Sinopharm Dental Files IPO Prospectus to Build a Comprehensive Oral Health Ecosystem through Upstream-Downstream Empowerment and Midstream Integration

The development level of oral healthcare is positively correlated with the overall standard of living in society.

The most rapid growth in the U.S. dental care industry occurred from the 1970s to the 1990s. By 1975, per capita disposable income in the United States had reached $5,600. Relevant data indicate that China’s per capita disposable income attained the same level in 2017.

Drawing on the successful experience in the United States, Sinopharm Capital’s research team is optimistic about China’s dental healthcare market, believing that the sector holds immense potential for development and is poised for a golden period of rapid growth lasting 15–20 years.

In October 2017, Sinopharm Capital officially announced the establishment of Sinopharm Dental Medical Devices (Shanghai) Co., Ltd. (hereinafter referred to as “Sinopharm Dental”). This move is understood to be a major strategic initiative by Sinopharm Capital to position itself in the Chinese dental market, leveraging its “integration of capital and business operations” strategy. The aim is to build a dental health ecosystem tailored to China’s dental industry by fully integrating capital with industry resources.

Sinopharm Dental leverages its capital advantages to rapidly integrate midstream distributors in the dental industry, building a platform that offers one-stop comprehensive solutions for professional dental products and value-added services through its subsidiary service network covering key provinces and cities across China. As of July 2019, Sinopharm Dental had acquired subsidiaries in 15 different provinces and cities.

How has Sinopharm Dental achieved such remarkable results within just over a year of its establishment? What is the underlying business logic, and how does it empower the dental industry? To address these questions, a reporter from VCBeat (WeChat ID: vcbeat) conducted an exclusive interview with Lv Sang, General Manager of Sinopharm Dental.

Since its inception, Sinopharm Dental has adopted an “Integration + Innovation” development model. On one hand, it leverages its strengths in mergers and acquisitions to rapidly integrate outstanding distributors across China, thereby gaining swift access to major hospitals, clinics, and dentists nationwide. On the other hand, it innovatively provides supply chain finance services, DSO (Dental Support Organization) services, and e-commerce services, offering more professional, integrated dental solutions to both public and private end-users.

Currently, Sinopharm Dental has established partnerships with various manufacturers, securing national general agency rights for a comprehensive portfolio of products covering clinical endpoints. These include oral imaging diagnostics, digital diagnosis and treatment, infection control, dental implants, excellence in general dentistry, microscopic root canal therapy, as well as teaching and simulation systems supporting professional education.

Mr. Lü Sang stated that, as a next step, Sinopharm Stomatology will accelerate the expansion of the scale and variety of its general distributor product portfolio, striving to rapidly introduce products with strong market competitiveness and high channel acceptance. It is understood that Sinopharm Stomatology offers terminal enterprises a wide range of product series, allowing clinical end-users to select the most suitable products based on their specific needs.

Further elaborating on the advantages of Sinopharm Dental, Lu Sang smiled and told VCBeat that this requires a detailed discussion of the business model currently being prioritized:

1. Offline Tradition: Expand the company’s overall business scale and performance through rapid integration of mergers and acquisitions, while the headquarters empowers and optimizes resource allocation to further enhance the group’s profitability and brand image.

2. New Retail: It can provide enterprises with a one-stop procurement experience for dental consumables, equipment, and services, driven by data on “people, goods, and scenarios.” It is understood that Sinopharm Dental will soon pilot new retail initiatives in several provinces, expanding an innovative model integrating distribution, settlement, and services. On one hand, this will further liberate manufacturers and distributors, enhancing service efficiency; on the other hand, it will effectively address pain points in clinic procurement, optimize inventory management and the corresponding capital occupancy ratio, while ensuring adequate category availability and shortening order delivery times.

3. Supply Chain Finance: Sinopharm Dental is gradually introducing financial leasing, factoring, sale-and-leaseback, and direct leasing solutions tailored for distributors and clinics, along with the innovative “Zero-Start Dentist Support Program,” to help clinical end-users rapidly expand in areas such as equipment upgrades and clinic openings.

4. DSO and Innovation Projects: Involves equipment hosting, pre-sales and after-sales support, medical engineering design for clinics, and innovative initiatives aligned with market development trends.

5. Headquarters' General Agent Products: Spanning seven major product lines to create a comprehensive, one-stop dental ecosystem solution.

For upstream dental manufacturers, the customer base is large and fragmented, encompassing specialized dental hospitals, stomatology departments in general hospitals, private dental chains, and independent clinics, each with distinct product requirements. Addressing these challenges, Sinopharm Dental, as a midstream platform, facilitates the precise targeting of products to appropriate customer segments on behalf of upstream enterprises, thereby rapidly expanding market share. Furthermore, through collaborations with cross-industry partners, Sinopharm Dental provides customers with a broader range of service solutions.

In terms of integrating the upstream and downstream industrial chains and expanding the market, Sinopharm Dental leverages not only the resources in the pharmaceutical and medical device sectors backed by Sinopharm Group but also the strength of its team. It is reported that members of the Sinopharm Dental team all come from Fortune 500 companies, possessing certain backgrounds in pharmaceuticals and medical devices as well as strong business execution capabilities.

To mitigate the professional liability risks of dentists and promote the reasonable and lawful resolution of doctor-patient disputes, Sinopharm Stomatology has jointly launched a professional liability insurance policy specifically tailored for dental practitioners with PICC Property and Casualty Company. It is understood that this insurance is purchased voluntarily by doctors at their own expense, with a maximum compensation limit of RMB 1 million. Claims are settled promptly following loss assessment and mediation conducted by experts from the Medical Dispute Mediation Committee or the Medical Association.

On one hand, dental practitioner liability insurance can mitigate the financial risks associated with professional practice for dentists in scenarios such as clinic-based practice, inter-hospital consultations, and multi-site practice. On the other hand, this insurance also covers accidental risks that dental practitioners may encounter at their workplace, while performing job duties, or during their commute, thereby providing more comprehensive protection for dental professionals.

“We hope to leverage our own capabilities, together with the strength of cross-industry partners, to provide more comprehensive protection for dental practitioners’ practice, thereby creating a secure clinical environment for dentists,” said Lv Sang. “Physician liability insurance serves as a lubricant in the doctor-patient relationship; it not only safeguards physicians’ rights but also respects patients’ interests.”

“Sinopharm Dental, as a pioneer in the dental industry for ‘insight into the ecosystem and integrated empowerment,’ also bears responsibility towards consumers and society,” said Lu Sang.

China’s dental healthcare market is vast, and future dental care will become increasingly standardized. In this process, the driving forces of branding, management, and digitalization will become more pronounced. Lv Sang told reporters, “Sinopharm Dental leverages its platform capabilities to empower both upstream and downstream segments of the dental industry, helping enhance product innovation capabilities and accelerate market entry, while providing integrated solutions and services to clinical endpoints.”

Regarding future plans, Lu Sang stated that Sinopharm Dental will continuously accelerate its integration efforts by leveraging capital to invest in dental distributors with years of deep-rooted presence across various regions. This strategy aims to further strengthen its footprint in key provinces and cities within China, thereby achieving rapid nationwide coverage. Specifically, Lu Sang outlined three criteria:

First, scale. The distributors acquired by Sinopharm Dental must rank among the top three in their local markets.

Second, there is extensive terminal coverage.

Third, the founder endorses Sinopharm Dental’s development philosophy and is willing to embark on this entrepreneurial journey together with Sinopharm Dental.

Sinopharm Dental has a basic profile for the leaders of acquired companies, preferring business owners born in the 1980s. On one hand, individuals from this generation are currently in their thirties or forties—prime working age—and possess sufficient energy and time to personally lead subsidiaries toward sustainable long-term development. On the other hand, these entrepreneurs tend to have stronger innovative awareness and a long-term vision, enabling them to collaborate with Sinopharm Dental for five to eight years or even longer.

“Many companies are talking about ecosystem chains. My understanding of an ecosystem chain is to abandon the previous pure competitive relationship and establish a diversified, win-win business model with upstream, midstream, and downstream partners, including cross-industry collaborators,” said Lu Sang. “They can bring traffic and services to the platform, while we can leverage this traffic to gain more exposure, deepen our understanding of customers, and enhance our ability to reach end users.”

“The oral care market is not characterized by cutthroat competition; rather, it boasts substantial capacity. Sinopharm Oral Care aims to collaborate with industry peers to advance the development of China’s oral healthcare sector,” said Lv Sang. “In this process, Sinopharm Oral Care, as a comprehensive midstream service provider, further empowers both upstream and downstream segments of the oral care industry.”