111 Inc. Subsidiary YaoFang Shanghai Completes RMB 515 Million Pre-IPO Round at RMB 10 Billion Valuation, Expanding Growth Prospects

Dec 22, 2020 18:29 CST Updated 18:29

On December 22, 2020, 111, Inc. (NASDAQ: YI), the first Chinese internet healthcare company to list in the U.S., announced that its subsidiary operating in China, 111 Yaofang Technology (Shanghai) Co., Ltd. (“Yaofang Shanghai”), has completed its Pre-IPO financing for a planned spin-off listing on the STAR Market.

Pursuant to the investment agreement, Yaofang Shanghai’s pre-money valuation was RMB 10 billion (approximately USD 1.53 billion), with the new investors committing a total investment of RMB 515 million (approximately USD 78.75 million). The funds are intended to support 111.com’s business expansion, including meeting the growing demand from millions of patients for digital healthcare solutions.

It is reported that this round of financing constitutes a new capital increase following Yaofang Shanghai’s RMB 420 million (approximately USD 60.49 million) funding round in August this year. Investors in the previous round included Youkai Investment, Shanghai State-owned Enterprise Reform Fund, and Liangji Industrial, among others. Investors in the current round include SAIF Partners, Shenli Enterprise Management, Huasai Fund, Zhangjiang Torch Capital, Zhilin Capital, Shanghai Science and Technology Innovation Investment Co., Ltd., People’s Pudong Fund, Aixiang Investment, Zhangjiang Sci-Tech Innovation, and Huazhi Capital. To date, Yaofang Shanghai’s total cumulative financing has reached RMB 935 million (approximately USD 143 million).

Seizing the Internet Healthcare Sector: Technology-Driven Exponential Growth

Since 2019, with the establishment of the STAR Market and the pilot implementation of the registration-based IPO system in China, a large number of enterprises boasting premium industry sectors, clear growth logic, and high technological content have gained access to an efficient platform that fosters innovative breakthroughs and aggregates development momentum. In the internet healthcare sector, which commands a market space worth trillions of yuan, 1 Drug Network (1 Yao Wang) stands out as one of the most competitive and high-growth players.

Public information indicates that 1YaoWang is a digital pharmaceutical and healthcare platform established in 2010. Over the past decade, 1YaoWang has leveraged its first-mover advantage in the internet-based pharmaceutical and healthcare sector, focusing on intelligent supply chain management and digital technological innovation. By implementing an omnichannel commercialization strategy for pharmaceuticals and building a comprehensive ecosystem, it has connected patients, doctors, hospitals, pharmacies, pharmaceutical manufacturers, insurers, and pharmaceutical distributors, achieving exponential growth.

In September 2018, 111.com successfully listed on the NASDAQ in the United States. 111.com operates professional digital healthcare platforms, including the B2C pharmaceutical platform “111.com,” the internet hospital “1Zhen,” and the B2B pharmaceutical platform “1YaoCheng.” Its exceptionally rapid revenue growth has impressed the capital market, and it continues to maintain strong momentum. According to its latest quarterly report and previous financial statements, 111.com achieved a record single-quarter revenue in Q3 2020, with net revenues of RMB 2.36 billion, representing a year-on-year increase of 112.8%. This marked eight consecutive quarters of nearly 100% revenue growth since its IPO, and the cumulative revenue for the first three quarters of 2020 surpassed the full-year total of 2019.

Expanding Channel Ecosystem Advantages; 1Yao.com’s Undervaluation Becomes Increasingly Prominent

Tech companies in a phase of rapid growth are in even greater need of support and catalysis from the capital markets. 111, Inc. listed on the U.S. stock market as early as 2018. In recent years, its core business has demonstrated strong performance, and it has gradually built a healthcare technology ecosystem centered on “omni-channel pharmaceutical commercialization” and “digital pharmaceutical services.” Despite the continuous deepening of its technological attributes and internet industry value, the company has long been overlooked by many investors.

The Q3 financial report shows that 111.com’s B2B business processed 1.114 million pharmacy orders, a year-on-year increase of 297%; recorded revenue of RMB 2.202 billion, up 134.1% year on year; and achieved gross profit of RMB 58 million, surging 343.7% year on year. As of the end of September, the company’s total cash and cash equivalents, restricted cash, and short-term investments amounted to RMB 1.213 billion, with positive operating cash flow reaching RMB 25 million in the third quarter. Meanwhile, 111.com has comprehensively upgraded its T2B2C strategy and omnichannel commercialization platform strategy. Driven by digital technology innovation, its virtual pharmacy network has expanded to over 300,000 retail pharmacy terminals, while explorations into specialized internet hospitals and chronic disease patient–physician management platforms have deepened continuously, further expanding its channel ecosystem advantages and growth potential.

Since 2020, the healthcare sector has experienced a significant overall surge. In terms of valuation, 1YaoWang, as a sci-tech innovation enterprise starting from scratch with high growth potential, has a price-to-sales (P/S) ratio of only 0.51. This is far below the average P/S ratio of over 20x for its Hong Kong-listed peers, such as JD Health (29.97), AliHealth (24.45), and Ping An Good Doctor (16.67). Currently, with the advancement of China’s registration-based IPO system, the value of medical technology companies is being re-evaluated and rediscovered by institutional investors, including securities firms and investment banks. Yaofang Shanghai’s recent Pre-IPO financing round, which attracted capital injections from more than ten strategic institutional investors and achieved a pre-money valuation of tens of billions of yuan, undoubtedly signals that the market holds strong optimism regarding 1YaoWang’s severely undervalued status and its future business potential.

Regarding the new round of financing, Dr. Yu Gang, Co-founder and Executive Chairman of 111.com, stated: “We are energized by the continued commitment of these renowned industry investors to the digitalization of pharmaceuticals and healthcare, as well as their strong support for 111.com. This demonstrates investors’ confidence in the company’s rapid growth, the value it will create for society, and its ability to transform how the public accesses pharmaceutical and healthcare services.” He further emphasized, “111.com will remain dedicated to leveraging digital technology to organically connect patients with medications and healthcare services. We will continue to identify and capitalize on strategic market opportunities to solidify our leadership position in China’s digital pharmaceutical and healthcare market and accelerate the realization of our mission.”