A Decade of Climbing and Leaping: WeDoctor Emerges as Digital Healthcare Welcomes a Spring Dawn
On the evening of April 1, WeDoctor Holdings, the digital healthcare arm of WeDoctor which has been in operation for over a decade, formally filed its listing application with the Hong Kong Stock Exchange.According to a Frost & Sullivan report, WeDoctor is China’s largest digital healthcare service platform in terms of the number of internet hospitals and the volume of digital medical consultations, ranking first with a 15.5% market share—exceeding the combined total of the second- through fifth-ranked players.
The publication of the prospectus has lifted the veil on this “slow-moving company.” As Hong Kong stocks are about to welcome the “first digital healthcare stock,” it has carved out a path to break through the impasse in the digital healthcare services industry with ten years of strategic focus.
The prospectus shows that in 2020, WeDoctor’s total revenue was RMB 1.832 billion, a year-on-year increase of 262% compared with 2019. The gross profit margin was 27.2%, representing a significant improvement from 23.3% in 2019. From 2018 to 2020, the three-year compound annual growth rate (CAGR) of revenue reached 168%. In 2020, medical service revenue amounted to RMB 706 million, accounting for 38.6%; health maintenance service revenue was RMB 1.125 billion, accounting for 61.4%.
Correspondingly, WeDoctor’s net losses for 2018 to 2019 were RMB 4.05 billion, RMB 1.94 billion, and RMB 1.91 billion, respectively. Excluding the impact of factors such as changes in the fair value of convertible preferred shares and share-based compensation expenses, WeDoctor’s adjusted losses were RMB 410 million, RMB 760 million, and RMB 870 million, respectively, totaling RMB 2.04 billion.The loss ratio narrowed significantly from 163% to 47% year over year.
Losses are a common issue for technology companies at the time of their initial public offerings (IPOs), with companies such as Kuaishou, Meituan, and Xiaomi having all faced scrutiny due to substantial losses. In fact, these losses arise because internet companies often use preferred shares for financing; such preferred shares are recorded as corporate liabilities prior to the IPO, which means thatThe accumulated losses in WeDoctor’s prospectus include the increase in the fair value of convertible redeemable preferred shares.. Generally, the greater the increase in a company’s valuation prior to its initial public offering (IPO), the larger the shareholders’ “paper gains,” and consequently, the greater the losses recognized due to fair value adjustments. However, these fair value losses are not actual economic losses; rather, they reflect the inclusion of investors’ appreciation in value.
Therefore,Unlike actual losses in the conventional sense, the larger this type of “loss,” the better the company’s development and the greater its value appreciation.Following the company’s initial public offering, preferred shares were converted into ordinary shares, and this portion of the loss is no longer included in the financial statements; therefore, it is typically treated as an adjusting item.
Behind the consecutive annual revenue growth and the continuous narrowing of losses lies WeDoctor’s strategic determination in focusing on the digitalization of serious medical services.As is well known, the unequal distribution of medical resources, which leads to difficulties and high costs in accessing healthcare, has long been a challenging issue for China’s healthcare service system. Furthermore, due to the lack of proactive, continuous, data-driven care tailored to individual patients, the health accountability system has yet to be effectively implemented, making it difficult to link payment models with health outcomes.
The internet possesses inherent advantages in addressing these pain points within the healthcare industry. However, this first requires companies to commit to long-term investment and development, connecting supply-side resources to build digital healthcare supply capabilities. Nevertheless, the substantial capital expenditure required for “infrastructure” and stringent policy regulations have deterred most participants in this sector. The liberalization of policies governing the online sale of prescription drugs has enabled pharmaceutical e-commerce platforms to rapidly enter the market, leveraging the traffic advantages of existing consumer e-commerce to achieve the online retailing of medicines. Yet, they have consistently failed to penetrate the core segments of medical services.
Document No. 26 issued in 2018 marked a milestone for the industry. The General Office of the State Council released the “Guiding Opinions on Promoting the Development of ‘Internet + Healthcare’,” encouraging medical institutions to leverage “Internet+” technologies to optimize existing healthcare services (“enhance stock”) and drive deep integration between the internet and healthcare (“expand increment”), thereby creating space for the survival and development of internet hospitals. The 2020 pandemic further stimulated market demand while strongly accelerating the introduction of a series of favorable policies, particularly insurance coverage support for internet-based healthcare, which served as a powerful catalyst for the industry’s takeoff.Throughout this process, WeDoctor has evolved from its initial roles as a provider of internet-based hospital services and public services into a true digital healthcare platform, driving industry efficiency as an integral part of the public healthcare service system.
As revealed in the prospectus, WeDoctor’s development trajectory closely mirrors that of the industry as a whole. The company has experienced rapid performance growth over the past three years, with revenue surging by 262% year-on-year in 2020 alone, signaling the emergence of scale effects typical of internet enterprises. This success may well be attributed to WeDoctor’s non-“e-commerce DNA.” Long before favorable market conditions and supportive policies materialized, the company consistently maintained the posture of a “plumber,” deeply cultivating the medical services sector. Amid the explosive growth of the digital healthcare industry, the moat built through its substantial early-stage investments has become its most valuable asset.
According to the prospectus, as of December 31, 2020, WeDoctor’s R&D team comprised more than 860 employees, accounting for 27.8% of its total workforce, and the company held over 470 patents and computer software copyrights in China (including those pending approval).WeDoctor’s R&D expenditures from 2018 to 2020 were RMB 238 million, RMB 360 million, and RMB 344 million, respectively. In 2018 and 2019, R&D spending accounted for as high as 93.4% and 71.3% of its revenue, respectively., with R&D expenses nearly equivalent to its total revenue. Even in 2020, when revenue surged by 262%, the proportion still exceeded 18.8%.
According to the latest financial report, JD Health’s R&D expenses increased by 80.1% from RMB 338.2 million in 2019 to RMB 609.1 million in 2020, accounting for 3.1% of total revenue. In contrast,As a privately held company, Weiyi has spared no expense in its R&D investments. Years of development and investment have not only built a competitive moat for Weiyi itself but also brought about a series of innovative breakthroughs to the industry.
In 2015, WeDoctor established China’s first internet hospital—Wuzhen Internet Hospital.
In 2017, WeDoctor established its first Internet Hospital Service Center and launched online collaborative services.
In 2018, WeDoctor launched the “Mobile Hospital” empowered by its internet hospital platform and established the first internet hospital dedicated to chronic disease management—the WeDoctor Taishan Chronic Disease Internet Hospital.
In 2019, WeDoctor launched China’s first city-level chronic disease management service model in Tai’an, Shandong Province, enabling direct settlement through medical insurance. By 2020, the average consultation time for local chronic disease patients was reduced from 2–3 hours to 30 minutes, the average cost per prescription decreased by 12.7% compared with 2019, and expenditure from the local medical insurance fund for chronic diseases was also reduced.
In 2020, WeDoctor launched China’s first provincial-level Digital Health Community in Tianjin, led by an internet hospital. It will gradually connect 267 primary healthcare institutions in Tianjin to provide digital medical services, including digital chronic disease management services.
Through continuous exploration, WeDoctor’s model for the digitalization of serious healthcare, organized by medical insurance pooling areas, has become increasingly clear.
Meanwhile,WeDoctor’s R&D innovations in big data, artificial intelligence, and smart IoT have expanded the reach of its digital healthcare service platform and provided effective empowerment to all stakeholders across the healthcare value chain.The prospectus reveals that WeDoctor has established a medical tag library comprising nine major categories with over 840,000 cumulative tags, and precisely matches the needs of doctors and patients through its relationship engine and knowledge graph. Its fundus lesion-assisted diagnostic system achieves a specificity of 98.8% and a sensitivity of 85.3% in the binary classification of diabetic retinopathy. WeDoctor’s Clinical Decision Support System (CDSS) covers more than 300 common diseases and includes detailed diagnostic and treatment recommendations for 26 types of chronic conditions. By integrating these capabilities with its self-developed innovative medical terminal and equipment products, such as Mobile Hospitals and Cloud Diagnostic Kits, WeDoctor has effectively enhanced the diagnostic and treatment capabilities of primary healthcare institutions and further expanded the accessibility of medical services. In terms of effectiveness, the diabetes management program launched by WeDoctor, leveraging its internet hospital platform, has helped users achieve an HbA1c control rate of approximately 64.1%, significantly higher than the industry average of 49.4%.
The prospectus shows that as of December 31, 2020, WeDoctor's platform had over 220 million registered users with real-name verification, and the monthly average number of paying users (MPU) in 2020 exceeded 25 million. As of 2020, WeDoctor had accumulated more than 145,000 chronic disease members, with an annual revenue per user of approximately RMB 3,600. According to data, there are currently about 300 million chronic disease patients in China, and the online conversion rate for common chronic diseases is as high as 75%, indicating a huge market potential.
As of December 31, 2020, WeDoctor operated 27 internet hospitals in China, 17 of which were designated as medical insurance providers. The WeDoctor platform connected more than 7,800 hospitals, covering over 95% of China’s Grade A tertiary hospitals. Among its 270,000 registered physicians, 86% held the title of attending physician or higher. Its mobile healthcare services delivered high-quality medical resources and services to primary care settings, particularly in rural and remote areas. As of December 31, 2020, these services had reached a total population of 28 million across 69 counties in 12 provinces in China.
WeDoctor’s digitalized closed-loop service ecosystem encompassing “medical care, pharmaceuticals, and insurance” has comprehensively enhanced the accessibility, effectiveness, and affordability of healthcare services. Its extensive capability to connect supply-side resources and integrate with payers has naturally become a first-mover advantage and a competitive barrier.According to public information, WeDoctor’s digital chronic disease management model is expanding from Tai’an to multiple cities in Shandong Province, including Jinan and Dezhou, and has been incorporated into Shandong’s 14th Five-Year Plan as a top-level strategic framework. Meanwhile, Tianjin is gradually expanding its connectivity and empowerment of 267 primary healthcare institutions under the guidance of the “Digital Health Strategic Cooperation Agreement.”
The prospectus indicates that WeDoctor will further expand its urban coverage and membership system in China, enhance member stickiness by developing innovative value-added services and products, and leverage its technological and data analytics capabilities to continuously improve the effectiveness and efficiency of digital healthcare services.The economies of scale generated by early-stage infrastructure deployment have endowed Micro Medical’s closed-loop business model with strong replicability and profitability. It is easy to envision that, as the business scales up further, the commercial value created by Micro Medical will grow at a geometric rate.