Medical AI: A Strategic Battleground for Capital to Drive Industrial Upgrading

In recent years, artificial intelligence has been applied to many areas, including medical imaging recognition, computer-aided diagnosis, surgical procedures, gene sequencing, and healthcare big data. The issuance of the “New Generation Artificial Intelligence Development Plan” by the State Council in 2017 sent a strong positive signal to the entire health industry, making medical AI a highly sought-after hotspot.

However, China’s current healthcare service system still faces certain challenges, and medical AI is confronted with significant hurdles. In this context, policy, technology, and capital have become the primary drivers of innovation and transformation in the healthcare industry.

On October 28, 2018, the forum titled “Capital Fueling the Industrial Upgrade of Medical AI” was held in Chengdu, hosted by BOC Group Investment Company Limited. Industry leaders and medical experts participated in the event, including Gong Jianzhong, Executive President of BOC Group Investment Company Limited; Song Anlan, Partner at SoftBank China Capital; Zhang Jianbin, Partner at IDG Capital; Wu Yongxian, Associate Principal at McKinsey & Company; Fan Li, Vice President of EDDA Technology; Sun Xiaorong, Chairman and General Manager of Wuhan Landing Medical High-Tech Co., Ltd.; Yang Cuijun, Chairman of Medtrum Technologies; Huan Dandan, Vice President and Board Secretary of Ankon Medical Technologies; Wang Peng, Chairman of United Imaging Healthcare; Song Jie, Founder and CEO of C-Plus Medical; Gong Xiangyang, Director of the Department of Radiology at Zhejiang Provincial People’s Hospital; and Wang Dong, Director of the Robotic Minimally Invasive Surgery Center at Sichuan Provincial People’s Hospital. The participants engaged in professional and in-depth discussions on topics such as development trends, commercial closed-loop models, and capital investment opportunities in various subfields, including AI-assisted diagnosis and AI-enabled healthcare.

The organizer, BOC Group Investment Company Limited, is a wholly-owned subsidiary of Bank of China specializing in professional investment management. It conducts diverse investment activities across Hong Kong, Macau, mainland China, and overseas markets, with its portfolio spanning sectors such as healthcare, consumer goods, energy, transportation, and finance.

Artificial intelligence began to garner widespread attention in 2017, a year also hailed as the “Year One of AI.” According to data from the VCBeat database, there were 27 financing events in China’s medical AI industry that year, with total funding exceeding RMB 1.7 billion. By 2018, the number of statistically trackable medical AI companies in China had surpassed 130. Leading enterprises embarked on restructuring and optimizing their business models in the new year, while simultaneously grappling with the challenge of accurately addressing core clinical needs.

After a period of intense hype, the AI healthcare sector has gradually cooled down. High-valuation, high-growth companies have prompted investors to enter a phase of more sober reflection, with the ability to achieve robust clinical application becoming a critical factor in investment decisions. At this stage, how companies can seize opportunities and effectively integrate capital with industry development has become the core focus of this forum.

Mr. Gong Jianzhong, Executive President of BOC Group Investment Co., Ltd. (hereinafter referred to as “BOC Investment”), stated while discussing the core theme of “Capital Empowering the Industrial Upgrade of Intelligent Healthcare” that data, algorithms, and application scenarios are the key focal points for BOC Investment when evaluating AI enterprises. Data quality serves as the foundation for the development of medical AI; transforming foundational algorithms into applicable ones is critical to the growth of AI companies, while intellectual property constitutes their core competitive advantage.

The current pain points between the healthcare industry and investment lie in the unclear production chain and ambiguous capital boundaries. For enterprises and capital, it is essential to identify their respective positions and pursue collaborative development, enabling capital to serve as an “accelerator” for enterprises and even the entire health industry.

BOC Investment favors AI healthcare companies that are in the “1 to N” stage. Mr. Gong Jianzhong stated, “‘1’ refers to enterprises that have transformed their intellectual property into relatively mature products, with the conditions and prospects for commercial promotion. With capital support, we not only provide funding for commercial implementation but also collaborate with enterprises to optimize and upgrade their technology roadmaps, product strategies, business models, and marketing networks. This helps successfully bring the investee companies’ products or services to market, achieving the ‘N’ stage of widespread application.”

In addition, Mr. Gong Jianzhong specifically pointed out that investment institutions focusing on early-stage investments, such as Morningside Venture Capital and SoftBank China, have provided early support and assistance to startups. Institutions specializing in different investment stages, including Bank of China Investment, have also jointly facilitated the further development of startups by leveraging capital as a link.

At the conference, Mr. Song Anlan, Partner at SoftBank China, also used SoftBank’s strategic layout in the healthcare sector as an example to deconstruct the medical AI industry chain and the investment logic of capital.

China’s AI market has maintained a high growth rate since 2017, and according to SoftBank China’s forecasts, the growth rate in the coming years will exceed 40%. Following the PC internet boom of 2000 and the mobile internet surge of 2010, artificial intelligence represents the next wave of disruptive technology, making it a fiercely contested battleground for venture capital.

AI has permeated various sectors of the healthcare industry, introducing new capabilities and business models that drive efficiency gains and cost reductions. Mr. Song Anlan stated, “SoftBank China has long been active in the AI sector. However, we believe that investment decisions must be made with caution and selectivity. Not every artificial intelligence venture will succeed; therefore, selective investment is a critical principle.”

As one of the world’s most renowned consulting firms, McKinsey & Company’s Associate Partner, Mr. Wu Yongxian, presents intuitive statistical data on the healthcare industry, offering insights into investment trends and opportunities in healthcare technology.

According to McKinsey’s analysis of investment data from the past two years, investments in the healthcare sector primarily exhibit five trends:

First, China’s healthcare industry is undergoing a period of transformation. In recent years, healthcare investment in China has been particularly active in terms of the number of deals, investment amounts, and the diversity of enterprises involved.

Second, product and technological innovation are increasingly becoming the focus of investment, such as investments in artificial intelligence and genetic diagnostics;

Third, there has been a surge in the volume of international M&A transactions;

Fourth, driven by policy innovation, China is increasingly leading the world in the development and investment of healthcare platform technologies;

Fifth, extensive collaboration within the medical ecosystem is increasingly becoming a trend, including explorations of business models with the technology sector and investment partnerships with venture capital (VC) and private equity (PE) firms.

As the core driving force behind the development of the medical AI sector, innovative enterprises play a pivotal role in the industrial ecosystem. At present, technological innovation and business model innovation are the key priorities for the growth of medical AI companies.

With the growing popularity of the “preventive treatment” concept, artificial intelligence is playing an increasingly significant role in early cancer screening. Wuhan Landing Medical High-Tech Co., Ltd. (Landing High-Tech) is among the first companies in China to apply medical AI to clinical tumor cell diagnosis and achieve commercial success. Through decades of dedicated efforts, Landing High-Tech has continuously upgraded its technology and services, successfully expanding and deepening the application of AI in the field of cancer screening.

Ms. Sun Xiaorong, Chairwoman and General Manager of Wuhan Landing Medical High-Tech Co., Ltd., believes that as a technology-driven enterprise, while steadily enhancing its own strength and creativity, it must also carefully consider how to implement clinical applications and ensure the feasibility of commercialization strategies. “As a company, the first thing to consider is not that the market will automatically pay for AI-based diagnostics, but rather how to effectively enter the market.”

Ms. Fan Li, Vice President of EDDA Technology, believes that the defining characteristic of medical artificial intelligence, particularly in its application to precision surgery, is its human-centric nature. “We must ensure that physicians find our products both intuitive and valuable; the products must be user-friendly and deliver significant, tangible clinical benefits for patients. We hold that the core principle of medical AI is to be people-oriented, not to replace humans.”

Compared to early-stage AI companies focused on diagnosis, EDDA Technology’s IQQA empowerment platform has obtained multiple FDA approvals in the United States and CFDA approvals in China, and has been widely adopted in clinical practice. With over 45,000 cases of precise surgical applications, IQQA effectively assists physicians in performing accurate surgical planning. Its users include nine of the top ten hospitals in China and five of the top ten hospitals in the United States, with these user institutions having independently published more than 250 clinical papers.

The “impossible trinity” of healthcare requires the introduction of new technological increments, and the emergence of new technological entities will change activity patterns, industrial composition, and institutional arrangements. The arrival of new technologies will trigger extensive adjustments in prices and production networks within the economic system.

Addressing the pain points in the diagnosis and treatment of gastrointestinal diseases, Anhan Medical has developed a capsule gastroscopy robot, achieving a breakthrough in scale from 1 meter to 0.01 meters. Building on existing technologies, in addition to capsule robots for gastrointestinal examination, Anhan has also developed a vibrating capsule robot that extends its product portfolio into the therapeutic field. Ms. Huan Dandan, Vice President and Board Secretary of Anhan Medical, stated, “By massaging the terminal nerves of the gastrointestinal tract, the capsule can treat prevalent constipation issues, thereby addressing the challenges faced by high-risk populations—such as the elderly and pregnant women—who are unsuitable for chemical medications due to concerns over drug resistance and adverse effects.”

In the final roundtable session, Mr. Gong Xiangyang, Director of the Department of Radiology at Zhejiang Provincial People’s Hospital, and Mr. Wang Dong, Director of the Robotic Minimally Invasive Center at Sichuan Provincial People’s Hospital, discussed physicians’ needs for artificial intelligence technology from a clinician’s perspective.

Mr. Gong Xiangyang believes that it is crucial for medical AI products to align with clinical practice and integrate into clinical workflows. “Healthcare should be driven by needs; when problems arise in clinical settings, solutions are sought, and AI is merely one of those solutions.”

Mr. Wang Dong stated, “From pre-consultation screening to in-consultation treatment—such as surgical procedures performed by surgeons and diagnostic testing ordered by internists—and further to post-treatment rehabilitation and follow-up, we aim to achieve genuine AI integration at every stage to enhance efficiency and precision.”

Mr. Yang Cuijun, Chairman of Yiyu Medical, stated that while diabetes is not a critical illness, it is highly cumbersome. In the field of diabetes management, AI can enable intelligent monitoring and intelligent treatment; the integration of these two components essentially constitutes artificial intelligence. The key challenge in applying AI to diabetes lies in the fact that, although vast amounts of data are generated daily, much of it is redundant. Blood glucose levels exhibit continuous fluctuations and are influenced by emotions, environment, and lifestyle. Therefore, beyond model training, AI solutions for diabetes must also possess certain reasoning capabilities.

“Traditional offline processes are cumbersome and inefficient, typically generating only offline transaction data during the distribution of medical devices. It would take approximately one and a half years to leverage this data for product improvement through streamlined processes,” said Mr. Wang Peng, Chairman of Lianyi Medical. He noted that the application of artificial intelligence (AI) in the distribution sector has significantly enhanced industrial efficiency. The journey of medical devices from manufacturers to end-users involves numerous intermediate links. Through AI-driven personalized matching or data mining, Chinese manufacturers can accurately characterize end-user needs, including user demographics, price sensitivity, and specific requirements for product improvements.

When asked by an investor representative about how to select AI companies for investment, Mr. Zhang Jianbin, Partner at IDG Capital, stated that IDG Capital favors “hard” products that truly meet market demands, have the potential to lead future development, and are commercially viable. The key to artificial intelligence empowering the upgrading of the medical industry lies in transforming the supply side and enhancing efficiency, as exemplified by Anhan Medical and EDDA Technology mentioned earlier. Furthermore, corporate products must also address current barriers to the application of AI across the healthcare sector, such as ethical, legal, health insurance reimbursement, and pricing challenges.

The forum concluded with in-depth insights and discussions. We have every reason to believe that this event marks only the beginning of broader conversations on the development and investment landscape of the medical AI industry. Looking ahead, we anticipate that capital infusion will further empower medical AI, thereby driving genuine industrial upgrading.