improve.

Personal Chronic Disease Management Solutions and Other Segments primarily connect doctors with patients, providing out-of-hospital monitoring, consultations, and prescription services for chronic disease patients. As of December 31, 2023, the platform had over 103,000 registered physicians and more than 31 million registered users, delivering 185 million online service interactions, setting a new historical high.

In 2023, while upholding its “Hospital-First” strategy, Zhiyun Health upgraded its strategy to the “Patient-to-Manufacturer” model (P2M model), leveraging its robust infrastructure across both in-hospital and out-of-hospital scenarios. Under the P2M strategy, the company engages in strategic collaborations with pharmaceutical manufacturers to sell self-operated products over which it holds ownership, sales rights, or other exclusive rights, a move poised to steer the company gradually toward profitability. Leveraging its extensive and deep-rooted network of hospitals and pharmacies, the company has become a gateway for industrial enterprises to access hospitals and retail pharmacies. Its digital capabilities closely connect industrial enterprises with end-user hospitals and pharmacies, ultimately delivering high-quality products with competitive pricing and exceptional convenience to patients with chronic diseases.

Meanwhile, the rapid development of artificial intelligence (AI) and its continuous innovation drove profound reforms in the healthcare industry in 2023. The government has introduced multiple regulations and guidelines to encourage the application and innovation of “Internet + Healthcare” and AI in the medical field. By leveraging technology to empower the ecosystem, the company enhances the efficiency of healthcare systems, fulfills its corporate responsibilities, and increases its commitment to providing high-quality, affordable medical services and products to stakeholders in the healthcare ecosystem. It also continues to build digital infrastructure for the chronic disease management industry.

During the reporting period, guided by the “Hospital-First” strategy and the “P2M” strategy, the Company’s business demonstrated strong growth momentum. The flywheel effect of its business model will further drive commercialization, enabling a new round of rapid growth and overall profitability.

Following the strategic upgrade, the company has continued to increase its investment in R&D, actively expanded its ecosystem of partners, proactively selected high-quality products with large target markets for sale as proprietary offerings, and consistently accelerated the pace of business development.

On January 26, 2024, the National Medical Products Administration (NMPA) announced on its official website that Sevelamer Carbonate for Oral Suspension, developed and manufactured by Hangzhou Anyuan Biopharmaceutical Technology Co., Ltd. and exclusively commercialized by a subsidiary of Zhiyun Health, received NMPA registration approval and is deemed to have passed the consistency evaluation for generic drugs. This marks the first approved Sevelamer Carbonate for Oral Suspension in China. Zhiyun Health will leverage its hospital SaaS coverage network and digital capabilities to collaborate on the digital marketing promotion and sales of this product.

On March 9, 2024, Hetangjing® (Dapagliflozin Tablets), developed and manufactured by Nanjing Fangshenghe Pharmaceutical Technology Co., Ltd. and exclusively commercialized by a subsidiary of Zhiyun Health, was officially launched across China. Hetangjing® is a high-end generic drug that has successfully broken through the patent barriers of the originator product through proprietary innovative technologies, further reducing the financial burden on Chinese patients with diabetes and improving medication accessibility. Zhiyun Health holds the exclusive distribution rights for Hetangjing® and will collaborate with Fangshenghe Pharmaceutical, leveraging its advantages in hospital SaaS networks, pharmacy SaaS networks, and digital capabilities, to cooperate in areas such as medical information dissemination and digital marketing promotion for this product.

As the number of such self-operated products increases, Zhiyun Health’s digital marketing capabilities will gain growing recognition from pharmaceutical companies, significantly boosting the company’s long-term business growth and profit margins, thereby validating the scalability of its SaaS network’s digital capabilities and business model following its strategic upgrade.

Furthermore, leveraging its advanced ClouD DTx R&D platform, specialized medical team, and data element processing capabilities, the company has collaborated with domestic research institutes and renowned universities to conduct multiple digital therapeutics studies. These findings have been published in top-tier authoritative journals both domestically and internationally, contributing to the establishment of industry consensus. This effort continuously promotes the safe and compliant development of the digital healthcare industry, making medical services more accessible to a broader population of patients and healthcare providers.

Zhiyun Health will continue to strengthen cooperation with various industry stakeholders, pursue diversified business layouts and commercial practices, deliver greater value to partners within the ecosystem, and support the company’s steady development and growth in financial performance.