Xiyou Health Secures Tens of Millions in USD Funding to Accelerate DTP+DTC Medical Device Retail Model

VCBeat (WeChat ID: vcbeat) has learned that on April 16, Beijing Xiyou Tiantian Health Technology Co., Ltd. (hereinafter referred to as “Xiyou Health”), a company dedicated to the development of new retail in pharmaceuticals and healthcare, announced that it had secured tens of millions of U.S. dollars in investment from Redpoint China Ventures and Matrix Partners China. This round of financing marks another capital injection for Xiyou Health following its funding round in July 2020, and will be primarily used to advance the company’s DTP+DTC medical device model and to build an internet hospital integrated with medical device usage scenarios.

Founded in September 2019, Xiyou Health has established an innovative dual-track development model combining Direct-to-Consumer (DTC) and Direct-to-Patient (DTP) services within less than two years. Its business coverage extends to tertiary hospitals and adjacent pharmacies across numerous provinces, municipalities, and regions in China, with partnerships involving many leading domestic pharmaceutical retail chains and renowned medical device companies both domestically and internationally. According to Xiyou Health’s post-investment planning for this round, the number of partnered physical pharmaceutical retail stores is projected to exceed 1,000 in 2021.

Regarding the DTC (Direct-to-Consumer) device model, driven by the rising silver economy, heightened public health awareness, and the rapid advancement of IoT technology, demand for home-use medical devices has continued to climb year after year. These devices have become an integral part of household goods in China. Furthermore, given that medical devices emphasize user experience, professionalism, and service, they are naturally well-suited to the service scenarios of brick-and-mortar pharmacies, emerging as the most direct source of incremental growth for pharmacies after pharmaceuticals. Public data indicates that the market size for medical devices will continue to expand in the coming years, with the domestic market expected to surpass RMB 900 billion by 2022. Pharmacies located near hospitals will be the primary beneficiaries of this rapid growth.

Leveraging the dual benefits of the separation of prescribing from dispensing and the advancement of medical devices, Xiyou Health’s DTC business model has entered a phase of rapid growth. Through a series of specialized initiatives—including the formulation of pharmaceutical and medical device sales strategies, professional in-store sales support, coordination of in-hospital patient traffic, expansion of innovative medical devices, integration with online channels, content marketing for user acquisition, and after-sales customer service—Xiyou has successfully facilitated the transformation of medical device sales in numerous pharmacies and significantly boosted their performance. This approach delivers two key forms of empowerment: large-scale external resource infusion and refined internal capability building.

Regarding the DTP model for innovative medical devices, first, continuous cost containment in China’s healthcare sector is driving hospitals toward “de-functionalization,” prompting them to gradually return to their fundamental public-welfare mission. Second, as the role of hospitals evolves, the doctor–patient relationship will extend beyond in-hospital consultations and treatment to encompass long-term patient services such as out-of-hospital rehabilitation and quality-of-life improvement; thus, out-of-hospital medical services will become a new professional requirement and performance evaluation component for physicians. Third, patients’ health awareness has shifted from focusing solely on in-hospital diagnosis and treatment to emphasizing out-of-hospital disease prevention and rehabilitation, while the demand for professional guidance from physicians remains strong.

Driven by the “Three Major” transformations, intelligent medical devices with connectivity attributes and data value have become indispensable “infrastructure.” Examples include common needle-free insulin pumps, blood glucose monitoring systems, ambulatory blood pressure monitors, and wearable devices. The Device-to-Patient (DTP) model directly leverages intelligent devices to seamlessly bridge in-hospital and out-of-hospital scenarios. On one hand, it breaks through the ceiling of traditional medical hardware services, providing support and a foundation for physicians’ post-discharge care; on the other hand, it facilitates a smoother connection between patients’ post-discharge treatment, rehabilitation, and convalescence and in-hospital diagnosis and therapy, thereby substantially meeting the personalized and specialized healthcare needs of targeted patient populations.

In recent years, policy support and a surge in capital investment have directly driven the rapid development of innovative medical devices. The Regulations on the Supervision and Administration of Medical Devices, released in March this year, explicitly prioritizes innovation in the medical device sector, granting priority review and approval for innovative medical devices, supporting their clinical promotion and use, and promoting high-quality development of the medical device industry. Furthermore, the Blue Book of Medical Devices: Report on the Development of China’s Medical Device Industry (2020) notes that innovative medical devices are emerging at an accelerated pace, with more such products expected to gain regulatory approval for market launch. China’s medical device industry demonstrates robust vitality and broad prospects for future growth.

Kang Kai, Founder and CEO of Xiyou Health, stated that leveraging various development dividends, Xiyou Health has established a business model combining DTP (Direct-to-Patient) and DTC (Direct-to-Consumer) channels, supported by its mature and extensive network of pharmacy stores adjacent to hospitals and its robust operational team. This dual-channel model will more efficiently streamline the distribution chain for innovative medical devices, simplifying traditional processes such as pricing code assignment, inclusion in fee schedules, and tender negotiations. It aims to transform the device retail segment from simple physical delivery into professional service centers, facilitating faster market entry for high-quality medical devices into China’s end-user market and making cutting-edge medical technological achievements accessible to the general public.

Redpoint China Ventures stated that there is still at least a fivefold gap in the penetration rate of medical devices in China compared to the United States. The ecosystem chain for innovative medical devices is complex and lengthy, lacking efficient channels for popularizing knowledge, selling devices, and providing continuous services. Household users’ awareness of home medical devices remains limited to the “traditional trio,” such as blood pressure monitors, blood glucose meters, and oxygen concentrators. Xiyou Health has created an innovative “hospital-adjacent store” model by establishing an integrated online-and-offline professional sales and service network, efficiently and precisely matching high-quality devices with target populations to deliver better user experiences. The Xiyou Health team comprises industry veterans who have accumulated deep industry know-how in specialized fields such as pharmaceutical retail and medical devices. By combining this expertise with extensive experience gained from practicing and expanding in the new retail sector, they have developed an effective comprehensive management system that empowers partners and helps enhance their operational efficiency and retail performance. We are pleased to support the team in this funding round and hope that Xiyou Health will continue its rapid development, bringing greater value to more users and upstream and downstream partners within the medical device ecosystem.

Matrix Partners China stated that, against the backdrop of volume-based procurement for pharmaceuticals and high-value medical consumables, traditional marketing models are facing challenges. We continue to focus on investment opportunities in new marketing networks emerging during this transformation. While there are commonalities between the marketing system construction for medical devices and pharmaceuticals, there are also significant differences. Over the past six months, the Xiyou team has demonstrated efficient execution and high-quality service. We look forward to Xiyou becoming a leading enterprise in the new era of medical device marketing.

Bai Yu, President of the Medical Device Branch of the China Medical Pharmaceutical Materials Association and a renowned expert in pharmaceutical and healthcare venture capital, stated that based on current conditions in both primary and secondary markets, innovative drugs and medical devices are highly attractive investment targets. These sectors have recently seen frequent financing rounds with substantial amounts raised. Against the backdrop of normalized pandemic management, the out-of-hospital prevention and rehabilitation market will continue to expand in both scale and intensity. The tipping point for the medical device industry is expected to arrive significantly earlier than anticipated. This trend and opportunity are widely recognized across the entire pharmaceutical and healthcare sector, suggesting that medical devices will wield greater influence and industrial leadership.

As the exclusive financial advisor for this round of financing, Zhu Xin from Qiangyun Capital stated that he was pleased to accompany Xiyou Health in rapidly completing two rounds of financing within half a year.Grapefruit Health is positioned within the window of industry dividends. Leveraging strong execution capabilities in the style of Alibaba, the company has achieved rapid growth in its business metrics and fully capitalized on first-mover advantages driven by policy support. We have known the Grapefruit Health team for many years and share numerous mutual contacts within the pharmaceutical and healthcare industries. We recognize Grapefruit’s deep industry accumulation and explosive growth potential"Full of confidence, we are delighted to have facilitated the collaboration between Xiyou and renowned investment institutions in this financing round. We remain committed to accompanying Xiyou Health on its long-term development journey."