Alibaba Health Interim Report FY2018: Revenue Exceeds RMB 800 Million, Strategic Focus on Smart Healthcare and Health Management

On the evening of November 15, VCBeat (WeChat ID: vcbeat) learned that Alibaba Health released its interim results announcement. For the six months ended September 30, 2017, the company recorded revenue of RMB 889.7 million and gross profit of RMB 255.5 million, representing significant year-on-year increases of 1,516.9% and 437.5%, respectively. Meanwhile, the adjusted net loss decreased substantially by 30.2% year-on-year to RMB 34.4 million compared with the same period in fiscal year 2017.

“The strong growth in revenue and gross profit was primarily driven by the rapid expansion of health product sales during the reporting period,” stated the interim report.According to the performance announcement, Alibaba Health’s core business primarily comprises three major segments: health product sales and e-commerce platform services; product traceability platforms; and smart healthcare and personal health management services. During the six-month period from April 1 to September 30 this year, revenue from health product sales reached RMB 786.2 million. Meanwhile, income from e-commerce platform services and other innovative value-added services also experienced significant growth.

This progress is attributable to a series of advancements made by Alibaba Health in its pharmaceutical and healthcare retail platform. In August last year, Alibaba Health completed the acquisition of Guangzhou 5000 Years Pharmaceutical Chain Co., Ltd. (subsequently renamed Alibaba Health Pharmacy), thereby launching its B2C pharmacy business. In September, Alibaba Health officially began providing comprehensive outsourcing and value-added services for pharmaceutical-related categories on Tmall’s Medical Pavilion, assisting Tmall in developing its pharmaceutical e-commerce operations in exchange for service fees. This July, Tmall’s “Blue Hat” business was fully injected into Alibaba Health. As a result, Alibaba Health’s pharmaceutical and healthcare retail platform has become increasingly comprehensive.

As the internet-based general health industry enters a new phase of development, Alibaba Health announced its interim results for the first half of fiscal year 2018. The announcement reveals that this flagship platform of Alibaba in the pharmaceutical and healthcare sector has not only achieved robust growth in revenue and gross profit from pharmaceutical and healthcare retail, but has also begun to make long-term strategic investments in cutting-edge technologies such as medical big data and artificial intelligence (AI).

Compared with the explosive growth in revenue from health product sales and e-commerce platform services, innovative health-related value-added services account for a relatively small share. However, based on the length of the announcement, innovative areas such as smart healthcare and health management will be one of Alibaba Health’s key strategic focuses for future development.

HC3i.cn stated in its “2016–2017 AI + Healthcare Market Analysis and Trends Report” that the market size of China’s AI + healthcare sector reached RMB 9.661 billion in 2016, representing a year-on-year growth rate of 37.9%. It is projected to exceed RMB 13 billion in 2017, with a growth rate of 40.7%, and is expected to reach RMB 20 billion in 2018.

Meanwhile, Alibaba Health’s management has publicly stated on multiple occasions that the surge in technologies such as AI, cloud computing, and wearable devices, coupled with the accumulation of medical data and the advent of an aging society, will bring broader market prospects to “Internet + Healthcare.”

The announcement indicates that the smart healthcare and personal health management segment serves as a bridge, connecting governments and medical institutions upstream while providing services to patients and medical personnel downstream. With core offerings including smart hospital solutions, medical AI solutions, and health management tools, it ultimately establishes a comprehensive closed-loop ecosystem for smart healthcare services. Within this closed loop, priority is given to the research and development of rapidly evolving cutting-edge technologies such as big data, medical AI, and medical consortia. This strategic focus underpins Ali Health’s commitment to sustained investment in this area.

Announcement data shows that for the six months ended September 30, Alibaba Health “continued to hire more information technology engineers to expand its medical service network, build a health management platform, and develop a medical intelligent analytics engine.” As a result, product development expenditures amounted to RMB 61.37 million, representing a 21.7% increase year over year.

Facts also show that Alibaba Health made continuous moves in the field of smart healthcare innovation in 2017: In July, Alibaba Health launched its medical AI “Doctor You” and demonstrated the real-world application scenario of the CT pulmonary nodule intelligent detection engine within “Doctor You” in the remote imaging diagnosis process at the Wanliyun Medical Imaging Center.

In August, Alibaba Health announced a pilot project with Changzhou City, Jiangsu Province, to integrate medical consortia with blockchain technology. By applying cutting-edge blockchain technology to the underlying technical architecture of Changzhou’s medical consortium, the project achieved data interoperability among selected local healthcare institutions, marking China’s first blockchain application implemented in a healthcare scenario.

In October, Alibaba Health signed agreements with The First Affiliated Hospital of Zhejiang University School of Medicine, The Second Affiliated Hospital of Zhejiang University School of Medicine, and Xinhua Hospital Affiliated to Shanghai Jiao Tong University School of Medicine to jointly establish “Medical Artificial Intelligence Engineering Laboratories,” build a national-level “Intelligent Training Platform for Medical Professionals,” and create benchmark smart hospitals.

“The Group’s vision is to ‘leverage big data to empower healthcare, use the internet to transform health, and provide equitable, inclusive, and accessible pharmaceutical and healthcare services to one billion people.’” The announcement pointed out that, to achieve this goal, Alibaba Health will spare no short-term interests and continue to increase investment in the fields of medical and health big data and artificial intelligence.