Valued at 3 billion (€ 2.8 billion) in a funding round in 2016, Chinese eHealth mobile application Good Doctor (Ping An) has led since its launch a wave of investment flooding the China’s mobile medical industry.
But investors are beginning to lose confidence in the ability of these companies to turn a profit, analyzes the Financial Times in a story published on March 2017.
However, investors start losing confidence in these companies and their ability to make profits, analyzes the Financial Times in an article published in March 2017.
China: more than 2000 eHealth apps
In China, more than 2,000 mobile applications offer users health services, such as medical advice, appointment bookings, etc. and niche services are tapping into demand, offering patients secure health services and providing easy access to healthcare in a country where the industry is marked by widespread distrust of hospitals and clinics, often overcrowded.
Good Doctor, founded by China insurance group Ping An, says they have 27 million monthly active users – some analysts estimate that are approximately 20 million users – who receive 400,000 diagnoses in one day . « Digital healthcare services are releasing some of the pressure on China’s creaking healthcare system, » said the founder of the application, Oliver Wang (Financial Times).
Straddling the areas of healthcare and technology, two of the China’s most prominent investment sectors, hundreds of medical applications attracted in 2016 private equity and venture capital funding.
Among the most famous mobiles applis in the country, there are WeChat (Tencent), WeDoctor and Spring Rain Doctor, claiming more than 800 million users. Valued at more than $1 billion (€ 926 M), they are among the most promising Chinese start-ups.
EHealth: Chinese regulations restricts opportunities for entrepreneurs
The Chinese consumer demand for digital health services is motivated by a lack of trust in the lower levels of the national public health system and limited access to doctors, especially in remote areas.
However, regulations prevent firms to charge for booking hospital appointments and limit services offered via applications, that offer users health advice rather than full consultations.
To make profit, WeDoctor (Tencent) is based on advertising and recommendation of doctors to patients, a service that can be charged because it allows users to avoid long queues through appointments line. The company claims to have registered more than 100 million appointment bookings over the past two years and RMB1.2 billion ($175 M; €162 M) in revenue in 2016.
Investments in the China’s digital health sector dropped by 10% between 2015 and 2016
Despite the good market development, investment in eHealth sector dropped by 10% in China year on year in the last quarter of 2016 to $520 million, after a 41% decline in the previous three months, according to consultancy VC Beat (Financial Times).
« If you look at the user numbers it looks great, but if you ask who’s paying it doesn’t look so great, » said Florian Then, a Shanghai-based partner at McKinsey’s healthcare practice.
« We’ve invested in several of these companies but are still generally very sceptical of how most of the sector will generate revenues. Sustainability will be a big question mark, « analyzed managing partner at Qiming Venture Partners, which has backed WeDoctor.
In 2016, investors were shocked to discover online a list of 27 medical applications that had closed after burning through their funding. Another unpleasant announcement for the market followed: the internet giant Baidu recently said it would close was shutting down its mobile health unit and its famous app Baidu Doctor.
To make more money, digital health startups circumvent regulations
- In an attempt to generate income, eHealth mobile applications try to find tie-ups with physical hospitals. WeDoctor is aiming to set up 100 hospitals within three years, in cooperation with existing facilities.
- After it realize that advertising was not enough to cover its expenses, Spring Rain Doctor plans to offer its users private health insurance.
- The start-up of the sector have also begun to focus on consumer services, offering over-the-counter medicines or paid-for services, such as botox injections.
But there is a regulatory risk. If local interests are jeopardized, officials could act to restrict the use of these medical applications.
The health sector is quite sensitive, said the Financial Times. In 2016, Baidu recorded its worst quarterly earnings performance since 2007 after an investigation revealed it was broadcasting on its search engine advertisements promoting unlicensed private hospitals, offering unnecessary or poor quality treatments.
« There is not a regulator system telling you what you can and can’t do in mobile health and that makes the market a big mystery, » said M. Wang (Ping An Good Doctor). You couldn’t know when the government [is going to say] ‘no’. »
EHealth apps: investments continue despite some doubts
Despite growing doubts and lack of clear rules on the market, Chinese investors appear to retain some interest in the mobile healthcare sector.
Among the most recent example: Chinese society Hakim Unique Internet Co. has led in March 2017 a funding round of $40 million (€36.8 million) in March 2017 for Haoeyou, a start-up which offers Chinese patients access to an online platform where they can connect with doctors based in the United States.