Shiqiang Pharmaceutical's Prospectus Highlights Its Specialty Internet Hospital Model in Andrology

When establishing an internet hospital, Shiqiang Pharmaceutical faced numerous challenges: How to obtain the qualifications for building an internet hospital? Should it be self-built or jointly built? Is it necessary to establish an internet hospital in every province and city? Should a comprehensive internet hospital or a specialized one be chosen?

Shiqiang Pharmaceutical ultimately chose to build its own internet hospital.The decision not to pursue a joint venture stems from the fact that Shiqiang Pharmaceutical connects with physicians through its pharmaceutical products, meaning its core resource is the drugs themselves rather than the physicians. Adopting a joint venture model could place Shiqiang Pharmaceutical in a passive position; even after physicians are onboarded onto online platforms, the ties maintained with them would remain relatively weak.Shiqiang Pharmaceutical’s robust financial resources also enable it to adopt the capital-intensive model of building its own internet hospital.

After reviewing internet hospital policies across various regions, Shiqiang Pharmaceutical established its internet hospitals in Hainan and Tonglu, obtaining the operating licenses for Hainan Shiqiang Internet Hospital and Tonglu Shiqiang Internet Hospital in September 2019 and July 2020, respectively. The decision to establish the Tonglu Shiqiang Internet Hospital following the launch of the Hainan facility was driven by considerations of geographic coverage and regulatory policies.As national health insurance coverage has not yet been fully integrated, a single internet hospital is clearly insufficient to meet the needs of Shiqiang Pharmaceutical; therefore, multiple internet hospitals are required to achieve geographic coverage.Moreover, Zhejiang is also the home base of Shiqiang Pharmaceutical.

Shiqiang Pharmaceutical also considered whether it was necessary to establish separate internet hospitals in each province and city to provide doctors with better service platforms. However, for practical reasons, they chose to build only two internet hospitals, which respectively cover and serve patients in the northern and southern regions.In the later stages, Shiqiang Pharmaceutical may leverage the “Huihui Health” platform to collaborate with hospitals in jointly establishing internet hospitals.

Let Shiqiang Pharmaceutical ChooseBuilding an internet hospital focused on andrology, rather than a comprehensive one, is closely tied to Shiqiang Pharmaceutical’s inherent strengths.Over the past two decades, Shiqiang Pharmaceutical’s deep commitment to the andrology specialty has enabled it to accumulate a substantial network of andrologists.

Following the launch of Shiqiang’s internet hospital, which specializes in andrology, the platform can rapidly facilitate the digital onboarding of andrologists, thereby rebuilding an online pool of physician resources.The fact that the single-product sales of Fufang Xuanju Capsules in andrology have exceeded RMB 1 billion, coupled with the rapid growth of the online pool of specialized andrologists, cannot be easily replicated in the short term., which will also constitute Shiqiang Pharmaceutical's future competitive advantage.

Unlike typical open internet healthcare platforms, Shiqiang Internet Hospital is built on “acquaintance”-based doctor-patient relationships. Most patients with andrological conditions require a treatment course of 3–6 months, along with regular follow-up visits.When patients access internet hospitals, the “acquaintance”-based doctor-patient relationship established through offline interactions can be extended to the online setting.Patients can obtain prescription refills and other services from their trusted physicians online. Meanwhile, health managers on the platform may assist physicians in patient management, with patient authorization, to improve adherence and enhance cure rates.

Building a “familiarity-based” doctor-patient relationship is driven by multiple considerations:

First, compliance with policies. Internet healthcare has a policy red line of "offline first diagnosis, online follow-up." However, some internet healthcare platforms often have their own understanding of the first diagnosis when implementing medical behaviors, and there is a trend to expand this concept. For Shiqiang Pharmaceutical, it is offline consultation first, followed by online follow-up. AndIn offline consultations, doctors and patients establish a "familiar" relationship characterized by mutual trust, which facilitates subsequent diagnosis and treatment.

Secondly, in terms of patient conversion rates, the cost of converting offline patients is lower than that of online patients. When providing medical services on internet healthcare platforms, responsible physicians often spend considerable time understanding patients’ conditions and chief complaints, and conduct rigorous diagnoses.Compared to in-person consultations, the purely online approach consumes a significant amount of physicians’ time and incurs higher patient conversion costs.

The most critical consideration is that the “acquaintance” model of the doctor-patient relationship is more readily accepted by both physicians and patients. A large number of doctors and patients remain reserved and skeptical toward internet-based healthcare, not recognizing it as a serious form of medical care. While some physicians, impacted by the rise of internet-based healthcare, are actively seeking transformation and joining online healthcare platforms, many others remain highly conservative. AndBased on the “acquaintance” doctor-patient relationship, physicians are already well-acquainted with their patients, enabling them to provide medical services with confidence and facilitating patient acceptance. On the other hand, when necessary, physicians can require patients to attend in-person follow-up visits, thereby further mitigating their liability risks.

Internet-based medical practices rooted in “acquaintance” doctor-patient relationships will remain a key development trend for Shiqiang Pharmaceutical for the foreseeable future. However,They also do not rule out the possibility of building a more open platform in the event of a surge in the number of online doctors and patients.

Focusing on the physician and pharmaceutical segments as Shiqiang Pharmaceutical’s core strategic priorities for the foreseeable future is closely aligned with the company’s current situation and overall strategy.

Shiqiang Pharmaceutical’s core strengths lie in its offline resources, including flagship products such as Compound Xuanju Capsules, a sales force of thousands of medical representatives, and access to tens of thousands of physicians. In building the Shiqiang Internet Hospital, the company is also exploring how to leverage these offline advantages in the online space.

In internet-based medical services, the core lies in establishing a doctor-patient relationship. The supply side of this relationship consists of physicians, while the demand side comprises patients; intermediate links may involve pharmaceuticals, medical services, and other components.Shiqiang Pharma has its own pharmaceutical products and access to physicians, but its product portfolio is relatively limited. This led the company to leverage its closest resource—physicians—by building a medical service chain and providing medical services to activate the entire continuum from providers to patients. It then gradually enhanced its product and service offerings, creating a closed loop integrating medical care, patients, pharmaceuticals, and rehabilitation.

In fact, during the treatment of andrological disorders, patients are typically assessed using the Chronic Prostatitis Symptom Index (CPSI), the International Index of Erectile Function-5 (IIEF-5), and the Self-Rating Anxiety Scale (SAS). Patients’ subjective evaluations are crucial. Due to the lack of objective assessments, medication adherence among patients is often suboptimal. AndBy leveraging the health stewards of Shiqiang Internet Hospital to support physicians in patient management, it is often possible to alleviate patient anxiety, enhance medication adherence, and ultimately improve cure rates.

As of last December, the number of physicians registered on Shiqiang Internet Hospital exceeded 20,000, with nearly 8,000 active physicians. Currently, Shiqiang Pharmaceutical is maintaining a restrained approach to physician digitalization and has not fully onboarded its entire pool of physician resources, which is alsoTo leverage the role-model effect to onboard more physicians and sustain their engagement.However, rebuilding the online physician resource pool will remain its core strategic focus for a considerable period in the future.

In addition to physician resources, Shiqiang Pharmaceutical is also strengthening its efforts in the pharmaceutical segment of medical services.

In terms of product R&D, Shiqiang Medicine is conducting independent research and development while actively collaborating with renowned domestic R&D institutions.Currently, it has five chemical drug candidates, three traditional Chinese medicine (TCM) products, and three TCM health supplement projects under development.

In terms of product manufacturing,Shiqiang Pharmaceutical plans to develop and manufacture products across seven therapeutic lines: urology and andrology, gastroenterology, gynecology, orthopedics, cardiology and cerebrovascular diseases, hepatobiliary medicine, and dermatology and venereology., and plans to develop five product variants for each product line, ensuring that the company’s overall product portfolio exceeds 30 items.

To meet patients' medication needs, Shiqiang Pharmaceutical is also improving the pharmaceutical supply chain of its internet hospital, adopting strategies of purchasing or generic manufacturing of drugs based on actual conditions to expand its product portfolio.In terms of pharmaceutical operations, the Huihui Health platform, which supports Shiqiang Internet Hospital, has basically achieved comprehensive coverage of commonly used medications for andrology through drug agency agreements and third-party collaborations, while also expanding its pharmaceutical portfolio for other medical specialties., to fully meet the requirements of physician prescriptions.

Shiqiang Medicine’s decision to build an internet hospital centered on andrology stems from its long-term dedication to this specialty. However, if it seeks to further extend its capabilities into other clinical departments in the future, does this mean starting entirely from scratch?

In fact,In building an internet hospital and promoting the online transition of physicians, Shiqiang Pharmaceutical has focused on improving doctor-patient relationships—by leveraging the internet hospital to help build a bridge for communication between doctors and patients.The Shiqiang Pharmaceutical team, which maintains closer ties with physicians, has chosen to launch its services with andrologists as a model, a strategy that will be replicated for other specialties.

As Shiqiang Pharmaceutical’s internal staff shift their mindset to focus more on serving doctors and patients and enhancing their experience—exemplified by the onboarding of andrologists onto online platforms—physicians from other departments are also becoming willing to explore digital engagement. The process of attracting physicians from other specialties to go online may not be as difficult as anticipated, largely because Shiqiang Pharmaceutical has a team well-versed in physician needs and possesses high-quality channels through its internet hospital.Shiqiang Pharmaceutical will also further bridge the gap between doctors and patients through its services, while ensuring clinical professionalism.

When categorized into comprehensive and specialized internet hospitals, comprehensive institutions currently dominate the mainstream. Their full range of medical departments enables them to better meet patients’ diverse healthcare needs. In contrast, specialized internet hospitals exhibit greater diversity in type, focusing primarily on specialties with strong consumer demand, such as chronic disease management, dentistry, and ophthalmology. These institutions typically address multi-layered patient needs, encompassing medical care, health management, and consumer-oriented services.

Amid the dominance of general hospitals, what are the advantages and niche for specialized internet hospitals?

From an operational perspective, the current participants in specialized internet hospitals can be categorized into the following types:

It categorizes this type into two classes.Certain platforms, such as e-commerce sites, inherently possess user traffic entry points.To address users’ medication purchasing needs and improve conversion rates, the platform initially covers general practice medical services and gradually expands into specialized fields. By ultimately providing specialized medical services, the platform meets user demands and drives revenue growth.

Another type of platform sustains continuous operations to keep physicians active online, building a vast pool of medical professionals and monetizing through lightweight online consultation services for patients.However, influenced by the dominant trend of “pharmaceutical e-commerce” in internet healthcare, the industry will ultimately evolve toward establishing internet hospitals, where physicians issue prescriptions to provide pharmaceutical services. In this process, platforms will also choose to develop specialized services in their areas of competitive advantage.

Both approaches ultimately evolve from general practice services to the strategic development of specialized specialty services, while providing pharmaceutical services through physician-prescribed medications.

Most pharmaceutical companies can be categorized under this group. After entering the internet healthcare sector, as upstream enterprises, they will expand their product portfolios from single-category to multi-category offerings in the process of enhancing their service chains.This type of platform connects physicians through pharmaceutical products and then leverages these physicians to acquire patient traffic.In the majority of current internet-based medical services, pharmaceuticals undoubtedly occupy a critically important position.The advantages of pharmaceutical company-led internet hospitals may also be reflected in this aspect: for instance, Shiqiang Pharmaceutical possesses its own flagship andrology products, such as Fufang Xuanju Capsules.

Disease-oriented internet healthcare platforms focus more on chronic diseases. For chronic conditions such as diabetes, these disease-centric platforms are bound to deepen their expertise and refine every aspect, including the etiology, treatment, prognosis of complications, and disease management of diabetes.Through disease-specific platforms, they will further attract traffic from doctors and patients. In this process, disease-led platforms also need to achieve offline geographic coverage., because patient needs do not end with online access to the most authoritative specialists in specific disease areas.

Summarizing the methods and key points of participation by various entities in internet hospitals, Yang Yunfeng, Head of Academic Affairs at Shiqiang Pharmaceutical, pointed out:

As medical resources are the most scarce resource, this means that participants in the internet healthcare sector, regardless of their approach, must consider the upper limit of physicians' service capacity.As the patient population grows, physicians are faced not so much with an increase in complex and rare diseases, but rather with a surge in the volume of patient inquiries, necessitating platform support for foundational service capabilities.

For instance, the Huihui Health platform, which underpins Shiqiang Internet Hospital, leverages health managers and artificial intelligence to address repetitive issues that physicians may encounter during clinical consultations. By minimizing ineffective communication, it enables doctors to work more efficiently, allowing them to manage a larger patient panel while conserving time and energy.

Specialized Internet hospitals possess more targeted diagnostic and treatment systems and knowledge graphs compared to platform-based Internet hospitals.Shiqiang Pharmaceutical is currently exploring a disease management system that integrates “psycho-behavioral therapy with pharmacotherapy,” collaborating with physicians in offline clinical practice to create an integrated digital diagnosis and treatment service package. This approach empowers physicians while enabling them to serve a larger patient population.

In fact,Operating around internet hospitals means, for traditional pharmaceutical companies, a restructuring of their promotional systems and an expansion of the breadth of their product pipelines. Internet hospitals also serve as a key lever for enterprises’ digital transformation.This is precisely why Mr. Yu Luping, Chairman of Shiqiang Group, designed Shiqiang Pharmaceutical’s internet healthcare business and regards it as a second entrepreneurial venture.

As for the development of internet healthcare platforms, one or two large-scale comprehensive internet healthcare platforms offering general practitioner services may emerge in the future.Meanwhile, highly specialized internet hospitals will emerge in large numbers, becoming one of the key tools supporting the diagnosis and treatment of specialized diseases and providing a new platform for basic medical research.