Sinohealth Holdings Limited Debuts on HKEX with 60,000 Partner Pharmacies and 2.7 Billion Health Data Records

The Market for Health Big Data Solutions Is Seeing a Surge of Competitors.

Following the successful listings of Yidu Tech, Medlive, and Zhiyun Health on the Hong Kong Stock Exchange, the exchange welcomed another health big data company today—Zhongkang Holdings Limited (abbreviated as: Zhongkang Holdings, HK: 02361), listed on the Main Board of the Hong Kong Stock Exchange, with an offer price of HK$5.36 per share and 75 million shares offered in the public offering. In the grey market trading on July 11, Zhongkang Holdings Limited fell by 14.18%.

Zhongkang Holdings, established in 2007, is a health big data service provider offering health insight solutions, designed to meet the sales and marketing needs of medical product manufacturers.As an emerging sector, the health big data field has remained highly active in recent years.. In addition to Zhongkang Holdings, other health big data companies that have submitted applications and are awaiting listing include Yuanxin Technology, Sipei Health, and MedSci.

Compared with other big data companies in the same sector,ZHONGKANG’s Sustained Profitability Is NoteworthyThe company’s total revenue in 2019, 2020, and 2021 was RMB 177 million, RMB 202 million, and RMB 324 million, respectively, representing a three-year compound annual growth rate (CAGR) of 35.3%. The corresponding net profits were RMB 54.379 million, RMB 69.329 million, and RMB 92.628 million, with net profit margins reaching 30.6%, 32.3%, and 28.6%, respectively.

ZHONGKANG’s sustained and stable profitability in the industry is underpinned by the following advantages.

First, leverage asset-light platforms to collect data, and then use data-driven solutions to drive revenue growth.

ZHONGKANG’s business model is similar to that of Medlive, as both first acquire data through asset-light platforms or SaaS tools, and then generate primary revenue from service income derived from data solutions. Medlive drives business growth through its digital service capabilities, while ZHONGKANG Technology drives business growth through its big data and SaaS product (SIC) service capabilities.

ZHONGKANG SIC serves retail pharmacies, with over 63,000 pharmacy users.ZHONGKANG’s SaaS products primarily provide retail pharmacies with specialized services such as membership and automated marketing management, store management, data insights, and training. Additionally, based on customer needs, the platform can integrate various functionalities—including medical product information, consumer profiling, retail market and industry analytics, store and retail management tools, health and disease management tools, and clinical management tools—thereby helping chain pharmacies rapidly achieve digital transformation in their business operations.

According to the prospectus of Zhongkang Holdings Limited, 1,257 retail pharmacies have currently installed SIC, and 63,234 pharmacies are connected to Zhongkang Holdings’ SIC portal via their sales systems.

2.7 billion pharmaceutical retail data records, 80% of which are derived from SIC user usage logsCurrently, the Tiangong-1 data warehouse of Zhongkang Holdings stores over 2.7 billion data records, with 80% automatically collected by the system during daily use by ZHONGKANG SIC users, and the remaining 20% collected monthly from retail pharmacies that have signed CMH cooperation/confidentiality agreements with Zhongkang.

According to the SIC User Service Agreement, Zhongkang Holdings may collect and manage data such as the location, inventory, retail information, and de-identified member information of retail pharmacies connected to the SIC portal, without requiring consent from any third party. Specifically, the data dimensions included in each piece of information are:Store Information, Product Manufacturer, Product Specifications, Unit, Dosage Form, Sales Volume, Retail Price, Member Information (Membership Card Number, Age, Gender, Purchase History)etc. The timeliness and granularity of the data offer significant advantages within the industry.

For the remaining retail pharmacies not connected to the SIC port, Zhongkang Holdings adopts a cooperation model in which it provides monthly medical product retail reports to these pharmacies in exchange for their monthly retail data, thereby further collecting store-level retail data excluding members’ personal information. These data will be uploaded to the Zhongkang Data Collection Platform and then stored in the Zhongkang Tiangong-1 Data Warehouse.

Private cloud and de-identification measures ensure data securityZHONGKANG’s database is “live,” with a large volume of data continuously streamed into the ZHONGKANG SIC system by SIC users on a daily basis. ZHONGKANG first de-identifies data from partner pharmacies by irreversibly encrypting fields containing personally identifiable information, before importing it into the ZHONGKANG Tiangong-1 Data Warehouse. The data warehouse is isolated from the public internet, and the processed data is stored on a private cloud. Strict logging and monitoring are implemented for authorized personnel accessing the data, employing multiple measures to ensure data security and privacy.

It is evident that the majority of ZHONGKANG’s 2.7 billion health big data records consist of pharmaceutical retail data, which reflects consumer purchasing behavior preferences and differences across various distribution channels for pharmaceuticals and medical devices, thereby providing reference for subsequent marketing decisions by healthcare product manufacturers. Therefore,ZHONGKANG is a health insights data solution focused on “products and channels.”

Zhongkang Holdings’ core business boasts a high gross profit margin.

As disclosed in the prospectus, from 2019 to 2021, ZHONGKANG’s data insight solutions generated revenues of RMB 92.8 million, RMB 98.418 million, and RMB 161 million, with corresponding gross profit margins of 65.1%, 67.4%, and 55.9%; revenues from data-driven publishing and events amounted to RMB 80.506 million, RMB 96.678 million, and RMB 135 million, with corresponding gross profit margins of 58%, 65.5%, and 63.5%.Three-Year Average Data Insights Solution Gross Margin: 62.8%; Publishing and Events Average Gross Margin: 62.3%。

The primary deliverable of the Data Insights Solution is customized reports.ZHONGKANG helps clients make business decisions and implement data-driven marketing solutions through customized data insight reports, aiming to meet their specific combinations of needs for data analysis, application scenarios, objectives, and preferences.Customized reports primarily target medical product manufacturers., offering business growth or investment solutions for promoting products to retail pharmacies and consumers.

ZHONGKANG'sEach report is priced between RMB 100,000 and RMB 1 million, depending primarily on the depth of data insights requested by the client and the complexity of the research involved.. For instance, the citywide monthly retail indicator data for a single drug is generally priced at RMB 4,500 per report, while the nationwide annual retail data is priced at RMB 15,000 per report. However, since customized reports requested by medical product manufacturers typically cover multiple drugs and cities, the price for such customized reports often exceeds RMB 100,000.

From the perspective of average transaction value, Zhongkang Holdings' "Data Insight Solutions" in 2021Average revenue per enterprise-level customer: RMB 628,000/customer, representing a 44.7% increase compared to 2020. Among these, there were 87 corporate clients contributing order revenue exceeding RMB 300,000 each, accounting for approximately 33.9%.

In terms of data-driven launches and campaigns,ZHONGKANG generates an average revenue of approximately RMB 2 million per eventFrom 2019 to 2021, Zhongkang Holdings held 36, 86, and 58 events per year, respectively, generating total revenues of RMB 80.506 million, RMB 96.678 million, and RMB 135 million. The number of contracts corresponding to the annual events was 412, 487, and 746, with an average contract value of RMB 195,000, RMB 199,000, and RMB 180,000, respectively.

ZHONGKANG's establishment of a “HealthcareLink+ Xipu Conference / Xiding Conference / Meisi Conference“centered” online platform for health industry participants, has been successfully operating for over 14 years. This platform also provides Zhongkang Holdings with natural advantages in resource integration and customer acquisition. Zhongkang Holdings’ marketing expense ratio is less than 8%, nearly half that of its peers in the same sector.

Industry events hosted by ZHONGKANG provide clients with a variety of services, including publishing (speeches, reports, presentations, etc.), precise networking (brand promotion, roadshows, one-on-one business meetings, etc.), and exhibitions. These services assist clients in promoting their brand value and products while establishing connections with other potential industry partners.

ZHONGKANG also boasts high customer stickiness.

Of the 918 enterprise-level clients, 426 are repeat customers.. According to the prospectus of Zhongkang Holdings Limited, the company served 918 enterprise-level clients in 2021, among which 426 were returning customers. These returning customers generated RMB 262 million in revenue, accounting for 80.2% of the company's total revenue in 2021. Strong customer stickiness and high repurchase rates are among the reasons for the stable year-on-year revenue growth of Zhongkang Holdings.

ZHONGKANG Holdings’ Business Model (Screenshot from the Prospectus)

Business Synergy Is the Golden Key for ZHONGKANG to Enhance Customer StickinessZHONGKANG’s SaaS offerings, data insight solutions, and data-driven publications and events are mutually reinforcing. The Smart Information Center (SIC) provides data sources for customized corporate reports and event organization, while SIC clients can also participate in these customized reports and industry events. The reports provide content support for events, which in turn help capture various business needs. These three core business segments synergize to drive coordinated development and meet customers’ diverse needs.

In terms of customer types,ZHONGKANG also targets pharmaceutical enterprise clients with the highest degree of marketization and the strongest payment capacity.In 2021, pharmaceutical enterprise clients generated RMB 292 million in revenue for Zhongkang Holdings, accounting for 90% of its total income. Among the pharmaceutical companies served by Zhongkang Holdings, 63 are among the top 100 global and national pharmaceutical enterprises (out of a total of 180), ranking first among China’s “product and channel” big data solution providers in terms of coverage of top-tier medical product manufacturers.

iResearch predicts,Pharmaceutical companies will become the most significant payers in health big data solutions in 2024, accounting for 42% of the market.There are three reasons for this:

First, pharmaceutical companies themselves have stronger payment capabilities, with marketing expenses typically maintained at over 35% of revenue;

Second, pharmaceutical companies have reached a critical juncture in their transformation, with “product and channel” development being the primary focus at present. However, traditional marketing methods are no longer suited to modern consumers, creating an urgent need for pharmaceutical companies to leverage digital tools to enhance marketing efficiency and reduce costs;

Third, digital transformation is an industry trend. Digital solutions in the broader health sector are increasingly being integrated into pharmaceutical companies’ operations, and those with strong market-driven demand will rapidly adopt them.

Out-of-Hospital Pharmaceuticals and Market Services Are Poised for Greater Growth. Pharmaceutical marketing is primarily divided into two segments: in-hospital and out-of-hospital. The in-hospital segment refers to public medical terminals, while the out-of-hospital segment pertains to retail pharmacies. In recent years, driven by multiple factors such as the separation of prescribing from dispensing and the outflow of prescriptions, the market for in-hospital drugs and services has been shifting toward the out-of-hospital sector. An increasing number of retail pharmacies have begun to absorb prescription drugs and medical services transferred from hospitals, thereby significantly expanding the market space for out-of-hospital drugs and services.

Where the market lies, there lies the focus of effort. The shrinking market space for in-hospital pharmaceuticals will spur pharmaceutical companies to place greater emphasis on marketing strategies for the out-of-hospital market. Zhongkang Holdings has undoubtedly become the preferred supplier for clients seeking to expand their out-of-hospital market operations, further elevating the company’s industry influence.

This sector is crowded with numerous players, and the market offers substantial incremental growth.

Overall, the market size of China’s health insight solutions reached RMB 24.9 billion in 2021, with more than 2,500 enterprises operating in this sector. However, the market remains relatively fragmented, with a low level of concentration.

According to iResearch’s forecast, the compound annual growth rate (CAGR) of China’s health insight data solutions market is 39.2%, with the market size expected to reach RMB 130.3 billion by 2026. Among them,Health Insight Data Solutions for Medical “Products and Channels” Have the Highest Growth Potential。

ZHONGKANG operates in the data insights solutions sector for healthcare “products and channels,” primarily researching consumer purchasing behavior regarding pharmaceuticals and medical devices, as well as distribution channel data for these products. Its offerings include real-world studies (RWS) of healthcare products, data insight solutions, and pharmaceutical SaaS services. According to its prospectus, Zhongkang Holdings Limited stated that, whether in terms of annual revenue or the number of clients served,The company ranks first in this niche sector, with a market share of 3.9%.。

Peer Competitors Listed in Zhongkang Holdings Limited's Prospectus

In 2021, there were approximately 800 to 1,000 companies offering enterprise data solutions for “product and channel” insights in the healthcare sector, accounting for 32.9% of the total health insight solutions market. In addition to this segment, health insight data solutions encompass “medical services” solutions (53.8%) and “government regulation” solutions (13.3%). The former corresponds to clinical decision support systems (CDSS), electronic medical records (EMR), and medical imaging generated from data on interactions between physicians and patients; the latter refers to regional epidemiological research services supported by data on interactions between government entities and healthcare activities.

Currently, the market for “medical services” insight solutions is the largest, followed by the market for healthcare “product and channel” insight solutions. However, driven by factors such as pressure on drug R&D, market transformation pressures, and the COVID-19 pandemic, the healthcare “product and channel” insight solutions market is expected to grow rapidly, reaching a market size of RMB 61.1 billion by 2026.Becoming the largest market in the health insights solutions sector, accounting for 46.9% of the total market space。

The “Product and Channel” Insights Solution for the healthcare sector is driven by consumer purchasing behavior data and pharmaceutical sales channel data. As digitalization comprehensively sweeps through the healthcare and wellness industry, an increasing number of pharmaceutical companies will attempt to undergo digital marketing transformation, thereby further elevating the demand for market insights into products and channel types. Big data companies that accurately capture in-hospital and out-of-hospital consumer behavior data alongside pharmaceutical sales data will have the opportunity to secure a share of this incremental market space.

Meanwhile, the total number of chain pharmacies in China has been surging year by year. As chain pharmacies have higher requirements for information technology applications compared to independent pharmacies, this trend will accelerate the digital transformation of China’s broader healthcare industry. The expansion of chain pharmacies not only broadens the off-hospital sales channel for pharmaceuticals, prompting pharmaceutical companies to pay greater attention to the off-hospital retail market, but also enhances the data precision of big data companies driven by pharmacy retail data. Under this positive feedback loop, the outlook is promising.