JD Health targets largest Chinese PE-backed IPO in two years
JD Health, a Chinese online-to-offline healthcare business that raised around $1.9 billion from private investors after it spun out from JD.com, is looking to raise HK$26.9 billion ($3.48 billion) in its Hong Kong IPO.
The company plans to sell 381.9 million shares for HK$70.58 apiece, according to a filing. Six cornerstone investors – Hillhouse Capital, Tiger Global Management, Lake Bleu Capital, China Structural Reform Fund, GIC Private, and BlackRock – are willing to contribute up to $1.35 billion.
If the target is achieved, it would be the largest private equity-backed offering by any Chinese company since Meituan-Dianping raised $4.2 billion in 2018. The largest so far this year was by financial technology player Lufax, which secured $2.36 billion in the US.
JD.com retains control of JD Health with an 81% stake. Hillhouse owns 4.49% as the largest external investor, while CPE and Baring Private Equity Asia each hold 3.16%, CICC Capital has 2.37% and China Life holds 2.26%.
The company was spun out from JD.com in 2014 and raised two tranches of external funding, in 2019 and 2020, respectively. The first saw CPE, Baring and CICC participate in an investor group that paid just over $900 million for a 14.5% stake. Hillhouse subsequently committed $830 million as part of a $900 million round that also featured CPE, Baring and CICC, among others.
JD Health consolidates several healthcare-related businesses that were previously managed in separate JD.com subsidiaries. These include a B2C online pharmacy, JD Online Healthcare, which provides online medical consultations from registered doctors, a B2B drug sales platform called Yaojingcai, and a unit that uses artificial intelligence to study healthcare-related big data.
Customers accessing the service are directed to either consult with a doctor online or, depending on the seriousness of the condition, to an offline medical institution that has partnered with the platform. Those receiving online consultation are issued digital prescriptions, and the online pharmacy will compile a list of drugs for users to purchase either online or at a brick-and-mortar pharmacy.
“Our technology-driven platform is centered on the supply chain of pharmaceutical and healthcare products and strengthened by healthcare services, encompassing a user’s full life span for all healthcare needs. Through our end-to-end supply chain and online-plus-offline approach, we believe that we can redefine the way users manage personal health,” the company said in its prospectus.
JD Health claims to be China’s largest online healthcare platform and largest online retail pharmacy by revenue in 2019, citing a Frost & Sullivan report. As of June, it had more than 150 million users.
The retail pharmacy makes direct sales through JD Pharmacy and uses JD Group’s fulfillment infrastructure – comprising 11 drug warehouses and over 230 general warehouses – for distribution. It also operates an online marketplace that offers products from 9,000 third-party merchants and has an omnichannel initiative offering on-demand delivery services in 200 cities, in some cases fulfilling orders within 30 minutes. There were 72.5 million active users accounts as of June.
Healthcare consultation services are provided by a team of in-house doctors and external medical professionals with specific areas of expertise. There are more than 65,000 within this network. In the first half of 2020, average daily online consultations reached 90,000, a near sixfold year-on-year increase. During the coronavirus pandemic, JD Health was the first company in China to facilitate online appointments for COVID-19 nucleic acid testing.
JD Health generated RMB10.8 billion ($1.6 billion) in revenue last year, up from RMB8.2 billion the previous year. The company swung from a net profit of RMB214.9 million to a net loss of RMB971.8 million largely due to changes in the fair value of convertible preference shares. In the first six months of 2020, revenue came to RMB8.8 billion and the net loss was RMB5.2 billion, with convertible preference shares once again a key factor.
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