Urban Healthcare Files IPO Prospectus: A Profitable New Model for Primary Care in China's Greater Bay Area

Primary healthcare has long been the weak link in China’s medical system, characterized by inadequate infrastructure and limited service capacity. Despite surging demand, patients still find themselves drawn to large public hospitals due to their “siphon effect.”

Driven by a combination of factors including policy, capital, technology, talent, and distribution channels, the primary healthcare sector has never lacked players genuinely committed to strengthening medical service capabilities, expanding the boundaries of healthcare delivery, and ensuring practical implementation. In fields such as internet healthcare, pharmaceutical distribution, chain pharmacies, novel clinics, and independent third-party medical institutions, there is a clear trend of capital and talent flowing toward the primary care level, while trust between doctors and patients in primary healthcare is being rebuilt.

VCBeat (WeChat ID: vcbeat) has learned that Shenzhen Dushi Pharmaceutical Co., Ltd. (hereinafter referred to as “Dushi Pharmaceutical”), a company listed on the National Equities Exchange and Quotations (NEEQ), has recently undergone a strategic upgrade to become “Dushi Medical.” This move integrates its medical, pharmaceutical, and patient-centric business segments to directly address pain points in primary healthcare. The rationale behind this strategic upgrade is to establish a closed-loop ecosystem connecting pharmaceuticals, medical services, and patients; enhance primary healthcare service capabilities; and deepen its presence in the Guangdong-Hong Kong-Macao Greater Bay Area.

Urban Pharma was established in May 2010, with its headquarters in Shenzhen. The company primarily engages in the sales of pharmaceuticals and medical devices through offline self-operated chain pharmacies and online e-commerce platforms. In 2013, the company officially launched its pharmaceutical e-commerce initiative, successfully listing on third-party platforms such as Tmall, JD.com, and Yihaodian. In 2015, the company began to vigorously develop its self-built e-commerce platforms, including “Urban Pharma Online” and the “Urban Pharma APP.” On January 23, 2017, it was successfully listed on the National Equities Exchange and Quotations (NEEQ), leveraging capital markets to accelerate its rapid growth. In February 2017, planning for the Urban General Outpatient Clinic and Cloud Hospital was officially initiated. In the same year, the company secured RMB 30 million in Series A financing from Tianyi Investment Group (Zhongwei Fund).

What is the logic and strategy behind the strategic upgrade of urban healthcare? Using urban healthcare as a case study, how can new development models for primary care be identified? To explore these questions, VCBeat conducted an exclusive interview with Lin Peixin, Co-founder and CEO of Urban Healthcare.

It has been learned that, from an organizational structure perspective, New Urban Healthcare is primarily built around three core business segments: “Medical Services,” “Pharmaceuticals,” and “Patient Care,” which are overseen by Lin Xuhui, Zhang Guanying, and Lin Peixin, respectively.

The interviewee for this session is Lin Peixin, widely known to the public as “Mr. Lin.” He was previously primarily responsible for medical management at a Grade 3A hospital. Before that, he was better known in the internet healthcare circle as the Founder and CEO of Call a Doctor.

He revealed that Urban Healthcare is no longer a pharmacy in the traditional sense; it has undergone significant transformation. Following its upgrade, Urban Healthcare will focus on developing businesses across three core pillars: “Medical” (hospitals, outpatient clinics, private practices, independent third-party institutions, etc.), “Pharmaceutical” (pharmacies, pharmaceutical e-commerce, drug wholesale, etc.), and “Patient” (medical services, etc.). Centering on “Medical,” “Pharmaceutical,” and “Patient,” Urban Healthcare aims to revitalize resources and simultaneously expand the depth and breadth of its services. The specific strategies are as follows:

First is “medical services.” We are steadily advancing the development of third-party imaging centers, hospitals, clinics, and other offline related institutions. Currently, Dushi Healthcare operates three comprehensive outpatient departments, seven dental outpatient departments, two traditional Chinese medicine (TCM) outpatient departments, one primary general hospital, one third-party testing and inspection center, one hemodialysis center, and one assisted reproductive technology laboratory.

Next is “pharmaceuticals.” This segment primarily comprises self-operated chain pharmacies and online sales platforms. The company adopts a development strategy integrating physical chain stores with the internet, leveraging offline brick-and-mortar chains as the foundation while combining them with online operations to achieve complementary advantages. As of June 2019, the number of directly operated stores reached 56. Currently, these store locations are mainly distributed across Shenzhen, with expansion planned into major cities within Guangdong Province by 2020. Store development focuses on community and commercial areas, with distinctive DTP (Direct-to-Patient) pharmacies established around hospitals as a key feature.

Finally, there is the “patient.” Whether it involves medical care or pharmaceuticals, all efforts ultimately revolve around serving patients. Dushi Healthcare will next reorganize its operations by establishing streamlined processes centered on informatization, standardization, and service orientation, and will deploy a new system platform to better serve patients, hospitals, and the pharmaceutical industry.

In Lin Peixin’s view, Dushi Healthcare is currently focused on strengthening its core businesses in medical services and pharmaceuticals to solidify its competitive moat. Unlike other platforms that pursue simultaneous nationwide expansion, “Dushi Healthcare’s strategic positioning is to penetrate the grassroots level within the Guangdong-Hong Kong-Macao Greater Bay Area, delivering the services most needed at the primary care level. At a minimum, there are no plans for relocation or expansion outside this region over the next three years.”

“With regard to medical and pharmaceutical licenses, Urban Healthcare has secured all dozen-plus licenses required for its operations; the first internet pharmaceutical license in Shenzhen was awarded to Urban Pharma. Leveraging Shenzhen’s unique geographical advantages and open-policy environment, we are positioned to deeply cultivate the Guangdong-Hong Kong-Macao Greater Bay Area, where our existing network of medical institutions is now well-established.”

How Can “Medical Care,” “Pharmaceuticals,” and “Patients” Within the Region Be Better Integrated? Lin Peixin stated that we have already achieved interoperability among hospitals, pharmaceuticals, and medical insurance—known as the “Three Medicals” integration—and leveraged technological solutions to retain and transform data, thereby reducing costs and improving efficiency. “In Huizhou, we have implemented pioneering pilot initiatives, and currently, all our medical institutions and pharmacies are fully equipped to accept medical insurance payments.”

For internet healthcare, Dushi Medical’s proprietary “Dushi Medicine APP” will undergo a comprehensive upgrade to better serve hospitals, physicians, pharmacies, and patients.

Summarizing this strategic upgrade, Lin Peixin stated, “This is equivalent to another innovation and iteration for Dushi Healthcare. However, Dushi Healthcare is not an abstract concept, nor does it involve reckless, cost-ignorant offline expansion. Instead, we are building a closed-loop system integrating medical services and pharmaceuticals. Dushi Healthcare adopts a pragmatic approach; notably, all hospitals, clinics, and pharmacies within our current ecosystem are now profitable, which is of paramount importance to us.”

Following the upgrade, Dushi Medical employs nearly 500 staff members, with projected 2019 revenue of RMB 320 million and net profit of approximately RMB 5 million.

According to the "Statistical Bulletin on the Development of China's Health and Hygiene Undertakings in 2018" released by the National Health Commission, the total number of medical and health institutions nationwide reached 997,434 by the end of 2018, an increase of 10,785 from the previous year. Among them, there were 33,009 hospitals, 943,639 primary medical and health institutions, and 18,034 specialized public health institutions. In 2018, private hospitals accounted for 63.5% of the total number of hospitals, an increase of 3.1 percentage points from the previous year. The proportion of outpatient visits and hospitalizations in private hospitals rose from 14.2% and 17.6% in 2017 to 14.8% and 18.3%, respectively.

In 2018, the outpatient service volume of township health centers and community health service centers (stations) increased by 2.1% year-on-year, higher than the national growth rate of total diagnoses and treatments (1.6%). It accounted for 23.1% of the national total outpatient volume, an increase of 0.1 percentage points from the previous year, indicating a further improvement in the service capacity of primary healthcare institutions.

Currently, there are two mainstream approaches to extending healthcare services to the grassroots level. One is the pure new-clinic model, which often faces challenges such as low chain affiliation rates and difficulties in cross-regional expansion. Chain clinics in the market generally suffer from a shortage of physicians and struggle to achieve profitability.

Another approach is internet-based healthcare, which aims to expand the accessibility of medical services. However, online platforms predominantly serve public hospitals and physicians, require support from offline institutions, and face increasingly high customer acquisition costs.

Relatively speaking, Urban Healthcare boasts a relatively complete closed-loop integration of medical services and pharmaceuticals. Within its system, the pharmaceutical segment generates over RMB 200 million in revenue, while the medical services segment brings in tens of millions of yuan.

“You will find that as online internet platforms mature, they increasingly rely on offline institutions for service delivery and support. Moreover, due to the inherent nature of healthcare, the development of offline medical institutions cannot proceed too rapidly; therefore, focusing on establishing a strong presence in one region first is a more feasible approach.”

In summary, the significant adjustments to the offline landscape of urban healthcare can be distilled into three key priorities: self-built institutions, regional strategies, and standardized deployment.

First, self-built institutions. Within the urban medical system, all hospitals, outpatient departments, clinics, and third-party independent facilities (such as hemodialysis centers, clinical laboratories, and imaging centers) are self-built to facilitate quality control.

Second, regional strategy. In the medical sector, we focus on a specific region, primarily the Guangdong-Hong Kong-Macao Greater Bay Area. With offline physical facilities established in Shenzhen, Huizhou, Guangzhou, Zhongshan, and Foshan, we will form a multi-tiered and comprehensive layout of medical entities, thereby enhancing patients’ accessibility to healthcare services.

Third, standardized layout. Urban medical offline entities all have relatively standardized hardware layouts and clinical operation procedures. From preparation, renovation, opening to break-even, there is a mature single-store model for each store, which is based on the years of operational experience in the medical sector by urban healthcare providers.

Outlining Urban Healthcare’s strategy, Lin Peixin revealed, “We have been consistently streamlining our operations to focus exclusively on core medical services. Throughout this process, we have not placed excessive emphasis on certain conceptual frameworks. In areas where we lack competitive advantages, our strategy is to collaborate with other institutions.”

“No cash burn, no reckless spending. The pharmacies and medical facilities established by Urban Healthcare are tangible and visible, capable of generating revenue and profits. Our single-store model has reached its current state through long-term operational refinement. For instance, one of our comprehensive outpatient clinics serves approximately 200 outpatients per day, with each ultrasound machine handling around 45 patients.”

Leveraging strengths and addressing weaknesses, Dushi Medical, as a novel model integrating medical services and pharmaceuticals in primary healthcare, has currently planned to delist from the New Third Board to pursue further capital operations.