111 Group Reports Q1 2019 Financial Results with 98.5% Year-over-Year Net Revenue Growth
VCBeat (WeChat: vcbeat) has learned that on May 16, Beijing time, 111 Group (Nasdaq: YI) released its financial results for the first quarter of 2019. In the first quarter, 111 Group achieved net revenues of RMB 656 million, representing a year-on-year increase of 98.5%.
Non-GAAP losses continued to narrow, decreasing by 12.7% quarter-over-quarter. Meanwhile, core operational metrics showed sustained improvement this quarter, with the company’s overall profitability foundation and market competitiveness continuing to strengthen.
According to the performance report data, 111 Group’s total net revenue in the first quarter reached RMB 656 million, representing a year-on-year increase of 98.5% and a 17.6% increase compared to the fourth quarter of 2018. The gross profit margin in the first quarter rose by 1 percentage point from the previous quarter. Under Non-GAAP measures, the net loss continued to narrow, decreasing by 12.7% from the previous quarter.
Benefiting from the continued expansion of revenue scale and the strengthening of its overall profitability foundation, 111 Group’s brand influence has been steadily rising, enabling it to rapidly capture a larger market share. As of March 31, 2019, the company had provided services to more than 170,000 pharmacies. The B2B business has become a key driver of 111 Group’s revenue growth. Driven by expanded business scale and improved operational efficiency, product revenue saw significant growth, surging 246.5% year-over-year and increasing 39.2% quarter-over-quarter.
Dr. Yu Gang, Co-Founder and Executive Chairman of 111 Group, revealed that the company would continue to strengthen its B2B business segment in 2019. By the end of 2019, it was expected to add 60,000 pharmacies on top of the existing base, thereby establishing a virtual network covering 230,000 pharmacies nationwide and capturing more than 50% of China’s retail pharmacy market.
Furthermore, the implementation of a series of new healthcare reform policies, particularly the “4+7” volume-based procurement policy, has delivered an unprecedented shock to the hospital market, on which traditional pharmaceutical companies have long depended for survival. It is therefore imperative for these enterprises to urgently seek opportunities in out-of-hospital markets.
111 Group has established direct-procurement strategic partnerships with 98 renowned pharmaceutical companies both domestically and internationally, and has further deepened these collaborations. In January 2019, 111 Group signed a strategic cooperation memorandum with Eli Lilly, the multinational pharmaceutical giant. The two parties launched in-depth cooperation focusing on key areas such as the development of the “fourth terminal” for pharmaceutical distribution, big data, electronic prescriptions, doctor-patient services, and patient education. As Eli Lilly’s designated internet B2B distributor, 111 Group actively expands retail channels—including private hospitals and pharmacies—through its internet B2B model, helping Eli Lilly rapidly reach channels beyond traditional public hospitals.
On the B2C front, following the reorganization of its B2C business unit into four new divisions—Chronic Diseases, Privacy, General Diseases, and General Health—the company has further sharpened its focus on transitioning users from a consumer-oriented model to a medical-care-oriented one. In late March, the company launched a prescription renewal management system tailored for chronic disease patients. This initiative represents a systematic upgrade to its chronic disease management framework and is expected to significantly enhance user loyalty and medication adherence.
Dr. Yu Gang stated, “Since the beginning of 2019, we have continued to strengthen our core competencies in intelligent supply chain, cloud solutions, big data, and healthcare expertise, while refining our integrated ‘online + offline’ pharmaceutical and healthcare ecosystem. This empowers a growing number of industry participants and enhances user experience. It is our mission to address the pain points of inefficiency and opacity in China’s pharmaceutical distribution sector, as well as the prevailing challenges of difficult access to medical care and high medication costs for the general public. We remain committed to this mission and will accelerate our progress toward these goals.”
According to a report by Frost & Sullivan, the total size of China’s big health market approached RMB 10 trillion in 2017 and is projected to exceed RMB 17 trillion by 2022. Dr. Yu Gang once commented, “China’s pharmaceutical distribution industry currently suffers from multi-tiered and fragmented structures, leading to inefficiency and opacity, with the ultimate burden borne by the public.”
Meanwhile, with the continuous growth of internet users, online spending on daily necessities has become an irreversible trend, and this holds true for healthcare-related online consumption as well. Xia Chun, General Manager of Sanofi China’s Commercial and Emerging Business Department, believes that the traceability of all patients’ consumer behavior on the internet is a favorable factor, and that it is only a matter of time before the “Internet + Pharmaceuticals” model disrupts traditional models.
Industry experts believe that for pharmaceutical companies, leveraging the second and third terminals to rapidly scale up sales when new products cannot immediately gain access to hospitals is crucial for their future development. Currently, private hospitals remain a largely untapped market; as the fourth terminal in the industry chain, 111 Group can provide viable solutions to achieve comprehensive terminal coverage.
It is worth emphasizing that efficient supply chain management is one of the core competencies of 111 Group. The company leverages internet technology to serve consumers, optimize and enhance the entire value chain, and employs new retail methods to help pharmaceutical companies deliver medications to patients in the most transparent and efficient manner.
According to data from the 2018 Blue Book on China’s Pharmaceutical Market Development, the year-on-year growth rate of traditional pharmaceutical terminal sales slowed in 2018, whereas sales volumes through B2B and B2C online channels surged, with growth rates far exceeding those of other terminals. As national policies continue to open up and support intensifies, the advantages and prominence of online pharmaceutical channels will become even more pronounced in the future.
Dr. Yu Gang further stated, “The ‘online + offline’ new retail solution for pharmaceuticals launched by 111 Group integrates online and offline retail terminals. By leveraging the ‘fourth terminal’ represented by 111 and its unique T2B2C model, it empowers pharmacies, pharmaceutical companies, physicians, patients, and insurers, thereby establishing an integrated healthcare platform and ecosystem. Driven by technology, this initiative enables participants in the pharmaceutical ecosystem to better serve the public.”