VB Weekly Report on Internet Healthcare (20150119): Industry Moves, M&A, and Policy Updates

Events and Perspectives

Last week saw frequent industry activity, with new developments emerging from all three BAT companies.

Baidu Partners with PLA General Hospital (301 Hospital) to Co-build a New Online Medical Service Platform, Exploring the Establishment of Novel O2O Service Models and Innovative Operational Models in the Healthcare Sector.

Alibaba Health has reached a settlement with Oracle through arbitration, marking the end of any financial ties between the two parties. However, just last week, Yunfeng Capital, founded by Jack Ma, invested RMB 500 million in Guangzhou Pharmaceutical Holdings Limited’s (GPHL) financing plan, becoming a shareholder of GPHL. Meanwhile, GPHL signed a framework agreement with Alibaba Health, becoming its first partner in the pharmaceutical manufacturing sector. This move signifies that GPHL’s entry will enable Alibaba Health to complete the closed loop of its entire industry chain. For Jack Ma, who once worked as a pharmaceutical sales representative, this can be seen as a return to his roots.

Tencent is also reported to launch the Tangdaifu blood glucose meter on January 20. While details remain largely under wraps, it has been revealed that the device measures just 17mm x 3.51mm.

Last week witnessed several other major mergers and acquisitions. One was Huaye Real Estate’s aggressive RMB 2.15 billion acquisition of Jieer Medical, marking its entry into the healthcare industry. Upon completion of this transaction, the company will add pharmaceutical distribution and medical services to its business portfolio. Another notable deal was WuXi AppTec’s $65 million acquisition of NextCODE to establish a bioinformatics company, which lays a solid foundation for WuXi AppTec to build a global enterprise applying gene sequencing technologies to clinical pharmaceutical services.

In other news from the genetics sector, 23andMe, which secured a $60 million investment from Genentech in early January, signed a collaboration agreement with Pfizer last week. The deal grants Pfizer access to 23andMe’s research platform, including its services and genetic data analysis of more than 800,000 individuals. Furthermore, the two companies will strengthen their cooperation in genome-wide association studies (GWAS), population surveys, and clinical trial recruitment.

Last week, CITIC partnered with Taikang to jointly expand the healthcare market. Under the agreement, both parties aim to explore and develop health insurance products related to medical services and health management services, promoting the integration of CITIC Medical’s domestic projects in medical care, nursing, rehabilitation, and elderly care with Taikang’s medical and health insurance products.

Another entity was also extremely busy: Haoyaoshi, a wholly-owned subsidiary of Jointown Pharmaceutical Group, signed a strategic cooperation agreement with Beijing Zhonghuan Anorectal Hospital in Beijing, marking the commencement of its 2015 online hospital layout.

A notable development occurred last week: China’s first “blood bank” was established. Reportedly, Southwest Hospital of the Third Military Medical University in Chongqing is launching this “blood bank,” allowing citizens to store their own blood for potential future personal use. Storing your own blood for your own needs—well done!

Abroad, the Frankel Cardiovascular Center at the University of Michigan has allowed a patient with an artificial heart to return home. The cardiac drive device, weighing 13 pounds, enabled 24-year-old Stan Larkin, who was awaiting a heart transplant, to go home and reunite with his family.

Therefore, we should heed President Xi’s advice: young people should avoid staying up late.

Healthcare Reform

The official website of the National Health and Family Planning Commission officially announced on January 15《Technical Guidelines for the Construction of Telemedicine Information Systems (2014 Edition)》, it proposes the basic functions, technical architecture, and construction standards for national- and provincial-level telemedicine service and resource supervision centers as well as various telemedicine service sites; delineates the interrelationships between telemedicine information systems and regional health information platforms at all levels; and provides recommendations for project construction management and operational maintenance. (Click here to download the "Guidelines"）

The Ministry of Finance Will Cut Off Hospital Funding:The Ministry of Finance issued the "Notice on the Interim Measures for the Administration of Government Purchase of Services," in which it required that medical and health services be included in the guiding catalog for government purchase of services. This means that in the future, the Ministry of Finance will no longer provide direct appropriations to hospitals and other institutions; instead, funding will be allocated through the purchase of services.

Comprehensive Pilot Programs for Deepening Healthcare Reform to Launch in Four Provinces:At a regular press conference, the National Health and Family Planning Commission (NHFPC) stated that China will launch comprehensive pilot programs for deepening healthcare reform in four provinces—Anhui, Fujian, Jiangsu, and Qinghai. All public hospitals participating in the reform will eliminate the practice of subsidizing medical services with drug profits, abolish the policy of drug markups, and reasonably increase prices for medical services.

Guangdong Provincial Health and Family Planning Commission Holds Work Conference Last Week, Unveils New Healthcare Reform Policies. The main policy content focuses on two key points: first, no new approvals will be granted for the construction or expansion of public hospitals; second, further liberalization of physicians’ multi-site practice will be promoted. It must be acknowledged that Guangdong Province demonstrated outstanding performance and took numerous initiatives in advancing healthcare reform in 2014, relative to other regions.

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Overseas

UK Launches New Healthcare Reform: Patient Ratings Directly Impact Doctors’ Income
The UK Department of Health has outlined the framework for healthcare reform in the United Kingdom, along with the forthcoming Basic Law on Healthcare Services to be introduced by the UK government. Henceforth, the allocation of funding to public hospitals and physicians by the UK government will take into account patient satisfaction with their services. Specifically, patients will be able to rate the medical quality and service provided by the public hospitals they visit or by their treating physicians. These ratings will serve as a basis for the comprehensive evaluation of hospitals and doctors, directly influencing physicians’ salaries and hospital subsidies when the Department of Health distributes funds.

Data

The Lancet: Five Major Changes in China’s Health Landscape from 1990 to 2013Average life expectancy increased by 8.6 years; stroke is the leading cause of death among individuals aged over 70; mortality rate from chronic kidney disease rose by 147%; mortality rate from Alzheimer’s disease rose by 121%; mortality rate from lung cancer rose by 103%; deaths from pneumonia decreased by 56%, and deaths from malaria decreased by 88%.

Chinese Consumers Willing to Spend Only Around 1,000 Yuan on Wearable Devices:According to a survey by Tencent Big Data, only 26.4% of respondents reported having purchased wearable products, while as many as 56.1% stated that they had not purchased any wearable devices. Additionally, 17.5% of respondents indicated that they were unaware of what wearable devices are.

Data from “Ping An Good Doctor” indicates that psychological counseling mostly revolves around family conflicts:According to statistical data from the backend of the consultation hall on the “Ping An Good Doctor” APP, the daily volume of psychological counseling consultations has consistently remained in the triple digits. This makes it one of the most popular departments, aside from the most sought-after specialties such as general practice, pediatrics, and gynecology. Notably, over 60% of the consultations in the psychology department revolve around intergenerational conflicts between parents and children, as well as between mothers-in-law and daughters-in-law.

New Technologies

The Lancet Respiratory Medicine: Blood Tests Help Personalize Smoking Cessation for Patients!
A Psychiatry Professor at the University of Pennsylvania Identifies a Strategy to Help People Quit Smoking Through Blood Tests (i.e., Testing Nicotine Metabolism Rates in Smokers’ Blood Can Predict the Effectiveness of Different Smoking Cessation Treatments).

Science: Novel Implant Enables Paralyzed Individuals to Walk Again
An international research team successfully restored walking ability in paralyzed rats with severe spinal cord injuries by implanting a flexible device. This implant can function within the human body for nearly 10 years and has far fewer side effects than traditional treatments, offering new hope for the rehabilitation of paralyzed individuals.

eLife: Scientists Develop Contractile Human Muscle Tissue in the Lab for the First Time
Duke University researchers have, for the first time, developed human skeletal muscle in the laboratory that can contract and respond to external stimuli. This artificial skeletal muscle could help researchers conduct drug testing and investigate muscle function in the human body.

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