Sipai Health Soars Over 36% on HKEX Debut, Strengthening Its Foothold in the Health Insurance Sector

Today, Medbanks Health Technology Co., Ltd. (hereinafter referred to as “Medbanks Health”) officially listed on the Hong Kong Stock Exchange, with an opening price of HK$23.7, representing a 27% increase over the issue price. As of press time, Medbanks Health’s share price stood at HK$25.3, up more than 36% from the issue price, with a market capitalization exceeding HK$19.3 billion.

Based on its pre-listing performance, Medbanks Health’s IPO price on the Hong Kong Stock Exchange was HK$18.6, with the Hong Kong public offering oversubscribed by 7.27 times, indicating strong investor confidence.

(Bell-ringing image)

Not only that,Since its establishment in 2014, Medbanks Health has consistently attracted significant interest from numerous investors.Prior to its IPO, Si Pai Health completed seven rounds of financing, raising a total of over RMB 3 billion. Investors included Tencent, Sida Capital, Times Capital, IDG Capital, Shuanghu Capital, Zhongwei Capital, and CDH Investments, among others, as well as numerous secondary-market professional investors active in recent healthcare and biotechnology IPOs, such as Hudson Bay, Octagon, and 3W. Notably, Tencent and IDG participated in multiple financing rounds of Si Pai Health.

As a star enterprise in China’s health insurance sector, Medbanks is continuously strengthening its efforts to build a closed-loop “pharmaceutical and healthcare” service ecosystem., has established three business lines, including specialty pharmacy services, physician research assistance, and health insurance services.

In terms of specific revenue, the prospectus shows that Medbanks Health’s revenues in 2019, 2020, and 2021 were RMB 1.039 billion, RMB 2.7 billion, and RMB 3.474 billion, respectively, indicating a very rapid growth rate. Additionally, Medbanks Health’s revenue for the first half of 2022 was RMB 1.888 billion, representing a year-on-year increase of 21.8%.

 (Source: Medbanks Health’s prospectus)

Notably, according to data from Frost & Sullivan, Medbanks Health’s specialty pharmacy business was the largest private specialty pharmacy in China by revenue in 2021, while its physician research assistance business operated the largest oncology field management organization in the country. As of June 30, 2022, Medbanks Health’s health service providers had connected more than 1,200 Grade IIIA hospitals, 55,000 physicians, and 500 health examination institutions across over 150 major cities in China, serving approximately 23.9 million individual members and 876 corporate clients. This demonstrates that all three of Medbanks Health’s core business segments have achieved strong performance.

The listing of Medbanks Health serves not only as a key review of the company’s own growth but also holds unique significance for the development of the entire health insurance industry.

Health insurance is not an emerging sector, but it has grown rapidly in recent years, attracting numerous companies such as Huize, Shuidi, Tencent WeSure, Medbanks Health, Yuanxin Huibao, and Baoxian Jike to establish their presence. It has also drawn concentrated investment from firms including Sequoia Capital, Hillhouse Capital, Tencent, Ant Group, and Sinovation Ventures.

Behind this lies a dual impetus from both policy and market forces. From a macro perspective, improving the expenditure efficiency of medical insurance funds and implementing cost containment measures have been the trajectory of government healthcare reforms in recent years. Consequently, developing health insurance to serve as a supplement to basic medical coverage has been frequently emphasized in policy discussions.

From the user’s perspective, the greatest value of health insurance lies in its ability to address future uncertain medical expenses through affordable and predictable upfront costs. It is important to recognize that a single major accident can plunge an ordinary family into poverty due to illness, leaving a risk exposure that urgently needs to be covered. For this reason,Hundreds of millions of urban employees and their families, with greater financial capacity, have seen a surge in demand for health insurance, driving the rapid expansion of the health insurance market and turning it into a trillion-yuan blue-ocean opportunity.

Medbanks Health targets the supplementary and upgraded healthcare needs of hundreds of millions of people. By integrating medical resources and leveraging a healthcare network as its entry point, it has established a health insurance business model centered on health management services.

Guided by the aforementioned strategy, Medbanks Health has established three business lines: specialty pharmacy services, physician research support, and health insurance services.

 (Business logic; image source: prospectus)

In detail,Specialty Pharmacy Business LineIncluding specialty pharmacies and value-added professional pharmacist services, with a core focus on specialty drugs for the treatment of oncology and other critical illnesses.

How should this be understood? Patients can access the most innovative medications currently available through Medbanks Health’s specialty pharmacy, along with pharmaceutical care services, including medication guidance, adverse event (AE) consultation, and drug delivery.

(Schematic of Specialty Pharmacy Business; Image Source: Prospectus)

According to the prospectus, as of June 30, 2022, Medbanks Health operated 103 specialty drug pharmacies across all provincial-level administrative regions in mainland China, excluding Tibet and Qinghai. These pharmacies specialize in providing prescription medications for the treatment of cancer and other critical illnesses, offering a wide range of specialty drugs, including newly launched innovative therapies such as the full lineup of PD-1 inhibitors approved for commercialization in China. Throughout this process, professional pharmacist services help ensure better medication adherence and therapeutic outcomes for patients.

It is worth noting that Medbanks Health has established the first and only nationwide specialty drug management platform, enabling it to provide follow-up assessment services within a unified system.

Currently, 76 of Medbanks Health’s specialty drug pharmacies are designated providers under the Social Medical Insurance program, accounting for approximately 74% of all its specialty drug pharmacies. In addition, 47 of Medbanks Health’s specialty drug pharmacies have obtained “Dual-Channel Qualification for Critical Illness Insurance” from local medical insurance administrative authorities, enabling patients to seek reimbursement for medication expenses that were previously reimbursable only when purchased at public hospitals. Furthermore, these specialty drug pharmacies have established direct billing arrangements with major insurance companies, offering patients additional payment solutions.

Physician Research Support Business LineIt is primarily engaged in SMO (Site Management Organization) services, providing support to pharmaceutical companies throughout the drug development process from Phase I to Phase IV clinical trials.Additionally, Medbanks Health also provides real-world study (“RWS”) services after innovative drugs are launched.

(Schematic of Physician Research Assistance Services; Source: Prospectus)

In terms of revenue, the SMO business currently contributes the majority of income to the physician research assistance business line. The prospectus reveals that as of June 30, 2022, Medbanks Health’s trial centers across 87 cities had cumulatively served 289 clients, including China’s top ten listed pharmaceutical companies engaged in innovative drug R&D.

In addition, Medbanks Health has achieved full coverage of 27 provincial-level specialized oncology hospitals and five national-level cancer treatment centers. As of June 30, 2022, it had completed 99 SMO projects and was conducting 936 SMO projects. During the track record period, Medbanks Health achieved a 100% customer retention rate among its top ten SMO customers, measured by revenue in the same period.

Health Insurance ServicesAspect, Medbanks Health has effectively integrated medical resources.As of June 30, 2022, Medbanks Health’s network of healthcare service providers connected more than 1,200 Grade IIIA hospitals, 55,000 physicians, and 500 health examination institutions across over 150 major cities in China.

(Illustration of Health Insurance Services; Image Source: Prospectus)

Leveraging its extensive network of healthcare service providers, together with its specialty pharmacy business, Medbanks Health provides high-quality health management services to its members, including preventive care, general practitioner services, specialist referrals, internet hospital services, and overseas medical networks. To date, Medbanks Health has served approximately 23.9 million individual members and 876 corporate clients.

Furthermore, Medbanks Health has co-developed differentiated health insurance plans with major insurers. For instance, Medbanks Health has implemented inclusive supplementary medical insurance in multiple regions and launched a new generation of corporate medical and health benefits solution—Medbanks Health Insurance. The product logic of Medbanks Health Insurance adopts a model of proactive management by corporate physicians, completing the commercial insurance closed loop of “incident occurrence–service–claims settlement” within Medbanks Health’s self-built medical and healthcare system. It is rapidly expanding across China, helping enterprises achieve rapid development through high-quality and efficient medical services.

It is evident from the above that, by integrating resources across physicians, medical institutions, health check-up centers, and pharmaceutical companies, and leveraging its own network of specialty drug pharmacies, Medbanks Health has developed health insurance products underpinned by healthcare management capabilities. Furthermore, through the differentiated sales of these health insurance products, it has expanded the user base for its corresponding medical security system.It is precisely through the synergy among its three core business segments that Medbanks Health has been able to accelerate the implementation of a closed-loop “pharmaceutical, healthcare, and insurance” service ecosystem.

Reflected in its financial statements, Medbanks Health has achieved sustained high-speed business growth and expanded into new business lines each year over the past three-plus years, while persisting in building its own robust operational capabilities. Notably, its revenue in the first half of 2022 alone approached nearly twice the full-year revenue of 2019.

However, it is worth noting that Medbanks Health has continued to incur losses. The prospectus shows that from 2019 to the first half of 2022, Medbanks Health's losses were approximately RMB 596 million, RMB 1.041 billion, RMB 3.748 billion, and RMB 344 million, respectively. Based on this year's performance, there is a trend of narrowing losses.

Of course,To evaluate a company, one should not merely take a static view of its current business performance; rather, it is essential to examine the overarching logic of business evolution over a longer time horizon, thereby enabling more accurate observation and assessment of the enterprise.

Next, this article will examine the current standing of Medbanks Health from two key dimensions of market concern.

From RMB 1.039 billion in revenue in 2019 to RMB 3.474 billion in 2021, Medbanks Health has demonstrated strong growth momentum.

In terms of specific business operations, the specialty pharmacy business generated approximately RMB 3.136 billion in revenue in 2021, with a gross profit margin of 5.9%; physician research assistance services contributed around RMB 245 million in revenue, with a gross profit margin of 18.3%; and the health insurance business recorded roughly RMB 93 million in revenue, with a gross profit margin of 57.4%.

 (Data source: Prospectus; Chart by VCBeat)

It is not difficult to see that the specialty pharmacy business accounts for the majority of revenue, while physician research assistance and health insurance contribute relatively little to overall revenue.From this perspective, the pharmacy’s “drug sales” have indeed propped up the entire business of Medbanks Health.

However, financial observation is not static; rather, it should be conducted over an extended timeframe to monitor dynamic changes and identify trends.

Examining Medbanks Health’s three core business segments from 2019 through the first half of 2022 reveals that, in addition to the rapid expansion of its specialty pharmacy operations, its health insurance services also experienced surging growth. Revenue from this segment skyrocketed fortyfold in 2021 compared with RMB 2.21 million in 2019, while its gross margin—exceeding 60% in the first half of 2022—points to substantial commercial potential.

(Data source: Prospectus; Chart by VCBeat)

Therefore, viewed from a broader temporal perspective, Medbanks Health’s core focus in its early stage was primarily on resource integration and optimization. Due to its unique characteristics, the pharmacy business naturally accounted for the majority of its initial revenue. AndAs the three core businesses continue to synergize, particularly with the momentum gained in the health insurance segment, the foundational pillars of Medbanks Health’s overall revenue structure are gradually shifting.

In summary, it is evident that the specialty pharmacy business currently constitutes the primary revenue source for Medbanks Health; however, the overall revenue structure is being optimized, and the higher-margin health insurance business is poised for sustained rapid growth.

“High growth, high losses” can be described as the norm for companies in the internet healthcare sector. Similarly, since filing its prospectus, Medbanks Health’s recent years of losses have drawn industry attention.

According to the prospectus, from 2019 to the first half of 2022, Medbanks Health’s cumulative adjusted losses reached RMB 1.021 billion. This is largely attributable to persistently high sales costs. However, based on common industry experience, during the early to mid-stages of resource aggregation, sales costs often represent a significant and non-negligible investment.

On the other hand, this is also related to the business strategy implemented by Medbanks Health: instead of adopting the industry’s common practice in recent years of rapid expansion and revenue consolidation through mergers and acquisitions, it chose the more challenging but higher-quality approach of building its own specialty drug pharmacies. This asset-heavy operational model has, to some extent, resulted in continuous losses for Medbanks Health over a certain period.

The advantage, however, is that it enables Medbanks Health to rapidly and efficiently implement pharmacist services and nationwide direct-operated network management in accordance with unified standards. This approach ensures more efficient resource allocation, minimizes risks associated with integrated management, and provides high-quality resource support for the expansion of its health insurance business.

Therefore, the initial investment was highly necessary, providing strong momentum for the rapid growth of Medbanks Health’s business and unlocking significant potential for the development of integrated healthcare.

However, as its business matures in the course of future development, Medbanks Health will be tested on its capability for refined operations. Data disclosed in the prospectus indicates that Medbanks Health has already achieved certain results: the adjusted loss in the first half of this year narrowed by more than 25% year-on-year.

For a company, going public is not the end point, but often the starting point.

This is because the secondary market provides enterprises with better financing channels, enabling them to leverage financial markets to more effectively achieve their desired goals, strategies, or visions. Therefore, the use of proceeds raised after going public also offers insight into how Medbanks Health contemplates its future as it stands at the starting point of a new phase.

A review of the future plans and use of proceeds disclosed in the prospectus reveals that the expansion of its three core businesses remains a key focus for Medbanks Health.

Taking the specialty pharmacy business as an example, Medbanks Health aims to address China’s rapidly growing specialty drug market. According to data from Frost & Sullivan, China’s specialty drug market increased from RMB 147 billion in 2015 to RMB 304.8 billion in 2021, representing a compound annual growth rate (CAGR) of 12.9%. The market is projected to exceed RMB 1 trillion by 2030, with a CAGR of 17.4% from 2021 to 2030.

(Image source: Prospectus)

Notably, in its insurance services business, the prospectus specifically highlights talent acquisition, indicating that Medbanks Health plans to recruit approximately 10 medical experts and data scientists by 2024, as well as around 60 professionals specializing in product design and operations by the same year.

Additionally,R&D has also become a key focus of investment., to optimize technical infrastructure, systems, and applications, thereby enhancing data management capabilities by leveraging the value of data accumulated from past operations, and creating synergies for ever-growing business lines.

This means that in the past few years, after accelerating the implementation of the closed-loop “pharmaceutical and healthcare” services, Medbanks Health will continue to amplify its advantages in the new stage to achieve greater scale effects and maximize the value of its integrated health management.

China's health insurance industry is in a phase of rapid development.

From a macro perspective, the new round of healthcare reforms centered on the “three-medical linkage” has gradually entered deep waters over the past few years, driven by the drug R&D reforms initiated in 2014, the comprehensive elimination of drug markups in public hospitals in 2017, and the establishment of the National Healthcare Security Administration in 2018 to integrate multi-party medical security responsibilities.

The release of the State Council’s “Opinions on Deepening the Reform of the Medical Security System” further clarifies the need to accelerate the establishment of a multi-tiered medical security system and promote reforms in payment methods and the supply side of pharmaceutical and healthcare services.

Driven by policy support, China’s healthcare delivery, pharmaceutical usage, and payment systems have been accelerated in their optimization, gradually evolving toward a multi-tiered medical security system. Niche sectors such as commercial health insurance, out-of-hospital prescriptions, online diagnosis and treatment, and health management have also entered a fast-growth trajectory.

In the industrial sector, this is reflected in continuous large-scale financing within the industry and the emergence of publicly listed companies represented by Medbanks Health (Si Pai Health) and Shuidi Inc.

Nevertheless, the health insurance industry remains riddled with “bottlenecks” as it moves forward. Issues such as high loss ratios, information asymmetry, low profitability, and inadequate specialization have emerged one after another.

Therefore, the entire industry will have high expectations and demands for every participating enterprise in the future. Particularly during development, greater emphasis must be placed on technological innovation and improving service efficiency, which will significantly contribute to enhancing social benefits.

As the future path of professional exploration in health insurance will continue to focus on medical and health management-driven insurance coverage, it will deliver a better health management experience to the general public. This approach not only aligns with the health service objectives required by the “Healthy China 2030” initiative but also constitutes an indispensable component in achieving “common prosperity in health.”

Though the road ahead is long, time serves as an effective measure of value: having earned users’ enduring trust and confidence, health insurance companies will surely emerge as the true gold amidst the industry’s rigorous selection process.

In this process, more companies like Medbanks Health need to emerge.