JD’s health care unit vaults into No 2 spot for new unicorns with US$7 billion valuation

Coco Feng

The health care subsidiary of e-commerce giant JD.com was ranked as the most valuable among 22 new unicorns that emerged in China last year and No 2 worldwide, but what may be even more impressive is that it claims to be profitable in an industry that shows great promise but has yet to prove lucrative for most players.

Spun off from JD.com in May, JD Health completed its latest funding round of US$1 billion in November that valued the start-up at roughly US$7 billion, joining the so-called unicorn club that includes private firms with valuations greater than US$1 billion.

Investors in the latest round included CPE China Fund and CICC Capital, with JD remaining the majority owner of the unit.

Among the 142 new unicorns that emerged worldwide last year – a list that excludes those that reached that level in previous years – JD Health ranked second only to Uber's self-driving unit, Uber Advanced Technologies Group, with a valuation of US$7.3 billion, according to data from Crunchbase.

JD Health operates an e-commerce platform selling products such as vitamins, supplements, medical devices and contact lenses, as well as offering services including health checks, beauty clinics and gene testing in partnership with specialised institutions. The business also taps into the wholesale drugs market and web-based hospital services.

China’s JD Logistics planning overseas IPO, sources say

Deloitte forecast that China’s online pharmacy sector will be worth 400 billion yuan (US$57 billion) in 2020, spurred on by easing of regulation, improvements in logistics and the trend towards consumers shopping online.

A policy introduced by China’s State Council in 2018 encouraged cooperation between internet companies and health care providers. The latest version of the Pharmaceutical Administration Law, which came into effect in December 2019, effectively gave the greenlight to online sales of prescription drugs, previously seen as a grey area.

Several big names have moved into the sector but have yet to turn a profit. Ping An Healthcare and Technology, a part of Chinese insurance giant Ping An Insurance, and Ali Health, a unit of e-commerce giant Alibaba, the owner of the Post, have both listed publicly in Hong Kong.

However, both operations are still in the red although their net losses have narrowed in recent months.

Separately, Nasdaq-listed 111 Inc, a spin-off from China’s first online grocery start-up Yihaodian, saw its net loss for the first three quarters widen by 34.5 per cent to US$47.8 million.

Xin Lijun, the chief executive of JD Health, told the Post in a written response that the company has been profitable because of factors that include JD’s e-commerce strength, its fully-established supply chain, and its partnerships with drug makers and hospitals.

“If you want to expand vertically into the retail drug business, it has to be integrated with hospitals and the medical services they provide,” Xin said. JD Health is also exploring opportunities beyond the online pharmacy model by making its partner hospitals “smarter” with artificial intelligence.

These efforts include using AI to advise patients of the most appropriate department to call for an appointment based on the symptoms they have. Xin said the accuracy rate of such AI advice is as high as 95 per cent. JD Health will also deploy AI to help doctors more accurately prescribe medicine.

As economic headwinds persist amid growing competition among China’s online marketplaces, JD.com has been diversifying beyond its core e-commerce business. Apart from health care, it has also spun off JD Digits, specialising in data technology, AI and IoT, and JD Logistics that plays to its advantage in courier services. Both these units have become unicorns in their own right, with valuations of US$18 billion and US$14 billion respectively.

Xin told the Post that JD Health has plans for an IPO though a timeline has not been set.

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