JD Health Files for Hong Kong IPO with H1 Revenue of RMB 8.8 Billion and Full-Year Revenue Exceeding RMB 10 Billion

On the evening of September 27, the Hong Kong Stock Exchange disclosed the prospectus submitted by JD Health, which applied for a listing on the main board of the Hong Kong Stock Exchange.

According to the prospectus, JD Health’s revenues from 2017 to 2019 were RMB 5.6 billion, RMB 8.2 billion, and RMB 10.8 billion, respectively. In the first half of 2020, its revenue reached RMB 8.8 billion, representing a year-on-year increase of 76%. After excluding items such as changes in fair value and non-recurring gains and losses, its net profit margin reached 3.0% in 2018 and 3.2% in 2019, rising to 4.2% in the first half of 2020, reflecting a continuous improvement in profitability.

From its initial foray into pharmaceutical e-commerce to its entry into the field of internet healthcare, from expanding consultation services to offering health management solutions, and from independent operations to emerging as the third unicorn incubated by JD.com, JD Health has achieved successive leaps forward.

In the view of Yang Delong, Executive General Manager of Qianhai Open Source Fund: “JD Health achieved rapid performance growth during the pandemic, with its core sub-brand, JD Pharmacy, having become the largest online retail pharmacy in China by revenue. Driven by supportive policies and the development of the internet, JD Health has significant room for future growth, which will enhance investor confidence in the company. From an industry perspective, the internet healthcare sector is experiencing rapid development as a hot investment track, offering substantial growth potential in the years ahead.”

From its spin-off and independent operation last year to the formal submission of its IPO prospectus this year, JD Health has been regarded by the industry as a “dark horse” in China’s healthcare sector. In fact, starting from pharmaceutical e-commerce and evolving into the most extensive and comprehensive “Internet + Healthcare” ecosystem in the industry, JD Health has spent years honing its core supply chain capabilities.

In early 2014, JD.com began to venture into the healthcare sector. In July 2017, JD.com and Taizhou City signed a strategic cooperation agreement for “Healthy Taizhou.”

In December 2017, JD Health launched its online consultation service, marking its transition from pharmaceutical e-commerce to internet healthcare and establishing the initial framework of a closed-loop “medical-pharmaceutical integration” system.

Guided by its mission to “become the nation’s premier health steward,” JD Health entered a phase of rapid growth in 2019. In December 2019, the “JD Health Heart Center” was officially launched, becoming China’s first national-level specialized medical center dedicated to cardiovascular health services with an integrated online-offline model. In August 2020, JD Health introduced its strategic product, “JD Family Doctor,” providing users with comprehensive family health service packages.

The prospectus shows that JD Health’s core businesses are retail pharmacy and online healthcare services, with the former providing high-quality traffic to the latter, which in turn generates demand for the former. The strong synergy between these two businesses has ultimately formed a closed-loop system of “medical-pharmaceutical integration” for JD Health.

According to a report by Frost & Sullivan, the world’s largest corporate growth consulting firm, JD Health was China’s largest online healthcare platform and the country’s largest online retail pharmacy in 2019 by revenue.

According to the prospectus, JD Health’s online retail pharmacy business operates through three models: direct sales, online marketplace, and omnichannel layout. The direct sales model primarily refers to JD Pharmacy; the online marketplace model mainly involves third-party merchants setting up storefronts on the platform. As of June 30, 2020, JD Health’s online e-commerce platform hosted more than 9,000 third-party merchants, with 72.5 million active users. The omnichannel layout is designed to meet users’ urgent medication needs. As of June 2020, JD Health was able to provide same-day delivery, next-day delivery, and 30-minute delivery services around the clock (24/7) to users in 200 cities across China.

Online medical and health services primarily include online consultations, prescription renewals, chronic disease management, family doctor services, and consumer healthcare services. To better serve users, JD Health has established its own team of physicians as well as a network of external doctors; as of September 20, 2020, the platform had more than 65,000 registered doctors. Furthermore, JD Health has collaborated with top domestic experts such as Hu Dayi and Han Demin to co-establish 16 specialized centers, including cardiology and otolaryngology centers. In the first half of 2020, JD Health handled an average of approximately 90,000 online consultations per day, nearly six times the figure for the same period in 2019. As of June 30, 2020, over 150 million users had utilized the JD Health platform to purchase pharmaceuticals, health products, or medical and healthcare services.

The prospectus comprehensively elucidates the value JD Health creates for its customers: leveraging its core strengths to build an “Internet + Healthcare” ecosystem, enhancing healthcare services for the general population, driving the transformation of the healthcare industry, and generating substantial social value.

From the user’s perspective, the convenience of online medical services and the aggregation of high-quality medical resources enable users to transcend temporal and spatial barriers, enjoying one-stop, full-lifecycle, 24/7 healthcare services. By establishing specialty centers in collaboration with leading experts, JD Health provides users with scarce, high-quality medical resources, thereby improving accessibility to premium healthcare products and services for users, particularly those in remote areas.

For pharmaceutical and medical device suppliers, JD Health can effectively reduce their marketing costs while increasing market share and brand awareness. Leveraging its substantial traffic volume, JD Health provides clients with extensive user reach. Furthermore, by analyzing the preferences of its massive user base, JD Health assists clients in research and development as well as promotional activities.

For doctors and hospitals, JD Health can leverage its technological and supply chain capabilities to enhance the operational efficiency of partner offline hospitals and medical institutions, improve the service efficiency of physicians and other healthcare professionals, and increase their transparent income. The prospectus also indicates that JD Health’s online medical services are underpinned by a tiered diagnosis system. Through this triage system, consultations for minor and common conditions are conducted online via physician follow-ups, while consultations and follow-ups for critically ill patients are referred to specialists. This approach improves the efficiency and accuracy of consultations and follow-ups, significantly optimizing the allocation of medical resources.

During the COVID-19 outbreak this year, JD Health took swift action to ensure the supply of epidemic prevention materials to the front lines at the earliest opportunity, while also reducing or waiving commission fees for certain merchants on its platform. The team at its internet hospital mobilized to provide users with 24/7 online consultation services. Furthermore, JD Health co-launched the “Healthy China Pharmaceutical Subsidy Program,” which provides subsidies for registered impoverished households purchasing daily and chronic disease medications from JD Pharmacy. This initiative aims to cover 30 million impoverished users over the next three to five years.