Yaojingling Files IPO Prospectus: Empowering Independent Pharmacies with Data-Driven SaaS Solutions
In 2017, the overall scale of China’s retail pharmacy market exceeded RMB 400.3 billion. Policies such as prescription outflow and tiered diagnosis and treatment are expected to create additional growth opportunities. While other sectors are undergoing subtle changes, the retail pharmacy industry is experiencing a period of bold consolidation and strategic alliances. On one hand, strong capital involvement has triggered a wave of mergers and acquisitions; on the other hand, continuous policy introductions—including the “Two-Invoice System,” tiered diagnosis and treatment, and the separation of prescribing from dispensing—are consistently releasing positive signals.
However, the entire pharmacy retail sector involves multiple stakeholders in the pharmaceutical supply chain, including pharmaceutical manufacturers, pharmaceutical companies, and pharmacies. As policies governing the pharmaceutical distribution channel become more liberalized and transparency increases, identifying the right entry point within this complex industrial chain becomes critical. This requires not only technology capable of breaking down barriers within the pharmaceutical industry but also a deep understanding of the pain points faced by the pharmacy sector, enabling solutions that are precisely tailored to address these specific challenges.
Yaojingling is a platform that enters the retail pharmacy sector through pharmacy SaaS services, integrating resources from upstream pharmaceutical wholesalers and data from downstream terminal retail pharmacies. It provides SaaS tools for independent pharmacies and regional pharmacy chains, offering technical services such as centralized procurement, intelligent warehousing and distribution, refined operations management, and CRM-based membership management. By empowering retail pharmacies with its intelligent supply chain platform, Yaojingling collaborates with them to deliver in-depth health services to consumers.
In addition to serving retail pharmacies, Yaojingling leverages technology-driven data services to provide big data decision-making support for both the upstream pharmaceutical supply chain and end-user pharmacies, ultimately facilitating the new retail transformation of “pharmacies + internet.”
Supported by policy, the supply chain—from pharmaceutical manufacturers and distributors to terminal pharmacies—is becoming increasingly transparent, allowing retail pharmacies to capture a larger share of the market. This opening-up process has triggered a wave of mergers, acquisitions, and chain expansions, leading to greater market concentration in the retail pharmacy sector. Meanwhile, independent pharmacies and regional chains must leverage information technology to enhance their management capabilities if they are to secure a foothold in the market.
From a policy perspective, since the launch of the “New Healthcare Reform,” the “Guiding Opinions on Deepening the Reform of the Medical and Health Care System” and related supporting policies have been successively promulgated. Initiatives such as the separation of medical services from pharmaceutical sales, control over the proportion of drug costs in total medical expenses, development of a multi-tiered healthcare system, reform of medical payment mechanisms, strengthening of primary healthcare, implementation of the national essential medicines system, centralized procurement, and reforms in the pharmaceutical circulation sector have begun to redefine market boundaries.
For hospitals, pharmaceuticals have shifted from a profit-generating segment to a cost center. For retail pharmacies, policies such as the outflow of outpatient prescriptions will create additional growth opportunities. According to IQVIA’s “2017 Comprehensive Overview of China’s Pharmaceutical Market,” the total terminal sales of China’s overall pharmaceutical market reached RMB 1.36 trillion in 2017. The retail pharmacy channel accounted for 18% of this share, with a growth rate of 5.3%, while the hospital channel experienced a significant slowdown in growth, at only 3.6%.
The growth driver for retail pharmacies is not first-tier cities, but rather prefecture-level and county-level retail pharmacies, which account for 76% of the total and represent a year-on-year increase of 4.8%. Furthermore, the growth rate of county-level pharmacies slightly exceeds that of urban pharmacies, reaching 7.0%.
As the data reveals, pharmacies operating under the “mom-and-pop” model scattered across cities constitute a vast and fragmented landscape. In 2017, the chain affiliation rate of retail pharmacies was approximately 50.5%, while the top ten pharmacy chains accounted for only about 19% of total sales.
Beyond chain pharmacies, independent stores and regional chains can also capture a significant market share. In the United States, since the wave of consolidation began in the 20th century, the market has been dominated by the three giants: CVS, Rite Aid, and Walgreens. However, in the 2016 competitive landscape of the U.S. retail pharmacy market, independent pharmacies and small chain pharmacies accounted for 34% of the market share, approaching CVS’s 38%. This indicates that, aside from mega-chains, independent stores and regional chains still have substantial market potential.
It is certain that single-store operations can survive, but how to sustain their viability remains an unavoidable challenge.
Wang Wenfeng, founder of Yaojingling, stated to VCBeat: “There are still many opportunities in pharmaceutical retail. As large chains expand and M&A activity accelerates, independent pharmacies and small chains will face significant survival challenges. We aim to build a supply chain-based S2B2C platform, using SaaS services for pharmacies as an entry point to integrate resources across the upstream and downstream industry chain. This will help consolidate the currently fragmented pharmacy sector and provide them with chain-like services.”
Yao Jingling’s approach to entering the pharmaceutical supply chain centers on pharmacies, delivering an S2B2C service loop. It gains access to pharmacies by providing terminal pharmacy SaaS solutions and offering value-added services. While serving pharmacies, it aggregates substantial data to provide intelligent feedback and decision support to the upstream supply chain; moreover, serving pharmacies inherently entails better addressing consumer needs.
For independent retail pharmacies, Yaojingling’s current SaaS-based pharmacy ecosystem service platform has developed five major systems, including a marketing system, an ERP system, one-click inventory entry, a logistics system, and a procurement system. It is commonly believed that the pharmacy industry relies on mergers and acquisitions for expansion and has low operational barriers. However, pharmacy operations differ from other retail sectors, with stringent compliance requirements. Poor management or non-compliance can more readily lead to existential crises. Therefore, enhancing refined operational and management capabilities, as well as improving operational efficiency, is crucial for the sustainable development of pharmacies.
Wang Wenfeng, founder of Yaojingling, stated, “The core function of Yaojingling is to provide value-added services to pharmacies and increase their revenue. Currently, we have received very positive market feedback. It is by enhancing pharmacy stickiness through our core services that we can integrate the industry chain. If we were merely building an e-commerce platform, it would be difficult to attract pharmacies to join.”
Yaojingling’s SaaS platform provides integrated information value services to independent pharmacies. In procurement, it enables intelligent purchasing and one-click inventory entry. For GSP compliance, it automates maintenance plans and acceptance records, performs automatic data backups, and sends near-expiration alerts. In sales, it facilitates precision marketing, WeChat mall ordering, third-party traffic redirection, and follow-up management. For inventory management, it supports intelligent stocktaking, category optimization, and zero-inventory models. The precise TMS drug traceability customer service system now enables drug tracking akin to how Cainiao Guoguo tracks parcels.
In addition to common SaaS offerings, Yaolingjing’s “One-Click Inventory Entry” feature, launched in 2016, can save a significant amount of time. Currently, most independent pharmacies still rely on manual inventory counting and stock entry. The One-Click Inventory Entry feature reduces what previously took hours to just seconds.
The zero-inventory model helps expand retail product categories. Traditionally, retail pharmacies were limited by their physical store space and could only display a selection of medications in their showcases. However, with the zero-inventory model, consumers can scan a QR code to view the entire drug catalog. This effectively upgrades the pharmacy’s operational footprint through an online sales model, freeing retail pharmacies from the constraints of limited physical space and enabling store managers to intelligently manage all pharmacy locations.
The ability to successfully implement an exclusive S2B2C model lies not only in using products to better address the pain points of terminal pharmacies, but also in integrating upstream distributor supply chain resources.
Currently, Yaojingling has achieved coverage of 120 supply chain entities in Henan Province, with a penetration rate of 70%, reaching over 5,000 pharmacies. The platform processes 570,000 orders per month, with a monthly transaction volume of RMB 1.5 billion, and serves 8 million pharmacy members. At present, Yaojingling has also completed its initial layout in Gansu Province, covering 80% of the upstream supply chain distributors in the region.
Attracting distributors to join the platform is a major industry challenge. Traditional pharmaceutical companies, often constrained by path dependence, are frequently reluctant to adopt new business models. The competitive advantage of Yaojingling lies in its ability to provide data-driven feedback to distributors. By delivering deep-level services to pharmacies, Yaojingling can access granular pharmacy data and precise consumer profiles within a three-kilometer service radius of each pharmacy.
The service loop built by Yaojingling has a solid foundation in serving pharmacies, rather than being an impractical fantasy.
Many B2B e-commerce platforms are essentially internet-based tools, characterized by their ability to “reduce costs and improve efficiency.” They have replaced the traditional model of telephone-based order placement by integrating directly with enterprise information systems. Given that pharmaceutical procurement is not a low-frequency activity, these transformations deliver tangible convenience and benefits.
However, there is a formidable challenge that is difficult to overcome. This model requires disrupting the entire supply chain, yet the B2B pharmaceutical e-commerce sector is characterized by high upfront investment and low returns. From a cost-benefit perspective, traditional pharmaceutical companies lack the incentive to pursue such new business ventures. Meanwhile, beyond subsidies, ensuring strong stickiness with both the supply chain and pharmacies remains a significant issue.
Yaojingling’s ability to penetrate B2B transactions after serving pharmacies lies in its capacity to connect the entire pharmaceutical distribution chain through data. Yaojingling possesses the industry’s most comprehensive drug coding database, the “Drug Dictionary,” along with a proprietary code-matching algorithm. When pharmacies procure and receive inventory, they can directly import the data into the Yaojingling SaaS system with a single click.
Wang Wenfeng, founder of Yaojingling, explained, “In essence, just as Lianjia’s core asset is its ‘Property Dictionary,’ which houses the most comprehensive database of verified property listings in the industry, we were the first to propose and establish a ‘Drug Dictionary,’ a pharmaceutical coding database. By integrating this with our proprietary algorithms, we can achieve end-to-end traceability of pharmaceutical products, thereby breaking down existing information silos.”
Yaojingling has been deeply rooted in the industry, building infrastructure for the pharmaceutical distribution sector. Wang Wenfeng, founder of Yaojingling, stated, “What we are doing is a task that is one meter wide but one hundred meters deep.”
Next, the Yaojingling team will explore the pharmaceutical community model by establishing a two-tier community mechanism: store owner groups based on urban districts and pharmacy member groups based on local communities. The goal is to build China’s largest pharmacy ecosystem service platform.
Wang Wenfeng, founder of Yao Jingling, told VCBeat: “We previously saw media pre-reports indicating that Pinduoduo was preparing to enter the pharmaceutical sales market. In fact, we have also been piloting a group-buying model, albeit with slightly different mechanics. We believe that purchasing medications through group buys is not a high-frequency behavior among individual consumers (C-end). However, by initiating group purchases for best-selling items from upstream supply chains and near-expiry surplus inventory within WeChat groups composed of independent pharmacy owners and small chain store managers, we have gained significant popularity among these B-end small business owners. Meanwhile, we are assisting store owners in establishing community health groups similar to community group-buying models. Within these user communities, which are based on the service radius of each pharmacy, we are not simply providing ‘group medication purchases...”’but rather ‘competing on health.’ Current initiatives include hospital experiences, healthy medicated diets, and smart wearable hardware—non-pharmaceutical health-related products with relatively mature supply chains—which have been well received.”
Choosing to dig deeper rather than wider in the industry stems from Yaojingling’s decade-plus of experience in pharmaceutical distribution. Yaojingling’s founder, Wang Wenfeng, a graduate of the PLA Information Engineering University, has nearly 10 years of experience in pharmaceutical IT and founded Yunqi Pharmaceutical in 2009, which became Henan’s largest pharmaceutical technology service provider with annual profits exceeding RMB 10 million. Sales Director Shi Lei brings over 10 years of experience in IT solutions for pharmaceutical distribution. Co-founder Zhang Miao is a serial entrepreneur with more than 10 years of experience in internet operations.
Yaojingling is currently seeking Pre-A round financing. The funds raised in this round will be used to expand its big data team, extend its geographic coverage to more cities, and deepen in-store operations and consumer-facing (C-end) operations in pharmacies within its existing service areas.