111 Group Reports Record Net Revenue Surge of 123.2% YoY in Q3, Files New Prospectus

VCBeat (WeChat ID: vcbeat) has learned that 111 Group (NASDAQ: YI), the first Chinese internet healthcare company to list in the U.S., released its financial results for the third quarter ended September 30, 2019.

The report shows that 111 Group’s net revenue reached RMB 1.11 billion in the third quarter, a year-on-year increase of 123.2%, hitting a record high. Net revenue has exceeded the upper bound of the income guidance provided to the capital market for four consecutive quarters. The accelerated revenue growth and improved efficiency have begun to highlight the scale effects of 111 Group. In the third quarter, 111 Group’s gross profit also hit a record high, with a year-on-year increase of 204.3%.

Dr. Yu Gang, Co-founder and Executive Chairman of 111 Group, stated, “The pharmaceutical and healthcare industry is undergoing unprecedented transformation. Particularly as we entered the third quarter, the Chinese government’s resolve and efforts to support the development of the ‘Internet + Healthcare’ sector have continued to intensify. Bolstered by favorable policies and capital investment, 111 Group has adhered to its model of empowering the pharmaceutical and healthcare ecosystem through technology, resulting in sustained growth in customer stickiness and a significant improvement in operational efficiency. Revenue for the first three quarters doubled year-on-year, while profitability strengthened substantially. We remain confident in maintaining rapid and healthy growth in the future.”

Since the beginning of this year, 111 Group’s economies of scale have become increasingly pronounced, with an accelerated growth trajectory firmly established.

As of September 30 this year, 111 Group’s revenue for the first three quarters doubled year-on-year, reaching a cumulative total of RMB 2.604 billion, while net income increased by 112% year-on-year, surpassing the full-year revenue total of RMB 1.79 billion recorded last year.

Q3, 111 Group's Core SegmentsB2B BusinessMaintaining strong momentum, the scale of pharmacies served further expanded to 210,000, a year-on-year increase of 161.5%, with business revenue reaching RMB 909 million, a year-on-year increase of 229.5%.

In addition to growth in scale and revenue, customer stickiness in the B2B business significantly strengthened in the third quarter, with the number of orders reaching 280,000, a 45.1% quarter-on-quarter increase, among which same-store order volume growth contributed 24.6%.

This represents a qualitative transformation driven by 111 Group’s vigorous promotion of its technology-empowerment strategy. In the third quarter, 111 Group fully implemented services such as one-click inventory entry, CRM, and intelligent procurement, significantly enhancing operational efficiency. Through the one-click procurement solution provided by 1 Drug City (Yi Yao Cheng), pharmacies can now complete purchasing tasks that previously took several hours in just 15 minutes.

The application of a large-scale, independently developed intelligent management system has significantly boosted the company's overall operational efficiency and further reduced costs.

In the third quarter, the Group’s operating expenses as a percentage of net revenue decreased from 29.1% in the same period last year to 14.9%. Warehousing and logistics expenses as a percentage of net revenue declined from 4.2% in the same period last year to 2.8% in the current quarter.

Furthermore, to further focus on customer-centricity and enhance customer stickiness, 111 Group has furtherOptimizing the Supply Chain Network。

In the third quarter, following the establishment of four major operational centers in East, South, North, and West China, 111 Group added a Central China Operational Center.

Technology empowerment has made pharmaceutical distribution more efficient, reduced intermediate links, lowered operating costs, significantly enhanced the company’s profitability, and accelerated growth has also allowed economies of scale to materialize.

In the third quarter, 111 Group’s gross profit reached a record high, surging 204.3% year over year, while cumulative gross profit for the first three quarters rose 51.2% compared with the same period last year. Meanwhile, the non-GAAP loss further narrowed, with the non-GAAP loss as a percentage of revenue decreasing by 1,240 basis points year over year and falling into single-digit percentages for the first time.

Comprehensive, refined operational management has enabled 111 Group to achieve high-quality growth, while the government’s continuous policy liberalization has further broadened its market prospects.

Since the beginning of this year, the Chinese government has continuously strengthened its determination and efforts to support the development of the “Internet + Healthcare” industry. In January, the national “4+7” volume-based procurement pilot program was launched; in June, it was announced that internet medical services would be included in medical insurance reimbursement and restrictions on the online sale of prescription drugs would be lifted, thereby completely removing policy barriers that had hindered industry growth; in September, leveraging this momentum, the “4+7” volume-based procurement was expanded nationwide.

With the nationwide implementation of volume-based procurement, entry barriers to the hospital market have risen sharply, forcing a large number of non-winning products to shift their focus to the out-of-hospital market. Meanwhile, as new policies such as accelerated drug approvals, Diagnosis-Related Groups (DRGs), key monitoring lists, and clinical medication evaluations take effect, many high-priced innovative specialty drugs and non-first-line therapies are also redirecting their market strategies toward the out-of-hospital sector.

As can be seen,Online and Offline Out-of-Hospital Retail Channels Are Becoming the New Focus of Pharmaceutical Companies’ Strategic Transformation. As a leading enterprise in China's internet healthcare sector, 111 Group will usher in unprecedented development opportunities with its unique online-to-offline integrated channel resources.

Currently,111 Group operates the “three pillars” of its business: the B2C platform 1 Drug Store, the B2B platform 1 Drug City, and the internet hospital platform 1 Zhen., while leveraging its core strengths in intelligent supply chain, cloud services, big data, and medical expertise to comprehensively build an integrated online-offline pharmaceutical and healthcare ecosystem.

To address the “4+7” policy, 111 Group pioneered an integrated “O+O” pharmaceutical solution, aiming to empower pharmaceutical companies, pharmacies, physicians, and insurers within the healthcare ecosystem through its unique T2B2C (Technology-empowered Business for Better Public Service) model.

This model has been widely welcomed by pharmaceutical companies, and 111 Group has also becomeNumerous Leading Pharmaceutical Companies Enter the Out-of-Hospital Marketthe preferred choice. As of September 30, 111 Group has established strategic collaborations with 150 renowned pharmaceutical companies both domestically and internationally, leveraging its channel advantages to help these companies reach patients.Covers the out-of-hospital market, including pharmacies, clinics, and private hospitals。

In the third quarter, 111 Group in“Internet Healthcare + Insurance”Another milestone in ecosystem development: following Manulife-Sinochem and MSH China, a strategic partnership has been established with Taikang Online to comprehensively build a closed-loop service integrating “diagnosis, treatment, and payment.”

With the lifting of the ban on online sales of prescription drugs and the expanded implementation of the “4+7” volume-based procurement program, the out-of-hospital market is poised to see incremental growth worth hundreds of billions of yuan. The continuously upgraded and expanding pharmaceutical and healthcare ecosystem of 111 Group will capture a larger market share, demonstrating significant growth potential.