China’s Internet Healthcare Industry: B2B or B2G?

Original BCC Global
January 7, 2025, 09:30

Introduction

On December 30, 2024, HealthRoad was officially listed on the Hong Kong Stock Exchange. The next day, WeDoctor Holdings submitted its IPO prospectus to the same exchange, marking another milestone in the internet healthcare industry’s engagement with capital markets. As pioneers in the online medical appointment business, HealthRoad and WeDoctor have taken different strategic paths: HealthRoad has pivoted to a B2B (business-to-business) focus, while WeDoctor excels in B2G (business-to-government) services. Which path best represents the future direction of China’s internet healthcare industry?

From B2B Beginnings

• HealthRoad: Founded in 2001 as “Medical Care Network,” the company initially offered online medical appointment services, making it one of the earliest online appointment platforms in China. In 2015, after Beijing’s health department restricted partnerships between public hospitals and private companies for appointment services, HealthRoad diversified its offerings.
• WeDoctor: Established in March 2010, WeDoctor began as an appointment service at Fudan University’s Huashan Hospital. By September 2015, it rebranded from “Guahao.com” to “WeDoctor” and launched China’s first internet hospital in December of the same year in Wuzhen. WeDoctor has since evolved into a comprehensive platform, transitioning from internet hospitals to the concept of a digital “health community.”

B2B vs. B2G Business Models

HealthRoad’s Business Segments:

1. Healthcare Services: Offers appointment bookings, medical consultations, surgery arrangements, and follow-up services for individual users, enterprises, pharmacies, and distributors.
2. Enterprise and Digital Marketing Services: Provides a comprehensive range of services for enterprises and institutions, including:
   1. Content Services: Collaborates with external doctors to create educational content for B2B clients (e.g., Baidu) and develops disease-related content for pharmaceutical companies to enhance their market presence.
   1. IT Solutions: Custom software development and maintenance for hospitals, medical institutions, and pharmaceutical companies to improve operations and data management.
   1. Advertising: Provides targeted advertising services through its platform to help advertisers reach their target audience effectively.
   1. Brand Collaborations: Partners with corporations for brand promotion campaigns, such as health education events that also showcase pharmaceutical brands and products.

WeDoctor’s Business Segments:

1. AI Healthcare Services:
   1. Health Management Memberships: Provides healthcare services via “health community” memberships.
   1. Cloud Pharmacy: Manages prescription fulfillment and medication supply.
   1. Value-Added Services: Offers online and offline health service packages.
2. Digital Health Platform:
   1. Digital Healthcare Services: Includes online consultations, diagnosis, follow-up visits, and prescription services.
   1. Offline Medical Services: Operates physical clinics.
   1. Corporate Membership and Other Services: Provides subscription-based healthcare packages for enterprises.

Financial Performance Analysis

HealthRoad:

• Total Revenue:
  • 2021: CNY 431 million
  • 2022: CNY 569 million (+31.9%)
  • 2023: CNY 1.245 billion (+118.6%)
  • 1H 2024: CNY 612 million (+14.5%)
• Healthcare Services Revenue:
  • 2021: CNY 128 million (29.7% of total revenue, ~40% gross margin)
  • 2022: CNY 183 million (+43%, ~35% gross margin)
  • 2023: CNY 298 million (+62.3%, ~33% gross margin)
  • 1H 2024: CNY 123 million (-1.1%, ~30% gross margin)
• Enterprise and Digital Marketing Services Revenue:
  • 2021: CNY 301 million (69.8% of total revenue, ~50% gross margin)
  • 2022: CNY 385 million (+27.9%, ~49% gross margin)
  • 2023: CNY 946 million (+145.7%, ~51% gross margin)
  • 1H 2024: CNY 489 million (+19.2%, ~50% gross margin)
• Profitability:
  • 2021: CNY 155 million loss (36% of revenue)
  • 2022: CNY 256 million loss (44.9% of revenue)
  • 2023: CNY 314 million loss (25.2% of revenue)
  • 1H 2024: CNY 57 million loss (9.4% of revenue)

Summary:
HealthRoad has maintained high gross margins, especially in its enterprise services. However, continued public procurement initiatives may increase demand for digital marketing while putting downward pressure on prices, making it uncertain whether HealthRoad can sustain its high-margin model.

WeDoctor:

• Total Revenue:
  • 2021: CNY 962 million
  • 2022: CNY 1.368 billion (+42.2%)
  • 2023: CNY 1.863 billion (+36.2%)
  • 1H 2024: CNY 1.818 billion (+107.4%)
• AI Healthcare Services Revenue:
  • 2021: Not yet operational
  • 2022: CNY 39.7 million (~2.9% of total revenue, -8.4% gross margin)
  • 2023: CNY 355 million (+797.8%, ~15.4% gross margin)
  • 1H 2024: CNY 1.033 billion (+671.3%, ~17.2% gross margin)
• Digital Health Platform Revenue:
  • 2021: CNY 962 million (~22% gross margin)
  • 2022: CNY 1.328 billion (+38.5%, ~20.5% gross margin)
  • 2023: CNY 1.508 billion (+13.6%, ~19.7% gross margin)
  • 1H 2024: CNY 786 million (+5.8%, ~18% gross margin)
• Profitability:
  • 2021: CNY 213 million loss (22.1% of revenue)
  • 2022: CNY 195 million loss (14.3% of revenue)
  • 2023: CNY 214 million loss (11.5% of revenue)
  • 1H 2024: CNY 95 million loss (5.2% of revenue)

Summary:
WeDoctor’s gross margins are notably lower than HealthRoad’s, with a heavy reliance on government contracts. In 1H 2024, 56% of its revenue came from Tianjin’s healthcare authority, indicating potential risks due to concentrated revenue streams. However, its rapidly expanding AI healthcare business suggests promising long-term growth, provided it can maintain high R&D investments.

Conclusion

HealthRoad and WeDoctor exemplify two distinct approaches to internet healthcare transformation—from B2C to B2B and from B2C to B2G, respectively. Both companies have experienced rapid revenue growth and are on the cusp of profitability. HealthRoad’s IPO was priced at HKD 7.8 per share, with its price reaching HKD 14.56 by January 6, 2025. WeDoctor’s performance in the capital markets remains highly anticipated. The question of whether B2B or B2G will dominate China’s internet healthcare industry requires further observation.

Disclaimer:
This report provides an overview of relevant events and does not constitute investment advice. Information is derived from public data, expert insights, and BCC research. No responsibility is assumed for any losses arising from the use of this information. Investments carry risks—proceed with caution.