Yaoyaohao Files IPO Prospectus: Connecting 1,000 Pharma Manufacturers and Empowering 130,000 Pharmacies Through B2B E-commerce

I once watched a video of Wang Haiping’s speech. He is a quintessential figure from the “1980s,” with his hair slicked back, his suit impeccably pressed and neat, and his speech steady and concise.

Before speaking with him, I had some reservations; fortunately, he allayed my concerns.

Wang Haiping, Founder of Yaoyaohao

“I have spent over two decades in the pharmaceutical industry, working across both manufacturing and commercial enterprises, which has given me a deep understanding of the sector’s pain points. Now is the optimal time to leverage the internet to effectively address long-standing industry challenges, integrate upstream and downstream operations, streamline processes, and reduce costs. This approach ensures that all segments of the pharmaceutical supply chain benefit, ultimately fostering a pharmaceutical ecosystem characterized by multi-directional interaction and shared resource success,” said Wang Haiping, Chairman of Yaoyaohao (Hangzhou) Cyber Technology Co., Ltd., when asked about the key message he wished to convey to the public.

Yaoyaohao, a pharmaceutical B2B e-commerce platform founded by Wang Haiping and originating in Zhejiang, is committed to leveraging internet technologies to enable pharmaceutical manufacturers to more effectively reach downstream end-users. Through innovative approaches, it helps these end-users address challenges in drug supply and warehouse-distribution management, thereby establishing a resource-sharing platform for the pharmaceutical industry chain.

On July 20, 1969, Neil Armstrong and Buzz Aldrin set foot on the lunar surface. In the months leading up to the landing, the Apollo 11 astronauts trained in a moon-like desert in the western United States.

The region is also home to several Native American tribes. According to one story (or legend), astronauts once encountered a local resident. Upon learning that the astronauts were traveling to the Moon, the local implored them to memorize a message intended for the Moon God. The astronauts initially did not understand the meaning of the request; only after seeking out a translator were they able to decipher it.

The message the locals entrusted to the Moon God was: “No matter what they say, do not believe them; they are only here to steal your land.”

Later, Apollo 11 did indeed plant the American flag at the landing site, just as the Spanish had done upon their initial arrival in the Americas.

I share this story here because it is indeed highly relevant to today’s business ecosystem. Businesspeople who cling to tradition correspond to indigenous peoples; innovative enterprises that leverage internet tools as their “rockets” are akin to astronauts; and the new frontiers yet to be explored include not only the “Americas,” already occupied but not yet consolidated into dominant powers, but also the “Moon,” which can be viewed as the incremental market. The parallels are precise and striking.

Wang Haiping’s “Expedition” began in 2013. In September of that year, a team of EMBA professors from Tsinghua University, an EMBA student e-commerce entrepreneurship team, and the founding team of Yaoyaohao held a seminar at Tsinghua University in Beijing. The discussion focused on whether the pharmaceutical industry could leverage internet thinking, tools, and platforms to optimize and transform its supply chain, eliminating unreasonable and redundant segments that had long been attached to the industrial chain. The participants reached a consensus that the pharmaceutical industry could undergo thorough transformation by combining “traditional industry experience with internet thinking.”

With years of experience in the pharmaceutical industry, Wang Haiping’s deep familiarity with the pharmaceutical market environment has proven invaluable. “We have conducted a systematic review of the pharmaceutical market. Among more than 4,000 pharmaceutical manufacturers, the vast majority lack strong marketing teams. Of the 13,500 distributor companies, over 90% are small-scale enterprises. Large distribution companies such as Sinopharm, Shanghai Pharmaceuticals, and Jointown Pharmaceutical Group are primarily focused on hospital-based channels. The end-use points for medications include hospitals, primary healthcare institutions, outpatient clinics, and pharmacies.”

Pharmaceutical Industry Chain

Wang Haiping stated that the traditional pharmaceutical supply chain is excessively lengthy, requiring four to five tiers of distributors for medicines to reach consumers from manufacturers. Some small-scale distributors incur high costs, necessitating price markups of more than 10 percentage points. “It is difficult for end-point pharmacies to avoid high drug prices, but certain intermediate steps can be eliminated. We streamline the process through internet-based solutions, thereby avoiding the issue of multi-tiered price markups.”

VCBeat (WeChat ID: vcbeat) asked him whether this meant that Yaoyaohao’s initial purpose was to serve end consumers. Wang Haiping stated that eliminating unnecessary intermediaries actually benefits pharmaceutical sales terminals as well, reducing their procurement costs. The savings from reduced markups can be distributed through several channels, allowing pharmaceutical manufacturers, distributors, retailers, and consumers all to benefit.

“This is not a zero-sum game. The essence of pharmaceutical e-commerce lies in enhancing efficiency and reducing costs. Through the Yaoyaohao trading platform, we eliminate unjustified premiums that should not have existed in the first place. Our role in integrating the industry outweighs that of reshaping it.” Wang Haiping believes that Yaoyaohao’s ultimate goal is to transform the traditional business models of circulation and distribution, leveraging volume to secure better pricing and efficiency to gain market share. It aims to lead the reform of existing profit-margin allocation mechanisms, unlock potential profitability, and convert existing stock into incremental growth.

Business stories are never one-size-fits-all; the path of every emerging project is often accompanied by misunderstanding and friction, and Yaoyaohao’s entrepreneurial journey is no exception.

“We launched our business in 2014. At that time, industrial and retail enterprises were not sufficiently receptive to pharmaceutical e-commerce, so we often had to engage in extensive explanatory efforts to gain market traction in various regions; at times, we were even outright rejected,” recalled Wang Haiping. During the early stages of Yaoyaohao’s establishment, its business team withstood considerable pressure.

Yaoyaohao Team

Opportunities always favor those who wait and endure. By 2016, acceptance of pharmaceutical e-commerce had grown significantly across the upstream and downstream segments of the pharmaceutical industry chain, prompting industrial enterprises and retail chains to proactively approach Yaoyaohao (Hangzhou) Cyber Technology Co., Ltd. to seek collaboration.

Wang Haiping believes that the shift in market sentiment is mainly driven by two factors: first, policy support, and second, proactive changes initiated by both upstream and downstream segments of the pharmaceutical industry chain.

From a policy perspective, initiatives such as the “Internet Plus” strategy, policies promoting e-commerce, and the 13th Five-Year Plan for Pharmaceutical Circulation have adopted an encouraging stance toward pharmaceutical e-commerce. For instance, the 13th Five-Year Plan for Pharmaceutical Circulation explicitly calls for the widespread application of information technologies—including mobile internet and the Internet of Things (IoT)—in the pharmaceutical distribution sector, encourages enterprises to pursue service innovation based on the internet, and aims to diversify drug distribution channels and business models.

From the perspective of the pharmaceutical industry chain, recent years can be described as an era of “major transformation” in healthcare. For pharmaceutical manufacturers, cost-containment measures under medical insurance, the replacement of business tax with value-added tax (VAT), Document No. 94, and the two-invoice system have compelled companies to shift their marketing strategies, while channels for reaching consumers have undergone significant changes. For retail enterprises, rising industry concentration and growing demand for pharmaceutical care services have made enhancing bargaining power over the supply chain a key driver of growth. In particular, chain pharmacies must not only address competitive pressures within the industry but also continuously strengthen their supply chain integration capabilities to build reserves for external expansion.

Yaoyaohao has precisely identified the demands of both the supply and demand sides in the pharmaceutical sector, achieving value matching through a platform-based approach.

“Aggregating demand from the retail end can enhance bargaining power against upstream suppliers. Similarly, consolidating demand helps address distribution challenges in the pharmaceutical manufacturing sector. What Yaoyaohao does is match supply with demand and facilitate business transactions, thereby developing a richer suite of services, including supply chain finance, ERP pharmacy management systems, and customized demand solutions,” Wang Haiping told VCBeat (WeChat: vcbeat), stating that Yaoyaohao’s business logic is based on collaboration and mutual benefit.

As of December 31, 2016, Yaoyaohao had registered 11,129 corporate clients, covering a total of approximately 130,000 terminal stores, which accounted for about 30% of the total number of pharmacies in China.

East China, Central-South China, and Southwest China are the key regions for Yaoyaohao’s business layout. Its star partners include leading listed pharmacy chains such as Yixintang, Laobaixing, and Shuyu Civilian Pharmacy, with Yaoyaohao having become one of their primary choices for pharmaceutical procurement.

From a supply chain perspective, after nearly two years of development, as of February 2016, Yaoyaohao had established strategic sales partnerships with more than 1,000 renowned domestic and international pharmaceutical manufacturers, including AstraZeneca, Bayer Healthcare, Pfizer, and Yunnan Baiyao, offering over 10,000 product specifications.

What is little known to the outside world is that Yaoyaohao has already established a 20,000-square-meter standardized warehouse in the logistics park of Hangzhou Xiaoshan International Airport, with another 50,000 square meters of modern warehouse currently under construction. In the future, it will also establish regional distribution centers in various major regions through self-construction or cooperation, ensuring efficient warehousing, distribution, and high reach rates.

"Yaoyaohao has already stirred the waters of pharmaceutical distribution, ensuring smooth communication from top to bottom."

Starting this year, Wang Haiping has been spearheading the “Yaoheying” project. The project is described as follows: “Leveraging Yaoyaohao’s nearly three decades of industry background in pharmaceutical manufacturing and commerce, integrating advantageous resources, and relying on the Yaoyaohao cloud technology platform to achieve channel diversification, utilize big data analytics in the pharmaceutical industry, and build an integrated platform connecting upstream and downstream sectors of the pharmaceutical industry.”

Specifically, terminals will invest in Yaoyaohao through cash equity participation, with investment thresholds determined based on the terminals’ annual procurement volumes under agreement. If successful, this initiative will enhance Yaoyaohao’s competitiveness and strengthen its advantages in resource and capital aggregation in the short term.

“Co-building a pharmaceutical internet ecosystem in the big data era; sharing the dividends brought by the internet age; and achieving win-win outcomes with substantial returns from the capital market.” Wang Haiping described this project as the new aircraft carrier of B2B pharmaceutical e-commerce.