Alibaba Health Acquires Guangzhou Wunianian Pharmacy Chain for RMB 16.8 Million to Advance Dual-Track Strategy of Self-Operated and Platform Businesses

On July 7, Alibaba Health announced that it would acquire 100% equity interest in Guangzhou Wunian Medical Chain Co., Ltd. (hereinafter referred to as “Wunian Medical Chain”) for RMB 16.8 million.

Public information indicates that Wuqiannian Pharmaceutical Chain has a registered capital of RMB 5 million. It is primarily engaged in the retail of pharmaceuticals and traditional Chinese medicine (TCM) decoction pieces in China, operates a chain of pharmaceutical retail stores, and holds an Internet Drug Transaction Service Qualification Certificate, which entitles it to sell over-the-counter drugs listed in relevant regulations as well as certain other regulated drugs online.

Wuqiannian Pharmaceutical Chain recorded a full-year loss last year, with specific figures as follows: profit before tax amounted to RMB 1.078 million in 2014 and RMB -355,000 in 2015; profit after tax was RMB 1.075 million in 2014 and RMB -356,000 in 2015.

Why Is Alibaba Acquiring a Loss-Making Chain Pharmacy?

According to VCBeat, Wuxiannian Pharmaceutical Chain currently holds a Drug Operation Permit (Retail Chain), Good Supply Practice (GSP) Certification for Drug Operation (Retail Chain), Food Operation Permit, Filing for Class II Medical Device Operation, Internet Drug Information Service Qualification Certificate, and Internet Drug Transaction Service Qualification Certificate. These certifications are what Alibaba Health values most.

Alibaba Health stated in its announcement, “The Company’s mission is to build an online community connecting participants in China’s pharmaceutical and healthcare market. Through the acquisition of the target company, it will be able to engage in online pharmaceutical retail operations, offering a wider range of products and services to end consumers.” The qualifications held by Wunian Pharmaceutical Chain precisely meet Alibaba Health’s business needs in this regard.

Alibaba Health will focus on optimizing its platform.

However, Alibaba Health stated that Wunianqian has a collaborative and complementary relationship with platform merchants, not a competitive one.

Alibaba Health stated that, to the extent feasible, Wuqiannian will join forces with existing merchants to identify optimal synergies and achieve win-win outcomes. First, Alibaba Health will facilitate pharmaceutical brand manufacturers in showcasing their online and offline brand presence through Wuqiannian’s platform, thereby fostering multi-channel engagement between brands and consumers. Second, to enhance the medication purchasing experience on the platform, Wuqiannian will collaborate with other platform merchants to implement differentiated operations across product categories and coordinate supporting services, thereby meeting the diverse and personalized needs of different user segments.

Alibaba Health has been striving to build an ecosystem encompassing merchants, service providers, and consumers through a “platform-based” approach, thereby better achieving its goal of serving both merchants and consumers. Recently, in response to adjustments in national policies and the market environment, Alibaba Health will determine its subsequent business plans based on these changes. Nevertheless, one point remains clear: Alibaba Health continues to adhere to maximizing “platform-based” operations, enabling merchants to take the lead in managing categories and products that comply with legal provisions. Alibaba Health will actively explore business synergy and collaboration between Wunianqian (5000 Years) and its existing online merchants as well as O2O alliance partners, fostering the development of a comprehensive health ecosystem and achieving mutual growth and win-win outcomes.

In addition to its online pharmaceutical sales business, Alibaba Health is currently developing cloud hospitals, health management platforms, and other businesses.